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It turns out there are some concrete secrets to entrepreneurial success, and Edward Hess wants to share them with you. A professor of business administration at the University of Virginia’s Darden School of Business, Hess recently published Growing an Entrepreneurial Business: Concepts & Cases, in which he researched 54 high-growth entrepreneurial companies with an average of $60 million in revenue.
Hess aimed to uncover commonalities of action as the businesses developed from startup to established entrepreneurial venture. His main discovery: Not all growth is good, and it needs to be tamed.
“I found significant consistency among the challenges they (entrepreneurs) face, and the ones that handled it best were those who previously failed at another venture,” Hess says. “I wanted to put this out there so other entrepreneurs can learn from their mistakes. You don’t need to reinvent the wheel.”
Here is some of the road-tested advice Hess gleaned from successful entrepreneurs:
Learn to manage your company’s growth
Let up on the growth gas pedal to let your staff and systems catch up. “You have to pace growth,” says Hess. “So many entrepreneurs lost their businesses because the growth overwhelmed them, and they didn’t have the right people, processes and controls—both quality controls and financial controls—in place.”
Take the long view
As your company takes off, spend time away from the business—even if it’s on the weekend—to think macro instead of micro. You need to see the big picture to know which direction to head and map out a plan for getting there.
Prepare for growth
Get your systems ready to accommodate future growth, and remember to keep adjusting as you expand. That might mean instituting hiring processes to systematically bring on the right people or developing customer service programs. “Too many people don’t plan for growth,” says Hess. “Then when it hits, they hire as fast as they can and make mistakes. Or they run out of money because they don’t understand the financial part of growth.”
Learn to say no
Not all business is good business. One entrepreneur told Hess that he focused on what he could do very, very well and said no to everything else. “The more I said no, the faster I grew,” another entrepreneur reported. So turn down work that doesn’t fit your mission or expertise. Instead, work with customers who help hone your brand and reputation, offer repeat business, or serve as referrals for future jobs.
It’s usually better to hire someone you have previously worked with or someone you or co-workers know and trust, Hess notes. Have candidates interview with numerous employees, and then hire people on probation to make sure they’re the right talent and fit for your culture. “The best entrepreneurs hire slowly and fire fast, but almost everybody else does the opposite,” Hess says. “Many entrepreneurs had to make two to five hires to get to the right person. This is extremely inefficient and costly.”
Speed up payments
New ventures often run into trouble when it’s necessary to spend money on employees and supplies upfront, but don’t receive payment on their invoices for 45 to 90 days, which ties up their funds. When your company confronts cash-flow issues, get inventive. Try offering existing customers a 5 percent discount if they pay you in 14 days. That way you won’t need as much cash on hand. “The amazing thing is,” Hess says, “entrepreneurs were shocked at how many people paid fast just to save 5 percent.”
Provide “fire extinguishers”
Minimize the chaos of a growing company by documenting processes and procedures that will arm your employees to fight fires. Otherwise, you’ll be contending with the same crises over and over again. Require your employees to write instructions for how to do their jobs; if they get sick, go on vacation, or leave the company, you can maintain consistency in your business operations. “There should be no single point of failure in a business,” says Hess. “The smaller you are, the more you need to cross-train employees so others can step in and do an okay job.”
Don’t listen to the hype
One of the most common mantras in business is “Grow or die.” Hess searched far and wide to find empirical evidence to support that claim and never found it. “You need to improve or you will die. You have to stay better than the competition,” he adds. “Managing a growth business takes the right mentality. You can’t become complacent, and you can’t take your customers for granted. You have to be better, faster and cheaper—constantly.”
Once you’ve mastered improvement, things will really take off. Just remember to ease off the gas occasionally so you can pace your growth.
Suzy Frisch is a Twin Cities–based freelance writer. She’s covered business, politics, law and many other topics for a range of publications, including Twin Cities Business magazine, the Star Tribune and the Chicago Tribune.
Note: The opinions expressed in this article are those of the author and do not necessarily reflect the views of FedEx.
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