The path from a successful startup to a large company
On Habré, quite often articles are published on how to properly promote your startup (for example, this article). But I haven’t yet met articles about what to do with a startup after it has been successfully launched and promoted, so I decided to fill this gap and write about an article about the history of one spherical startup in a vacuum. The article is not without conclusions, based on real life experience and is under the cut.
Happy New Year! With new happiness!
So, it was a few years ago. Three people respected in the IT community who worked on director positions in large companies decided to create their own business. One of the three resigned from his job and became president of the newly formed company, the rest remained in their old companies, but began to actively help the business of a new startup with means, tips and connections (do not think that their companies immediately began ordering services from a startup - no, nothing there was no such thing, since the founders of the startup were respected people and valued their karma).
')
After a couple of months, the first customer was found (the startup worked on the B2B model) and a team of people familiar to the founders was recruited to fulfill the order. It turned out a small but efficient team of like-minded people, and the work began to boil.
The first year of the company has passed like clockwork. The company, with the help of a dozen employees, won several large tenders and earned a lot of money for its founders. The company was noticed on the market, it even got into the rating of 100 leading companies of Russia in its industry (without special efforts aimed at it). In general, the first year of the company's success.
Only a year has passed since the company was founded, and its founders have already received an offer to buy from one large holding. However, the future of the company to its co-founders appears in a rosy light, and therefore they reject the offer. The founders decide to independently develop the business and decide to invest all or almost all the money earned in the first year into the development of the company in order to turn it from a startup into a big company. And this is how it is done:
1. The company's staff is expanding, several highly paid employees are hired as executive, financial and technical directors from among the old acquaintances of the founders.
2. The work of the company is built in the image and likeness of large companies:
- business processes are regulated, a document management system is introduced, which involves the coordination of all outgoing documents;
- A number of information systems are being introduced (electronic document management, CRM, etc.), work with which takes a lot of resources from all company employees;
- the technical support service is significantly expanding to organize a round-the-clock shift in the office (the company used to be content with a mobile phone on duty, which the technicians took turns to do).
3. A lot of money is invested in the marketing of the company:
- ordered a new corporate identity from one of the leaders in the field of design;
- The company begins to participate in all industry exhibitions and conferences.
4. Many non-production expenses are made:
- The office is removed, several times larger than the previous one;
- lease new cars of the representative and business class.
With all of the above, the company does not hire new sellers, because the founders do not want to teach strangers to the business - it seems that there are plenty of customers, because the founders and newly hired directors have good connections in the market.
The second year of the startup’s existence goes like this:
- Attention to business by the founders decreases, because they trust the hired directors;
- new directors dismiss several old employees and imprison “their people” in their places, and in greater numbers than before;
- because of the new strictly regulated procedures, the company stops working quickly and loses its competitive advantage in comparison with large companies;
- the motivation of old employees who worked for almost 24 hours a day on the first, “golden” year, falls, because with the arrival of new top managers, they were relegated to second roles;
As a result, the efficiency of labor decreases, the internal climate in the company deteriorates, its employees (of whom there are more than 50) cannot be called a team of like-minded people. Due to the fall in work efficiency and due to increased costs, the company ceases to be profitable and begins to consume the money earned in the first, “golden” year.
By the beginning of the third year of the company's existence, the co-founders understand that it is not developing as we would like, and decide to rebuild the company and diversify the business:
1. The founders leave their jobs and start working full time for their company.
2. The company makes reductions - several top managers and half of the technical support service are fired.
3. Sharply reduced marketing costs
4. All the money left over from the “golden” year is invested in the development of new products in related areas of the market; a development team and several managers are hired for this.
But companies are no longer lucky as in the first year - new products are unclaimed, and old ones are already sold with difficulty. The company has to dismiss the team that developed the new products and continue cutting down the old employees. Former heads of divisions of the company become simple executors and leave the company one by one. Gradually, the company is rolling back to the figures of the first year - only without the money earned in the “golden” first year, without positive dynamics and without prospects.
And now - conclusions from the told story, which may be interesting for startups:
A. Sell the company during the "white line" - during the "black" you no one will buy it.
If you have an offer to sell the company, accept it if you are offered conditions acceptable to you. Especially - if you are not sure that you want to manage a large organization. Startup creation and corporate governance are two different competencies. If you got the first one, it’s not at all the fact that the second one will turn out.
B. Start the planned development of the company with the expansion of the sales office .
If you decide to develop on your own, you need to conduct active sales and ensure a steady stream of customers that would slightly exceed your ability to serve these customers. Only if this has been achieved can one reflect on the further expansion of the company.
Imagine that you are a farmer. What will you do first if you decide to expand the dairy business — expand the herd of cows, or hire new milkmaids?
B. Expand the technical management only after sales increase.
It is known that human resources are “rubber”, i.e. have some degree of elasticity. If the staff of the technical directorate is properly motivated, they will be happy for additional work, even if sometimes they have to recycle a little. At the same time, processing should not be done by the system and therefore, when you are convinced that sales are growing, and do not fluctuate, it will be necessary to expand the technical management.
G. Forge your own footage
It is much more correct to develop the competencies of your existing employees than to buy new employees with the competencies you need from other companies. The development of employees within the company increases their loyalty, carries less risk and is cheaper. The arrival of managers from the side inevitably means reducing the area of responsibility for existing employees. Therefore, it is better to expand the company, making executives managers and hiring other performers in their place than appointing outside managers.
Organic growth is similar to the natural growth of a tree, attracting top managers from the outside - grafting shoots into a tree of another variety, which does not always end successfully.
D. Do not get carried away with business processes and IT systems.
Regulated business processes and information systems are needed by transnational corporations and other large companies to structure their operations and increase management efficiency. However, a startup of up to 100 people can do without rigidly prescribed procedures and IT systems or with a minimal set of those.
