For New Businesses: Transitioning from Startup to a Firm

digital marketing for business growth

Are you thinking about opening your own business or taking your little startup to the next level? If so, you need to pivot from running the show to delegating responsibility and building a team you can trust with those responsibilities. For new businesses, founders often show a tendency toward micromanaging that limits the ability of the firm to grow and eliminates the value of having different perspectives and different skill sets that benefit the firm.

Don’t forget, you do have a duty to all your stakeholders as a business owner, to employees, investors, customers, and yourself. If you fail to live up to this responsibility, you limit your ability to grow and transform. You can also leave yourself open to lawsuits and a damaged reputation in the marketplace.

for new businesses

Growing pains for new businesses

Starting a new business is stressful (although this post can help set you up for success),especially if you’re a one-person shop. You must wear many hats, juggle tasks, set priorities, and learn new skills because you can’t afford to hire folks who already have those skills. The flip side of this is you’re the master of your own destiny. You make all the decisions and, right or wrong, and you don’t have to explain them to anyone or get them to implement your ideas. For many entrepreneurs, this freedom is one of the reasons they started the business in the first place.

But, being the only one working on your venture or only working with a small group of founders limits your ability to grow. If you don’t manage your time well, you can easily find your personal time with family and friends shrinks in a way that’s dangerous for your well-being.  It’s also dangerous for the long-term future of your firm since the number of employees and their skill set seriously limits the ability of your firm to grow or even survive in a competitive market.

Transitioning to a different organizational structure is challenging. I did some research a few years ago looking at businesses and the decisions made by managers when they reached that inflection point. Some made good decisions; some made bad ones. There’s a pattern to those bad decisions that I’ll share below for new businesses that want to grow.

Living in the past

This was by far the biggest challenge I saw for new businesses as they tried to grow. For instance, a glassmaker (stained glass, blown glass, etc) found themselves a captive of their successful past and unwilling to consider updating their staff, equipment, and processes since they’d worked well for decades. Employees still used cardboard patterns to cut complex shapes for stained glass because they didn’t have training or software to use more modern technologies such as CAD-CAM that reduce waste, and labor costs, plus allow for more innovative designs. Transitioning to the new technology wasn’t only expensive but meant hiring new employees to replace those with decades of employment with the company since they were unwilling to make embrace the computer revolution (most were over 50, some well over 50).  As the owner told us, “these people seem like family” when we suggested making changes despite the fact he contracted with us to help his business survive against new competition.

That’s the way things are done

For new businesses, the challenge of overcoming the notion that things should be done a certain way is strong, although many businesses of all sizes, shapes, and industries find themselves committed to doing things the way they’ve always done them. For instance, an entrepreneur comes from the industry and starts his/her new business bogged down with some of the same assumptions about how things are done they brought from their previous employer.

Sometimes it’s a trusted advisor who recommends the same tried and true tactics for the new business that always worked in the past. This is especially true when that trusted advisor is older, with a lifetime of experience. However, the world changes, sometimes dramatically. A good example is the Vietnam War and the Korean Conflict. These conflicts were lead by generals with vast experience in WWII, some even in WWI, men with vast success tested in the battlefield. They were good leaders, knew battle strategy, and faced the myriad challenges of fighting far from home. Yet, we lost both wars and, to a large extent, repeated those failures in Afganastan by continuing to fight the battles of WWII where the enemy lined up against your army and gave them hell. These conflicts were guerilla warfare when it wasn’t clear who the combatants were, where they were, and they didn’t fight based on knowledge of what worked in other battles.

Sure, winning in business isn’t like winning a battle, but the same principles hold. You can’t fight today’s competition with yesterday’s tactics. You must show your agility, your commitment to digital transformation, understand how today’s consumers make decisions (which is vastly different than in earlier generations), and adapt to new business realities not continue to do things the way you’ve always done them.

Letting go of the reins of power

This is another biggie for new businesses as they grow. The founders can no longer micromanage every aspect of the business as they did in the past. You must hire the right people and turn over the reins of power to them. Don’t look over their shoulder or demand layers of approval for every task in an effort to keep your hands in everything. You must accept that these folks are experts in what they do and have a combination of skills and experience that you lack. They’re also the ones who see what’s going on day to day in your business and are in the best position to solve problems before they happen.

Create a flat organizational structure to allow for maximum flexibility and agility.

New compliance responsibilities

As you grow, you’ll find you face additional compliance responsibilities that kick in with a larger number of employees or when you add additional layers of investors to fuel your growth. In addition to government regulators, your investors may impose restrictions and reporting procedures to protect their investment.

OHSA (the US Occupational Health and Safety Administration) imposes regulations to protect your workforce. These regulations are based on the potential for harm and often kick things up a notch for new businesses that reach a minimum number of employees. For instance, a flour dust explosion is something with a known risk to employees and companies must implement procedures to lessen this very serious risk to life and health.

In other cases, companies must issue appropriate protective equipment to employees and ensure they know its proper use. Employees facing risks must know the equipment isn’t optional but required to keep their jobs. In a famous case involving a company that removed silver from old x-rays, the company hired a workforce comprised mainly of non-English speakers. Although safety equipment was available, workers weren’t trained in its use and signs posted in Engish that described the danger, didn’t adequately inform workers. In this case, prosecutors were able to pierce the corporate veil and hold owners not only liable for damages but charge them with criminal acts. Several were sent to jail.

Conclusion

As you can see, for new businesses, the opportunities for growth are tempered by the fundamental changes required to manage the new business during the transition from a small, closely held organization to one with distributed decision-making and new procedures. I hope this helps you make this challenging transition that’s necessary as you grow.

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