Lots of small businesses do well, generating enough revenue to be sustainable and even give employees a secure future. But then there are the companies that take off and enjoy the kind of hockey-stick like growth others can only dream about.
They're different... but how?
"The DNA of a company changes as it grows," said Keith McFarland Thursday at the Inc. 500|5000 conference in Phoenix, Arizona.
McFarland, a three-time CEO and founder of McFarland Strategy Partners, a consulting firm based in Sandy, Utah, spent five years studying more than 7,000 growth companies. Among those, McFarland looked closely at nine top companies that not only grew extremely fast, but grew extremely large, too, with revenues of more than $250 million.
McFarland wanted to know what made these firms different?
The answer, he found, rarely had to do with the industry, market conditions, or even luck. Fastenal, for instance, a fastener distributor based in Winona, Minnesota, sells nuts and bolts. Last year, they sold about $2.5 billion in parts.
McFarland came to the conclusion that successful companies that managed to scale from entrepreneurial ventures to small businesses to mid-size businesses had efficiency in three areas: strategy, people, and execution.
Here are three big mistakes McFarland says most companies make when they try to plan for growth:
1. Strategy shouldn't happen once a year.
One of the common problems McFarland sees is the tendency for company CEOs to do a strategic planning session once a year, write up a report, and then, essentially, forget about it. McFarland believes that strategy is an ongoing process, and one that should be poked and prodded every 90 days.
"We think and talk about strategy too infrequently," he says. "Tthe problem with strategy is that things are changing all the time. You're trying to create adaptability, questioning the fundamental assumptions on which our companies are based."
2. Strategy shouldn't be exclusive.
Some company CEOs believe the best way to do strategy is simply to pull the top executives into a room and hammer out the plan. This is doomed to fail, McFarland says.
Instead, he says owners should bring democracy to leadership, something he calls "Democraship." The more people you have working on a problem, the better the solution.
3. Strategy shouldn't be too CEO-centric.
It's natural to want to surround yourself with employees who affirm your ideas. But "yes-man" culture can kill a business.
"We underestimate how much people are inclined to defer to authority," McFarland says. "You want everyone taking a full swing at the issues." To foster it, McFarland advises CEOs to encourage employees to disagree or challenge their superiors. "Insultants," he says, flourish--"those people willing to question those fundamental assumptions."