I hope my article was helpful. Once again, happy New Year!
Happy New Year! With new happiness!
So, it was a few years ago. Three people respected in the IT community who worked on director positions in large companies decided to create their own business. One of the three resigned from his job and became president of the newly formed company, the rest remained in their old companies, but began to actively help the business of a new startup with means, tips and connections (do not think that their companies immediately began ordering services from a startup - no, nothing there was no such thing, since the founders of the startup were respected people and valued their karma).
')
After a couple of months, the first customer was found (the startup worked on the B2B model) and a team of people familiar to the founders was recruited to fulfill the order. It turned out a small but efficient team of like-minded people, and the work began to boil.
The first year of the company has passed like clockwork. The company, with the help of a dozen employees, won several large tenders and earned a lot of money for its founders. The company was noticed on the market, it even got into the rating of 100 leading companies of Russia in its industry (without special efforts aimed at it). In general, the first year of the company's success.
Only a year has passed since the company was founded, and its founders have already received an offer to buy from one large holding. However, the future of the company to its co-founders appears in a rosy light, and therefore they reject the offer. The founders decide to independently develop the business and decide to invest all or almost all the money earned in the first year into the development of the company in order to turn it from a startup into a big company. And this is how it is done:
1. The company's staff is expanding, several highly paid employees are hired as executive, financial and technical directors from among the old acquaintances of the founders.
2. The work of the company is built in the image and likeness of large companies:
- business processes are regulated, a document management system is introduced, which involves the coordination of all outgoing documents;
- A number of information systems are being introduced (electronic document management, CRM, etc.), work with which takes a lot of resources from all company employees;
- the technical support service is significantly expanding to organize a round-the-clock shift in the office (the company used to be content with a mobile phone on duty, which the technicians took turns to do).
3. A lot of money is invested in the marketing of the company:
- ordered a new corporate identity from one of the leaders in the field of design;
- The company begins to participate in all industry exhibitions and conferences.
4. Many non-production expenses are made:
- The office is removed, several times larger than the previous one;
- lease new cars of the representative and business class.
With all of the above, the company does not hire new sellers, because the founders do not want to teach strangers to the business - it seems that there are plenty of customers, because the founders and newly hired directors have good connections in the market.
The second year of the startup’s existence goes like this:
- Attention to business by the founders decreases, because they trust the hired directors;
- new directors dismiss several old employees and imprison “their people” in their places, and in greater numbers than before;
- because of the new strictly regulated procedures, the company stops working quickly and loses its competitive advantage in comparison with large companies;
- the motivation of old employees who worked for almost 24 hours a day on the first, “golden” year, falls, because with the arrival of new top managers, they were relegated to second roles;
As a result, the efficiency of labor decreases, the internal climate in the company deteriorates, its employees (of whom there are more than 50) cannot be called a team of like-minded people. Due to the fall in work efficiency and due to increased costs, the company ceases to be profitable and begins to consume the money earned in the first, “golden” year.
By the beginning of the third year of the company's existence, the co-founders understand that it is not developing as we would like, and decide to rebuild the company and diversify the business:
1. The founders leave their jobs and start working full time for their company.
2. The company makes reductions - several top managers and half of the technical support service are fired.
3. Sharply reduced marketing costs
4. All the money left over from the “golden” year is invested in the development of new products in related areas of the market; a development team and several managers are hired for this.
But companies are no longer lucky as in the first year - new products are unclaimed, and old ones are already sold with difficulty. The company has to dismiss the team that developed the new products and continue cutting down the old employees. Former heads of divisions of the company become simple executors and leave the company one by one. Gradually, the company is rolling back to the figures of the first year - only without the money earned in the “golden” first year, without positive dynamics and without prospects.
And now - conclusions from the told story, which may be interesting for startups:
A. Sell the company during the "white line" - during the "black" you no one will buy it.
If you have an offer to sell the company, accept it if you are offered conditions acceptable to you. Especially - if you are not sure that you want to manage a large organization. Startup creation and corporate governance are two different competencies. If you got the first one, it’s not at all the fact that the second one will turn out.
B. Start the planned development of the company with the expansion of the sales office .
If you decide to develop on your own, you need to conduct active sales and ensure a steady stream of customers that would slightly exceed your ability to serve these customers. Only if this has been achieved can one reflect on the further expansion of the company.
Imagine that you are a farmer. What will you do first if you decide to expand the dairy business — expand the herd of cows, or hire new milkmaids?
B. Expand the technical management only after sales increase.
It is known that human resources are “rubber”, i.e. have some degree of elasticity. If the staff of the technical directorate is properly motivated, they will be happy for additional work, even if sometimes they have to recycle a little. At the same time, processing should not be done by the system and therefore, when you are convinced that sales are growing, and do not fluctuate, it will be necessary to expand the technical management.
G. Forge your own footage
It is much more correct to develop the competencies of your existing employees than to buy new employees with the competencies you need from other companies. The development of employees within the company increases their loyalty, carries less risk and is cheaper. The arrival of managers from the side inevitably means reducing the area of responsibility for existing employees. Therefore, it is better to expand the company, making executives managers and hiring other performers in their place than appointing outside managers.
Organic growth is similar to the natural growth of a tree, attracting top managers from the outside - grafting shoots into a tree of another variety, which does not always end successfully.
D. Do not get carried away with business processes and IT systems.
Regulated business processes and information systems are needed by transnational corporations and other large companies to structure their operations and increase management efficiency. However, a startup of up to 100 people can do without rigidly prescribed procedures and IT systems or with a minimal set of those.
I hope my article was helpful. Once again, happy New Year!
Source: https://habr.com/ru/post/79551/
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