Coping with fast-growth: Entrepreneurs share their tips
Growing firms experience a host of stresses and strains. Here's some tips on how to handle them
When you’re growing at meteoric speed, it can be hard to keep up, let alone stay one step ahead. We caught up with some entrepreneurs to hear about how they’re coping with fast growth, the curveballs they’ve faced and how they’ve knocked them out of the park.
Know your limits
The main barrier to expansion could be you. If you’re not evolving as your business grows, then you can’t maximise new opportunities. Philip Mossop set up Intelligent Waste Management Solutions (IWMS), which designs bespoke waste systems for blue-chips, with Robert Twiselton in 2006. Its turnover is now £5m. But following such speedy growth, cracks began to appear last year. “It never crossed our mind that it was because of the two of us sat right in the middle of it,” says Mossop.
After talking to someone outside of the business, Mossop and Twiselton realised that, by running everything past each other, they were creating a bottleneck. By admitting their shortcomings, they’re now playing to their strengths. Mossop likens the change to a pressure valve being released.
“I’m now development director,” he says. “My skills are innovating and being an entrepreneur, building the systems, infrastructure and culture. My partner is now the managing director. He gets things done; he’s an operations man.”
Refine your team
With your own role sorted, it’s time to focus on your management team. What are their roles and have they got the skills to take you where you want to go?
“It boils down to having good people,” says Peter Simmonds, managing director of email marketing agency dotMailer. “Whatever you want to do, you need the bandwidth to deal with it, either by buying a company, or by hiring people who may be overqualified for the job today, but have the capacity to take you forward.”
But building a first-class management team is not always easy. You may have brilliant technicians whose leadership skills leave a lot to be desired. Putting them into management roles can be disastrous.
Vicky Reeves, managing director of digital marketing agency Chameleon Net, believes she has found the answer. She offers staff two separate career paths: the management route or the specialist route. “It has worked,” she says. “We’ve had people who’ve said I don’t really want to do management, but they still want to grow with the company.”
Recruit to fit
Having examined your skills base, it’s time to plug the gaps, but do you go for expertise or someone who fits your company culture? For Reeves, the latter wins every time. “We’ve found that culture is so important,” she says. “During our interview process, we try to make sure our culture is going to fit with what each candidate is looking for.” This includes each one spending some time with their prospective team.
“If they have enthusiasm and passion, you can give them the skills,” she adds Someone with reams of industry knowledge can even hinder growth, according to Mossop. “We’re trying to come up with an innovative solution for our clients,” he says. “Someone who has been in this industry for years may shake their head and say: ‘That’s not how it’s done.’ They can put a stranglehold on the growth.”
Incentivising and rewarding your staff will engender loyalty, ensure your products and services are top-notch and drive growth. But what’s the best way to do it? Along with an annual bonus scheme based on hitting profit targets, Reeves introduced EMI share options for her staff, but junior members were indifferent to it. “They didn’t really get the concept,” she says.
Your people will be driven by different things, warns Sara Daw, managing director of financial director agency the FD Centre. She says a one-size-fits-all scheme could end up turning half of them off. “They will be driven by equity, income, control or a combination of these,” she says. “Your lower level employees are more likely to be driven by what’s in their pay packets.”
Mossop adds a word of caution about offering shares: “It was a disaster for us,” he says. “The pressure can change perceptions. We offered three people equity and not one is with us now. They all walked away.” He now focuses on fostering the right culture, “rather than trying to force an incentive by saying I’ll give you shares if you give me loyalty in return”.
It’s important to emphasise that everyone contributes to the long-term success of the business, and Adam Warren, founder of green watercooler firm Greencare H2O, recommends using a long-term bonus scheme. “I had one simply based on length of service and salary over three years,” he explains. “The aim was to grow turnover from £2m to £10m in three years. Everyone bought into the idea.”
Invoice discounting seems to be a pre-requisite for fast growth these days. “We did it in the first six months, when we took our first million-pound contract,” says Mossop. “We looked at the cashflow, and they were quite scary numbers.” When his previous bank advised him not to grow the business so fast, he switched immediately.
“The new one (NatWest) said unless we had significant capital to put into the business, we’d have to use factoring or invoice discounting. Without it we wouldn’t have grown to where we are now, or in fact be growing at all. We could take on a contract worth £2m tomorrow and when we’ve got to send that invoice out, the funds are available.”
Mossop, whose business has been self-funded so far, is now finding himself regularly approached by venture capitalists. With significant growth opportunities in his core business, which offers innovation in an increasingly out-of-date recycling industry, he’s weighing up his options: slow but controlled organic growth or the ability to seize more expansion opportunities. “The pros are that I get the capital in to do everything I want to do, reduce the level of risk exposure in the business and hire those great people,” he says.
But Colin Mills, founder of the FD Centre, sums up the downside. “It doesn’t matter what percentage you give away to venture capital,” he says, “you’re going to lose control, so think seriously about it.”