Recent research funded by the Kauffman Foundation tells us that over 440,000 Americans are starting businesses every month.
Most of these businesses are sole proprietorships or small firm ventures – the type of companies that make up the backbone of our economy. However, some of these new businesses have the potential to experience rapid expansion and become breakout growth companies. These types of fast growth companies, often called gazelles, certainly succeed against the odds. Verne Harnish, author of the book Mastering the Rockefeller Habits, notes that there are 23 million firms in the United States and that only about 4 percent ever get above $1 million in revenue. Of those, only 10 percent ever make it to $10 million revenue (0.4 percent of the total).
These stats lead me to ask the question – what does it take to become a successful fast growth venture?
Uncovering the Principles of Success
I am fascinated with the art and science of how companies with dreams and desires to become fast growth ventures can successfully achieve their goals. For years, venture capital firms have struggled to locate the next big thing; however, we know that out of any portfolio there will likely be far more losers than winners. While that success rate may ultimately work out for the VC firms and their investors, those failures are not good outcomes for the dedicated men and women working in those businesses. Thankfully, recent research is starting to shed more light on how to increase the odds of success for fast growth enterprises. While there is no silver bullet, there are principles that can be applied to help businesses increase their chances of success.
Thinking “On” Your Business
In this article, I will focus on one of the core principles for turning businesses into gazelles – methodically sizing up your business. Management teams need to periodically and methodically stop and honestly size up their business. For most leaders, the path from startup to creating a stable business is a whirlwind of activity. I rarely see owners/management in this stage that routinely take stock of where they are in their business. Most business plans, if there ever were any, are usually collecting dust on shelves. When you are in survival mode, it is understandable that taking time for seemingly theoretical concepts such as planning, analysis, and goal setting seem like a luxury. However, to help take the business to the next level, leaders need to begin the disciplined habit of critical analysis and planning.
While the type of analysis will vary depending on the business and industry, the benefit of this principle is the same – management should come away with a clear vision of the company’s strengths, weaknesses, market position, and where opportunities for growth may be available. For the owner, this is often also a chance to reflect and make sure the business is meeting his or her personal goals for being an entrepreneur. The key is to come away from the process with clarity. This clarity will help focus the efforts of the team to propel the company forward. Without this clarity, the sheer volume of decisions, challenges, and opportunities can be overwhelming.
Planning For Success
In the late 1990’s, I had a unique opportunity to participate in a venture backed dot.com in Silicon Valley. While the dot.com ultimately failed, like many others at that time, the experience was memorable and invaluable training for working with fast growth entrepreneurs.
I was fortunate to meet many successful entrepreneurs during this period and was struck by their focused vision and execution. Almost every one of these individuals had a disciplined practice of methodically evaluating their business. In addition to these anecdotal observations, this principle of planning is backed by leading research which tells us that it plays an integral role in helping businesses achieve their full potential.