It goes without saying that entrepreneurs are passionate, driven, and innovative. Where would we be without these dynamic, driven individuals who are trying to grow and positively impact their economies?
That being said, why do so many entrepreneurial ventures never find the ‘Promised Land’? Why are businesses trapped in the wilderness and chaos of ‘No-Man’s Land’? Their business is doing well, and in fact, may even be experiencing some growth, but it remains cash-strapped with little or no profit margins. NXT-9’s experience is that two-thirds of entrepreneurial businesses wind up here. Surviving but not thriving.
Why does this happen?
Many entrepreneurs end up in ‘No-Man’s Land’ primarily due to the scale-up itself. As the business scales, so does the gap between the size of the business and the capacity to manage that scale. In other words, as your business grows, it requires more than five people brainstorming over pizza to solve a client’s dilemma. It will require a higher level of sophistication – you now need a scalable management infrastructure with the right processes and systems.
Ultimately, your business should be systems-dependent, not people-dependent. Employees run the systems, but the systems themselves must run the business.
If you miss out on this crucial step, the business hits what we call the ‘scale-up debt’. All the time, effort and money that should have been spent on processes, recruiting the right talent and building strong internal infrastructure is now owed – and the resulting chaos can kill a blossoming start-up.
So, what should you watch out for to avoid scale-up debt? Here are some common the red flags:
- Employees have no KPIs
- The business has urgent cash flow crises that no one saw coming
- No additional funding is available
- Your key personnel are burnt out
- There is a lack of sales traction
- The business is experiencing periodic operational crises
- Escalating tensions within stakeholder/investor relationships
Shifting mind-set and leadership from start-up to SME
The good news is that if you’ve made it this far, the chances of you making it to ‘the Promised Land ‘have just increased!
Your entrepreneurial journey began with entrepreneurial leadership – hustling to get to your target customers. As you move into the next part of your journey towards building an enterprise, you will need to build basic management systems and processes. Once you move through the inventive and entrepreneurship management styles, the business will need robust organisational management with a well-defined strategy and a clear organisation culture. Founders and CEOs who recognise this and take action quickly, move to the next mode of leadership and build scale with sustainable business practices.
How can you check if you are using the right approach for your business? Ask yourself:
- What mode of leadership am I currently operating in?
- Is this appropriate for my company’s size and the company’s lifecycle?
Once you have honestly answered, you’ll know what your next steps should be.
A strong and vigorous management structure along with business systems and processes is not only healthy for a business, but also for you. It allows you to address long-term strategic issues of the business, while business operations become easier with accountable, responsible, and effective people and systems already in place.