Oct 222014

Dr. Earl R. Smith II

I work with mid-market government contractors. That means that I work with a lot of founders. For the most part, those founders have built their business to a point that it is very profitable. The are experience good cash flow – sometimes for the first time since they launched the company. The team has grown significantly, there has been substantial turnover and they have had to reinvent their role several times.

Many first come to me after reading an article I wrote. In Battle at the Cottage Gate I describe “a situation that occurs over and over during the growth of any company. It might seem that, once out of the cottage stage, companies are free of this syndrome but nothing could be further from the truth. The battle between traditionalists and futurists never ends.” Although this process is ongoing and never-ending, there seems to be on such ‘battle’ that tasks founders to the point that they decide to seek outside help.

The Limit of What One Person Can Do: Most early stages of a company’s growth are fueled by the enthusiasm, determination and understanding of the founder. Much like young people who do things because they can, founders grow their companies because they can. But, at some point, things become so complicated and the energy required to continue driving growth becomes so great that founders find themselves unable to continue to fill their historical role. The process of ‘minor reinvention’ no longer carries that day and a major redefinition of role – and a major restructuring of the company are called for if it is to continue on an upward path.

I realize, when I am approached by a CEO or stakeholder of such a company, that major change is going to be the order of the day. Once of the reasons that I founded The Federal Circle was to build a team that could help founders through this very demanding process. People who have successfully made the journey – engineered the changes – are the best mentors for those trying to make the journey for the very first time. Our first task is to help the senior team better understand the challenge they are facing and the solutions which will get them past it and into a new phase.

Graduation Does It: In government contracting, there is a particular event which brings a particular danger. There are government contracting categories which are designed to give a leg up to small businesses. One of the events that triggers the crisis – the need to reinvent – is a pending or actual graduation from one of these programs. A small business that no longer qualifies as a ‘small business’ by government measures suddenly finds that the shelter it has grown up in has been swept away and the cold winds of free-and-open competition for business is chilling.

Span Of Control Does It: Sometimes a founder finds themselves stretched so thin that they are no longer able to effectively manage the company. This is particularly the case with CEOs who see their role as ‘chief of everything’. Being mayor of a small village often does not prepare a person for the same role in a large and rapidly growing city. The same is true for founders. Success brings its own challenges. Once that success has pushed the company’s growth to the point that the founder cannot any longer manage it in the ‘old way’, stresses begin to appear and change becomes necessary if the company is going to move to the next level.

Rooting The Pot Does It: A company that starts with a single client often reaches a point of diminishing returns with that client – they root the pot, as it were. Many founders begin with a special relationship with a particular client. The company lives off of that relationship and its growth is fueled by it. But, at some point, that client has taken the company as far as it can and, in order to continue growing, a more formal approach to business development is needed.

Reinventing For Success: For whatever reason, the companies that I work with are facing a challenge unlike those it has previously met and mastered. In house resources – the senior team – the financial resources – all are proving increasingly inadequate to taking the company to the next level. A new model is needed – a new approach indicated. And, with this realization, comes some good news and some bad news. The good news is that yours is not the first company to face this challenge. Others have met and mastered it. Look around at all the large companies. They all started out just like yours. Lesson; it can be done. That is good news. The bad news is that it is not an easy process. It will put a lot of stress on you and your team. Your chances of successfully making the journey are poorer than you chances of building the business to its current level. One out of ten companies make it to their fifth anniversary profitably. Less than that make it from profitability to sustainable growth.

Bringing In The A-Team: I get approached by founders who have realized at least two important facts. The first is that they are not up to taking their company to the next level. Second, they are committed to take their company to the next level. The first realization – personal limits – is a hard one for many founders. Those that reach it are, however, faced with a choice. Many choose to accept those limitations for both themselves and their company. Their company becomes what I call a ‘life-style company’. Those that have the commitment to take their company to the next level, seek out people like me.


© Dr. Earl R. Smith II


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