This is a summary post about what I learned from 100 conversations with owners/CEO’s of mid-size businesses.
Here’s the structure of this post:
Background on why I did this
Defining a midsize company
Who are the people I spoke with
Common challenges during transition (from small to mid size)
Common challenges at midsize
Tips to their younger selves
So let’s get started!
Why did I do this?
Around 2015, it started to become apparent to me that there is abundant resources/expertise available for large global enterprise companies and small local/hobby businesses. They are thus very well served for nearly all of their business needs by available in-house talent and professional services. But what about those companies in between? Those mid-size/mid-market companies you her about? How does one journey from being small business to becoming a global enterprise?
This question niggled at me for a long time, until finally in the spring of 2016 when I couldn’t take it anymore. Folks I’ve mentored will smirk at this next bit. Yes, I followed my own advice that I’ve given to every one of you that you’re tired of hearing: I hustled to arrange 100 deliberate conversations with people who understand this better than me and I learned from them.
Thus, I set out to learn more about the challenges of companies in this growth/transition phase. Maybe I would discover there’s already a solid solution available on the market (spoiler: there wasn’t) or gather enough insight to be able to propose a solution for this market segment.
But before we move on…
What’s a mid-size company?
Here we know there’s this glaring gap in available resources/expertise to serve the segment of mid-size / mid-market companies, but what exactly are they?
Great question to start with, right? I thought so too.
I looked to Industry Canada, Gartner, Wikipedia, Stats Canada, US Census Bureau, and other credible organizations. Everybody had a different opinion. So, I did the very sensible thing: I made my own definition too!
For the purposes of my post, the terms “mid-size” and “mid-market” mean the same thing. My usage varied depending on what seemed to fit more naturally with the sentence.
A mid-size company is at the stage of having graduated from its ‘small business’ / '‘start up’ phase and has not yet scaled to become an enterprise that’s focused on competing globally. It typically employs 50+ staff on an FTE basis and is generating between $5m-$100m in annual revenues. While they’re all unique at an individual level, this segment as a population face exceptionally similar growing pains. It might help if you think of them as the teenagers of businesses.
So let’s get on with this!
Who did I talk to?
Over the course of ~1 year, I had 100 deliberate conversations with people who were either presently or previously the owners, CEOs, or regional executives of mid-size businesses (ie. run an independent P&L for a geographic market) - both public and private enterprise. These business geographical scope ranged from regional through global, by model either service or product, and included both importers and exporters. All conversations lasted at least 60 minutes, with some being multiple conversations to explore different topics of interest.
These notes do not include conversations with SMEs that work with executives, though I firmly believe their input adds invaluable perspective from having broad professional exposure to the types of challenges faced by midsize companies.
Note: the majority of the companies of people I spoke with are located in Canada and USA, concentrated on the West Coast, so there is likely some bias associated. A dozen were located in Continental Europe and APAC.
Transitioning from Small to Midsize
Changing mindset from an offering focus (i.e. your service/product) toward an organizational focus (i.e. your business roadmap)
Scrappy can-do agility becomes less of an advantage
Surrounding yourself with a great advisory team is crucial: corporate lawyer, financial advisor, HR expert, strategic advisor, sales coaching
Spend money on outside help if it’s available, but do so with the explicit purpose of upgrading your internal team. Do not take on the overhead and cultural weight for skills that are only needed 1-time (e.g. ERP implementation).
Higher overhead for the business - updating top management team, adding in a layer of management
Standardizing via process and systems will allow business to scale without linear increase in labour costs
Areas of personal investment that have outsize business returns:
Finance and Accounting
Personal Counselling / Executive Coaching
Parenting
Sales / Negotiation
Need to start using financial and performance indicators to make business decisions on a regular basis. Know what the real drivers of your business + sector are, and measure constantly against these only. Focus focus focus.
Growth at the expense of profitability is not sustainable unless you have outside investment - experience of one CEO who was enthusiastic about 500% YoY sales growth, but experiencing declining levels of profitability as they fulfilled the work
“Innovation” and “Culture” are priorities for every executive, but most feel uncomfortable with making significant investments here. Two challenges CEOs encounter: investments into innovation and culture are generally intangible and fleeting, and many pitches they receive are either completely out to lunch or offer incremental benefits at best.
Realities at Midsize
Your status goes from scrappy underdog to having a target on your back. The smaller companies are nipping at your heels, and the larger incumbents are now paying close attention to you.
Building a great finance department is critical. Challenging, will almost always fail the first 1-3 times in hiring/onboarding experienced hires, but persevere. Important.
Protecting your time is one of the most difficult, and most important, tasks
Quantify your value proposition and solidify your competitive positioning. Only way to shift from founder-/owner-led growth to repeatable team-led growth.
Financial and legal illiteracy leave you highly exposed and will slowly kill your business
The importance of a strong professional team is critical. Have these bases covered: accounting and tax advisory firm, corporate law firm, litigation support, fractional external expert support (ad hoc).
Marketing strategy should not be outsourced. Hire an in-house marketing team, teach them the mechanics of the business, and learn together how to separate the wheat from the chaff of marketing. Augment them with agency/contractor support on execution, throttle up and down as needed.
Lessons Learned:
“What would you tell your younger self?”
“Doing” becomes less important. There are departments and specialists for everything the business needs. Being the “chief motivator” and a true leader is more important now than ever. It is critical to develop your leadership capability and your management team’s capacity to grow to the next phase.
Create the governance structure in your business that puts insurance policies in place so you will avoid fatal mistakes. This can be an advisory committee, . It will be worth every. single. dollar.
You don’t know what you don’t know until you don’t know.
Two contrary views on growth:
Don’t grow too big - it’s not worth the pain that comes with it. You will make meaningfully more economic gains and will be taking on outsize headaches and drama.
Only by growing and continuously challenging your status quo can you hope to better serve your employees, your customers, your community, and yourself.