How to Grow from 1 Employee to 1,000 Employees (or More!)
People start out as a one-person business for all sorts of reasons. Some
people set out to follow a passion. Others get tired of layoffs and start a
business to gain control of their professional life. Others realize they can
actually make more money selling their skills directly to clients. But no
matter what drove the creation of the firm, the majority don’t start out as
well-funded start-ups. Most new businesses begin small and grow from there.
If you’ve created a business, and you’re just one person, growing can feel
intimidating, risky, or even impossible. But it can be done. In fact, many
successful firms have expanded from 1 person to 100 or 1,000 employees or
more. But there are things all companies must do to get scale up quickly and
Some Advice About the First Hire
A solopreneur works alone. Most one-person businessowners have a core set
of skills. They use those skills as the product, and also sell, fulfill, and take
care of the invoices. In the very beginning, most business owners are the
CEO, CMO, Sales Director, CFO, and all the rest. It’s very typical to see a
solopreneur who sells and executes during the week and on nights and
weekends, they focus on the billing and administrative duties.
It usually doesn’t take too long for a one-person shop to realize that if they
want to continue to grow, they need more manpower. And when that time
comes, we are adamant that the very first hire should be a good numbers
person. Seasoned accounting skills are critical for profitable growth no
matter what size the business. Whether the company is a start-up, pre-
revenue, or if you’re pulling in a million plus, an excellent financial hire is
needed to organize your cash flow. And let’s face it, for the majority of
solopreneurs, their cash flow is a mess.
When we work with a single-person outfit, it’s typical to discover that they’re
not sure of profit margins. They don’t know if their offerings are priced right.
But when you hire a financial expert, a bookkeeper, or a controller, the
company now has somebody paying attention to expenditures, cash flow,
pricing, and profits. A qualified financial officer serves as an invaluable
guidepost who makes sure that you’re getting it right.
A common error is to start by investing in sales and marketing first. Now,
sales and marketing are key, but unless you already know what you’re
spending, where you’re pricing, and what financial formula makes the most sense for the best margins, you’re spinning your wheels. Who wants more
unprofitable sales? Make sure your financial person can provide the kind of
reporting that tells you that you are getting it right. Then, and only then, can
you look for your next employee.
Are You Growing or Scaling?
So many of our clients tell us that they want to grow. Very few tell us they
want to scale. There is a big difference between the two. Understanding the
distinction between growing and scaling is actually essential for any
business, so read these next paragraphs carefully.
When a business owner makes a new sale, they are growing. They have
more business. When a company grows, it may bring in more money,
become busier, and get more clients. And all of that is good stuff.
But simply growing means that the business owner is still an employee. The
owner of a growing enterprise must be involved on a day-to-day basis and do
more and more to grow. Some business owners tell us they don’t want to
grow because they’re at capacity. The owner is already working full time,
and then some.
But scaling involves a different scenario. When an owner scales the
company, they aren’t simply spending more hours at work. Scaling is about
creating systems and predictability so that others can take over parts of the
company. Owners don’t have to worry about getting too many clients to
service or too many people to manage, because they have employees who
take over those duties. Financial people take care of billing and taxes, and
lines of credit. Sales teams manage client relationships. Human Resources
find the right hires for the right job. An owner who is focused on scaling
assigns selective control to their employees. Of course, these workers must
understand the company mission, vision, values, and purpose. With systems
in place, a firm runs profitably because it follows processes that create
consistent results over time. Scalable organizations don’t rely on the
bandwidth of a few people. Instead, it can grow almost infinitely on the
strength of its systems.
We often cite the example of the owner of one grocery store vs. the owner of
100 grocery stores. Does the owner of 100 stores work 100 times harder?
No. In fact, with good systems in place, the owner of 100 stores is more likely
to be able to walk away from the business for a day or a week or a month,
and the company hums along without them.
What Does Planned Growth Look Like?
Early on, we researched what all successful companies have in common. We
discovered seven very clear steps to creating a large, successful business.
We used this research to form the 7 Stages of Business Success. Stage 1
is strategic planning when you get a compelling and inspiring set of ideas out
of your head and onto paper.
Then you go to Stage 2, the specialty stage. Whether you’re a solopreneur or
working with a team, in Stage 2, the owner becomes an expert in your niche.
They are thought leaders, speakers, consultants, or have a particular set of
achievements or awards. They are now recognized as an expert in their
niche. That expertise is an integral part of price flexibility. You need fat
margins early on to carry you through later stages; when you sell more, but
margins can shrink.
Stage 3 is the synergy stage. The business is expanding, and it’s time to
surround yourself with people that help get the job done. This is the time to
create a top-notch implementation team.
In Stage 4, you make a giant leap into the systems stage. You decide what
kind of business you’re going to be. Will you be a closed ecosystem like
Apple? Want to franchise someday? Should you be multi-location? Where do
online sales fit in (if at all)? You decide on your ecosystem and systematize
Stage 5 is all about scaling. Systems become the star. How you do it makes
you different, and that makes it easier to scale. Think of Starbucks, FedEx,
Panera, or Uber. These companies can show up almost anywhere, and you
know you’ll get the same experience (mostly) whether you visit in Seattle,
Sarasota, or Shanghai. Systems and processes allow these companies to
duplicate success in multiple locations.
Once you’ve got systems and scaling covered, it may be time to consider
Stage 6, the salability stage. This is when the company is an asset that can
be bought or sold. Yes, everybody is working hard in and on your business,
but your firm now has standalone value that is working for you. Suppose you
want to sell your enterprise. This is the time to polish the books, clean up
any debts, and make it an attractive asset to sell or take public.
Stage 7 is the succession stage. A business becomes a legacy, and you can
confidently fire your first employee (yeah, that’s you!) You are replaced with
a CEO, and the value of your business actually increases because the market
recognizes that the firm’s success is no longer dependent on one person: the
company has a great leadership team in place.
Is it Time to Turbo Charge Your Business Growth Cycle?
Whether your business employs one person or 1,000, it’s always a good idea
to strengthen structure, systems, and strategic plans. 7 Stage Advisors offers
coaching and mentoring to business owners to help increase predictability,
fortify margins, or even create an exit plan. Contact us HERE