Dealing with fast growth can be tricky, just ask Bruce Banner. One moment he’s a regular comic book uber scientist, then someone has the bad judgment to make him angry and next thing you know he’s a 10 foot green monster who uses guns for toothpicks and likes smashing things. That sort of growth always comes with consequences. In Bruce’s case, it’s his clothes that suffer. Inevitably we see the Hulk burst out of his shirt as he transforms, all the while counting ourselves lucky that his pants managed to hold on for dear life.
Startup growth is not altogether unlike the Hulk’s growth – it can happen really quickly, and it can be hard to predict ahead of time. Sometimes I think about companies like Facebook and how fast they grow and it boggles my mind. In just a few short years Facebook has grown from a few guys in a dorm room with not an ounce of business experience between them, to a company with over a thousand staff! Can you imagine what that sort of growth must be like? I can’t. How do you make sure you don’t go off the rails? How do you keep delivering product excellence? How do you keep the right culture in the company? How do you hire the right people and so many of them?
Happily, Facebook makes my own startup Envato look like an insignificant pea in comparison, so we have not had to deal with anything so epic in scale. Nonetheless we’ve had our own growth these last few years and it’s been interesting, particularly this year watching, shaping and managing how it’s taken place. In the last two years we’ve grown about fifteen times larger in people, audience, revenue, and traffic. It’s not Facebook sized growth, but it’s a lot, and like any growth it brings some challenges.
The Demands of Growth
As our young company has grown, we’ve had to adapt to the change in circumstances. In some cases it’s been clear what was needed, in others we’ve had to use trial and error, advice from our more experienced team members, and intuition and instinct. Here are some of the demand of growth that we’ve experienced:
Hiring and Training the Right People
Unless you have Craigslist’s knack for running an enormous site with a skeleton crew, you are probably going to be hiring lots of people. There are enormous challenges in making sure you find the right people and then give them enough training and resources. I once read an article interviewing ten successful Australian entrepreneurs who’d run fast growing companies. About half of them cited hiring people too quickly with not enough thought and background checks as one of their greatest mistakes.
Aside from the possibility of hiring someone who isn’t right for a particular job, you also have the distinct possibility of hiring a person who isn’t the right fit for your company. Keeping the right culture in a business is critical because it determines how your company behaves, how it is perceived and who wants to work there.
Organizational Structure
If you’ve ever worked in a disorganized group or committee where it wasn’t clear who was in charge of what and whom, then you will know first hand the perils of bad organizational structure. Throwing lots of new hires into the mix without assigning clear roles, responsibilities and reporting structures is a recipe for trouble. It makes people less efficient, effective and ultimately less happy.
My father once told me there is no perfect organizational structure, there is only what works for a particular team. So what works in one company may be completely wrong for another. The important thing then is to figure out what structure suits a particular work style, ethic and attitude.
Accounting and Cash Flow
Growing fast means you need to have excellent accounts so you can quickly react to changes in the business. Cash flow is one of the biggest killers of new businesses and it’s particularly dangerous when your business is changing so fast you have trouble predicting what is going to happen next. Having solid accounts means knowing where your money is going, what’s in the bank, what your costs are and what a change in growth speed or revenue would mean in terms of your costs.
The greatest danger of inaccurate accounting is overshooting what is sustainable and finding yourself hanging off the edge with expenses and liabilities that outstrip both your current income and growth rate. If you don’t have up to date and accurate accounts, you may never know this is happening.
Not Getting Bloated
During a recent hiring process I had a chance to speak to a number of candidates who’d recently worked at large corporates. Every one of them recounted stories of red tape and unwieldy organizations that despite their success were slow and cumbersome. When you grow fast it’s easy to get bloated. Easy, but not pretty.
These are just some of the demands that fast growth makes on a company. Each has its own complications and is worthy of an article all on its own. What has become clear to me during the last two years however is that it’s important to manage the growth overall. The question is, how do you do that while maintaining momentum?
Growth and Consolidation
Unless you’re the Incredible Hulk, building muscle is usually a slightly different process to the anger induced mutation that Bruce Banner undergoes. In fact it’s a process that offers insight into how a company might manage growth.
Building muscle generally involves two phases. In the first you exert your muscles, pushing them as hard as possible, to the point where the muscle fibers begin to burst. Then you recover, letting your muscles adjust to this new level of required strength. In business you can manage growth by taking a similar two phase approach.
In the first phase you focus entirely on growth. Whether it’s increasing staff size, pushing heavily on marketing, or using money to buy you time in infrastructure; this period is the time for increasing the size of your company as fast as possible. It’s characterized by spending to solve problems, taking the view that some solution is better than none, and that you want to push out product and development as quickly as possible. In essence this phase is geared towards looking outwards.
In the second phase you switch modes to consolidate the growth. Here you focus on tidying up organizational structure. You make your infrastructure more efficient. You build up cash by pulling back on marketing. You take time to focus on the direction and strategy and to look at where your business is going. This phase is characterized by finding optimal solutions and looking to ensure they are going to stand up to the next phase of growth focus. It’s a time for prioritizing and organizing. In essence this phase is geared towards looking inwards.
Exertion and recovery. Growth and consolidation. This two phased approach allows you to focus on each phase without ignoring the equally important other half of fast growth.
Concurrency
During each phase you take an active approach to one aspect of fast growth and a passive approach to the other. So you continue growing during the consolidation phase, but it’s for the most part passive on the growth front. A few months later, you switch to growth mode and though you are still consolidating in the background, your main focus is growth.
So it’s not that you ever completely stop growing or consolidating. I think completely ignoring one part of growth wouldn’t be a great idea. Rather the focus switches. And having focus means you can get better results in that area.
I suspect that the larger you get the more concurrency is needed and possible. So a larger organization might have different focuses in different parts of the organization. For us here at Envato, we’re still pretty small — my head particularly so, so it’s nice to be able to have only one major focus going at a time!
‘Hulk, Smash!’
The great thing about fast growth of course is that it’s very exciting. Watching things change and move as fast as you can keep up is exhilarating! And you often suddenly realize that you are capable of doing a lot more than you used to be able to, a little bit like ol’ Bruce and his sudden ability to throw trucks and leap out of helicopters!
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