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Are you ready to grow your small business? It’s time to start thinking like the big dogs.

By John H. Barkley, Esq. of Shustak Reynolds & Partners, P.C. posted on Thursday, October 16, 2014.

The Obstacle:

Every successful small business reaches a critical point in its journey, where things get so complex and there is so much work to be done, that the original architects of success are simply too few in number to get everything done.  There are a lot of names for this very common problem for small businesses: “Founder’s Syndrom,” “Founderitis,” and even “The Baby Trap.”

What these terms describe is when the founders of a business, who have been responsible for bringing a successful new enterprise into the world, refuse to allow their baby to “grow up” into a mature business.  The very people whose genius spawned the business, now hold it back and limit its potential.  This leads to stagnant or slow-growth and can even lead to ultimate failure of the business as competitive forces and market changes eat away at the business’ revenue stream.

I was speaking with a professional business coach with over 30 years of experience recently and he said something that I thought was simple but profound: Every business has to think like big business, even if it’s a one-man show, otherwise you cannot grow.

The Solutions:

Business experts, accountants, attorneys, consultants, and other experts talk a lot about how a business is structured.  There are opinions both for and against having structure in a business.  Some find comfort in a traditional corporate structure with a board of directors, officers, and procedures.  Some feel that it is somehow wasteful, or bureaucratic to have structure in a business.

EVERY BUSINESS HAS A STRUCTURE.  Every single business ever conceived has a structure, whether people know it or not.  Those who operate “without a business structure” are actually operating their business with an unplanned and disorganized structure.  Those businesses that have well-defined and faithfully-executed procedures, job descriptions, allocations of responsibility and authority, and utilize this structure, are far more capable of growth.

Every business has someone who performs: Management, Administration, Finance, Marketing, Sales, Production, and Quality Assurance (the “Seven Departments”).  If a small business has no plan about how these departments are supposed to work, the business will  constantly be in a reactive mode, reacting to problems more often than preventing them.  The proverb “penny-wise and pound foolish” comes to mind.

EVERY STRUCTURE HAS ITS LIMITS.  The primary hazard of “Founderitis” is the limits this places on the ability of a business to grow.  One person can only do so much before they reach their own limit.  If a business is to grow beyond its childhood, founders must release the limitations they place on the business.  For example, if the founder retains direct control over management, admin, finance, marketing, sales, production, and quality assurance, then as a business grows, more and more of the work falls through the cracks and festers into legal problems, tax problems, or even worse: missed opportunities for greater revenue and profit.  Resources that could be devoted to growth are instead devoted to survival.

A mature and well-thought-out business structure gives the small business the strength and ability to actively prevent problems and pursue opportunities, plan for the future, and ultimately increase profits.  This happens for two reasons: (1) a deeper and larger talent pool can simply handle more work than founders could ever hope to accomplish on their own, and (2) with responsibility and authority for each area of the business delegated amongst the talent pool, everyone in the organization knows who to go to in order to accomplish the goals of the business, and people are able to do so because procedures are in place to facilitate that active communication.

A mature but poorly-thought-out business structure leads to bureaucratic waste, mismanagement of resources and personnel, poor morale from having “multiple bosses”, and excessive overhead costs.

TREATING SEVERE CASES OF FOUNDERITIS.  Founderitis comes down to one issue: control.  Founders often have the very-natural and common-sense mindset that “I built this business into what it is, and I know what’s best.”  For founders, accepting a more mature business structure, creating formal job titles, creating procedures, and delegating authority feels like they are releasing control.  This doesn’t have to be the case.  Procedures are the key element.  Specifically, procedures for communication.

Effective two-way communication with founders can give them the control they desire, while freeing the business of the limitations of founderitis.  The way I recommend accomplishing this involves a couple of different strategies.

First, the founders should receive regular written reports from each of the “seven departments” in a format that is clear and concise.  Information is power and ultimately, control.  These reports should be informative and complete, but short enough that the Founder doesn’t skip reading them (“TLDR”).  The best examples of these that I have seen also have features like checkboxes for the Founder to “authorize” whatever action is being discussed in particular items on the report.  This gives the founder a quick and easy method to continue to exercise control over the business.

Second, are regular meetings, preferably scheduled at the beginning of a week or month.  This strategy is obviously more complex and harder to do effectively (there are some hilarious videos on the internet about the various follies and failures in company meetings), but just about every mature business enterprise recognizes the value of getting decision makers into a room to talk about what’s going on.  Effective meetings (1) have an agenda, which is distributed before the meeting, (2) Stick to the agenda as much as possible, (3) involve discussions that concern the entire group, rather than discussions that could be had one-on-one between the seven departments, (4) Don’t last so long that people tune-out, and (5) have someone (a single person) designated in the meeting who has both the responsibility and the authority to enforce each of these rules.  These regular meetings must be attended by the Founders (if it is an inter-department meeting), otherwise the Founders will miss out on gaining the sense of control that they need in order to feel comfortable with the new business structure.

Philosophers may tell us that control is an illusion.  I would say that the sense of control is very real in the minds of just about every human alive.  It is critical to our sanity to believe we have some control over our lives.  For founders to release the limitations placed on their businesses by founderitis, they must shift their perspective from “controlling the business” to “managing a team.”  The two strategies laid out above go a long way towards making that shift easier.

What tools do we need to build a mature business structure?

Most of this has been said before, but without the perspective of making the transition described above, things like written contracts, employee handbooks, standard operating procedures, manager handbooks, accounting systems, employee performance appraisal systems, etc. sort of exist only in the abstract.  They are things “we all know we should have” but we may not know why, or how it will make businesses stronger and more profitable, while giving the founders the sense of control they need to feel comfortable with growth.

About the author:

John H. Barkley is a Partner with Shustak Reynolds & Partners, P.C. specializing in tax law, employer compliance with the Affordable Care Act, contract drafting & negotiation, employment law, corporate law, John regularly consults on matters of internal accounting, business strategy, growth strategies, strategic partnerships, and assists small businesses with creation of standardized contracts, employee handbooks, standard operating procedures, manager handbooks, accounting systems, and employee appraisal systems. Learn more about John and Shustak Reynolds & Partners, P.C.

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