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o Man's Land is the awkward, adolescent stage of corporate growth. It's a transitional time, when a company is too big to be small and too small to be big. Every growing company encounters that forbidding territory -- and not everyone makes it through alive.
N If you want to be a survivor -- if you want pass through adolescence into adulthood -- there are four steps you will have to take. Call them the "4 M's of Growth."
Understand your Model
Small companies generally achieve success by providing great service. Their business model is high performance coupled with cheap labor. Customers find it easy to do business with such companies. They have a direct line to you, the business owner, who ensures that their needs are met.
At a certain stage of growth, however, this model no longer works. Providing personal attention to each of your customers is no longer feasible. To continue growing, you need a different value proposition to keep clients coming through your front door. If your company doesn't have any other differentiation -- if your only competitive advantage is high performance, cheap labor -- you must remain small to survive.
That's certainly a valid option, not to be lightly dismissed. It may be most profitable for you to limit the company to two or three individuals, target the clients you want, and deliberately stay small. The alternative might be to grow yourself right out of business!
Realign with your Market
As your customer base increases and the demands on you as the entrepreneur rise accordingly, your contact with customers inevitably decreases. You're no longer simple to do business with -- and your business suffers.
To continue growing, you first need to be aware that your business is misaligned. Then you need to act: You must identify your real and potential competitive advantages and take steps to implement them. Hint: If you're constantly putting out fires, it might be time for realignment.
Hire your senior Management
There's a right way and a wrong way to do this. Typically, companies in No Man's Land promote from within. For example, you take your best salesperson and make him or her the vice president of sales. The result? Your top employees aren't doing what they are good at, and your management staff doesn't have any experience in that position.
If you decide that you can and want to grow your company, hire an experienced vice president of sales who knows how to build a sales group. Think that's too expensive? So is losing your business. Besides, the right hire can increase the value of your shares or make your company more attractive to a venture capitalist.
Raise your Money
Most companies enter No Man's Land without enough capital to leave it. The key to raising money is lowering risk -- that is, proving to potential lenders and/or investors that you can escape No Man's Land. If you take steps one, two and three, you are well on your way to reducing your perceived risk and obtaining the cash you need to keep growing.
Still, there's one more hurdle most growing companies have to leap -- the No Man's Land Capital Gap. That gap occurs when businesses need less than $1 million, an amount that traditional lenders generally shy away from as both too risky and too costly to administer.
This is a difficult hurdle without a specific solution. However, one potential solution is the BRIDGE Act (Business Retained Income During Growth and Expansion), a tax-deferral bill originated by Tatum CFO Partners that is designed to help small businesses escape the capital crunch. Now pending in both houses of Congress, the BRIDGE Act would ensure that more growing companies have an opportunity to cross the No Man's Land Capital Gap. We will have to wait and see the outcome of this bill.
In summary, the growth that leads your company into No Man's Land will not lead you out of it. To cross that desolate territory, you as the entrepreneur need to step away from day-to-day operations and honestly evaluate yourself and your company in light of the "4 M's." Only then can your company begin redirecting corporate energies to transition the business through No Man's Land to success.
About the Author:
Profile of Douglass Tatum Email: doug.tatum@tatumpartners.com
or
800.828.8623
Tatum Partners
Firmwide Management/
Corporate Headquarters4501 Circle 75 Parkway
Suite QA-1164
Atlanta, Georgia 30339
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Revised: March 6, 2003 TAF
© Copyright 2003 Douglass Tatum / Tatum Partners, All Rights Reserved
