Scaling Challenges| Fractional Management
|Paul||Oct 2, 2019|
As I mentioned in my last newsletter, I have been working on a new service to help founders transition from startups to ‘real businesses’ with a colleague, John Zaheer-Flaherty. It’s called ClimbWorks, and we are now in the middle of a soft launch. This edition is therefore focused on the challenges founders face in growing their businesses beyond the initial startup stage—and our initiative to address them:
We’re not in startup any more…
Carlos Eduardo Espinal nails it in his post outlining the challenges of scaling:
Scaling a company, particularly after having received substantial funding, is no easy feat. It requires an entirely new set of skills that are not exactly those that allowed a founder to succeed in finding product market fit in the first place.
In a thorough article with case studies, Mark Suster describes the mistakes that have led founders to fail after “extreme early success with an initial product adoption”:
They didn’t build an experienced or well-rounded management team,
They didn’t establish a well-articulated strategy or source of differentiation so that when they had hundreds of employees joined they could all pull in the same direction and for a common purpose
They didn’t establish a strong culture or norms that allowed for great decision-making without the founders having to intervene
They didn’t devolve authority or decision-making outside of the founders or a tight-knit executive group leading to delays by indecision or lack of authority
They failed to invest in internal systems to support growth
They didn’t establish enduring processes to allow the broader company to have a roadmap for how to operate.
Innovate, Systematize then Scale
Mark goes on to list some of the key questions that startups need to address to avoid these mistakes:
As companies get this initial customer feedback on their product they start to have to ask harder questions about unit economics:
How much does it cost us to acquire a new customer?
How profitable is my product or service?
How long does it take me to pay back my original customer acquisition costs?
What sized team can I afford in order to sell, market & provide service to these customers?
I always push companies to hire “an operationally focused CFO” during this phase because in order to systematise you need somebody who brings economic rigour to decision making.
When companies get ready to add scale it’s important to bring in industry experts who bring real-world experiences from world-class companies that you aren’t inventing things for the first time.
Solving the Chicken and Egg Problem
John and I have worked with lots of startup founders and seen these patterns repeat themselves. But we’ve also noted a chicken and egg problem: It’s really hard for startups who only have seed funding to afford the experienced industry management they need at this stage.
That’s why we’ve developed ClimbWorks. John has experience building big brands, and I have taken companies through the extreme growth transition as a CFO and General Manager. We have been there and done it at every stage of growth.
With us, you get a Fractional CMO and a Fractional CFO, a term we borrowed from Chris Brogan.
We will work with clients part-time for a limited period of 3-6 months, and our fees are partly deferred under a revenue-based model. This means we are affordable, but can make a big impact. We can extend the period we work with a company, which means they get continuity. But we also transition out when they are ready, which means they get flexibility.
There’s lots of more info on our website. We’d love to know what you think. Given the nature of the service we want to provide, we are only going to take on 2-3 clients at at a time. If you know of anyone who might be interested, please let us know and we’ll schedule a call with them.
As always, thanks for reading this far. If you liked it, why not forward it to someone who might find it useful?