Central Perk: Seth's Blog : Organizing for growth

sâmbătă, 1 noiembrie 2014

Seth's Blog : Organizing for growth

Organizing for growth

Maybe it’s (finally) working. Maybe demand is up, opportunities keep presenting themselves and people want to work with you.

So why are you so stressed out? It might be because different organizational choices lead to different paths for growth.

Consider a house painter. His business has always been okay, but thanks to his skill and a local building boom, jobs keep showing up.

The traditional method: He lays out the money for paint, he does the work, he sends a bill, and soon, he gets paid.

The good news is that as a freelancer, he's super flexible and can withstand tough times. But in this environment, all sorts of trouble hits. First, there's a cash flow issue. New jobs mean more need for paint and materials, but he has to lay out his own cash to pay for it. Second, new jobs mean more work, but he's the best (and the cheapest) employee, so he ends up working way more hours. No cash, no time, no joy.

An alternative is for the painter to create a scalable system. He could require a down payment on every job, an amount calculated to cover all of his cash costs. Second, he could spend the time to build a pool of journeyman painters, a Rolodex of talent ready when he needs it. In this scenario, the painter becomes a foreman, not a painter any longer.

Or, consider one step beyond that, in which the painter hires several foremen, each responsible for his own Rolodex. Now, the painter is a CEO, a salesperson, the architect of a brand, an organization and its growth. But that still involves a lot of risk as he scales.

The last structure I'll point out is the idea that the painter could refine his system and instead of dealing with homeowners, he could find partners, and license them the system. The system might include his brand name, his sales approach, a computerized, data-driven direct marketing program and most of all, a rule book that lets people who don't have his iniative enter this business. By charging every partner who joins an upfront fee (this is how franchises work) as well as a share of their income, he can grow from state to state, building a nationwide painting behemoth.

There's no right answer. Not everyone should run a national painting franchise business. The key insight is to feel the pain that an organizational choice leads to and fix that instead of merely chasing demand and embracing each opportunity (no matter how juicy) as it comes along.

The key things to focus on, I think, are:

Cash flow

Demand enhancement

Increasing the ability to keep your promises by investing in a pipeline of talent

And most of all, reminding yourself why you're doing this in the first place.