This post originally appeared on the Crain’s Detroit Business Second-Stage blog space.
Dave Haviland’s excellent article, “Scaling Up Fast,” especially in context of the upcoming Crain’s Workshop, has me thiinking a lot about tipping points lately. I think of the “tipping point” as that point in time in which a business ceases being an entrepreneurship and has become an enterprise (to name but one example). We have traditionally thought of such companies as “small businesses,” but that term does not begin to descriptively capture the vast differences between a truly small business and that which has become a second-stage company.
This concept of scaling is an interesting one. As someone who has been through it, I see it less as “scaling” and more of “transitioning.” That is, scaling (to me) connotes adjustment by degree, when I think what is needed is a transformation of mindset, operations and business systems.
Think about the various aspects of your business: sales, operations, recruiting, finance. If you are a stage-two company—or even stage three—consider how your systems and processes have changed since the day you hung the shingle and started operating as a small partnership (of some kind). For example: recruiting. Now that you have 25 (or 50, or 100) employees, are your recruiting processes and systems the same as they were when you had no employees—only on a grander scale? Or are they completely different systems and processes, managed by personnel who didn’t exist within the organiation during its first years? My guess is something closer to the latter is true for most second-stage companies. It’s not that you needed to scale the system; you needed to approach it dramatically different in order to be successful.
And so it is with marketing. Marketing was a simple organism in the early years. You brought some business from your former position/company; you knew a few people in and around the industry; and you marketed by word-of-mouth. Eventually, as the business grows up, those opportunities dry up. In order for the business to expand, you simply must market to people you haven’t yet met. So the process changes and adapts, it doesn’t stay the same and get scaled.
The same goes for HR, operations and finance. Eventually, every successful company has a tipping point—or a series of tipping points—and the personnel, the systems and the mindset need to change on the other side of it. Doing the same thing, only more of it, is not a way to scale a business in my experience. But recognizing that you are at, have passed, or are approaching that tipping point is often the most difficult first step.
So think about your tipping point. What is yours, in your industry, and with respect to your specific company? Have you reached it? If not, when will you reach it? Achieving that recognition will ultimately determine your ability to scale up and evolve into your next stage of development.