Stages of Business Growth
Stages of Business Growth
Lessons from a Family Enterprise's Journey
In 1969, my father launched a plastic packaging company that quickly blossomed into a robust enterprise. Although I previously touched on the pivotal moments that saved and reshaped our business in an article on Seed Scapes, I hadn’t explored the reasons behind its initial struggles. What caused a venture that enjoyed profitability from the outset to falter?
From modest beginnings, the company expanded to four locations across the United States, generating $45 million in sales from renowned clients in various markets. Remarkably, this growth was achieved without any external capital. Instead, the expansion was financed through bank loans, equipment leases, and, crucially, by reinvesting every ounce of profit to scale swiftly and substantially. With such momentum, one might wonder what could derail such a success story.
The landscape of the industry was evolving. New technologies were emerging that revolutionized how plastic packaging was produced—innovations we failed to adopt. This oversight meant we couldn't provide the comprehensive sourcing solutions our customers increasingly expected. At the same time, larger corporations were leveraging their scale to negotiate lower costs, and automation was beginning to streamline operations elsewhere, significantly cutting workforce requirements and expenses. Falling behind in these areas began to take its toll, yet these were merely the symptoms of a deeper issue.
It wasn’t until years later, while attending a talk by Clate Mask at the Genius Network, that the real root cause of our struggles became starkly clear. Clate eloquently outlined the fundamental laws of business growth, which resonated deeply with the challenges our family business had encountered. His insights revealed that our past difficulties were not just operational missteps, but a failure to adapt to foundational changes in business dynamics.
Clate Mask — February 2017…
There are predictable patterns and "laws" of business growth that occur as a company scales from around $100k to $10M in revenue. Major changes need to happen to grow 10x.
Going from $10M to $100M requires making changes across three main areas:
Vision - Having a clear vision aligned to your purpose, values and mission is critical for getting your team united and avoiding "entrepreneurial terror". Jim Collins' book "Beyond Entrepreneurship" has the best framework for creating a vision.
People - Good people can grow with you 1 stage (3x), great people 2 stages (10x). To scale, you likely need new leaders who have perspective beyond where you currently are. This is painful but necessary.
Personal Growth - Your success will never exceed your personal growth. Investing in your own development through coaches, mentors, reading, etc. is essential to leading the company while maintaining balance.
The key is focusing not just on 10x your business, but on 10x your life. Growing the business fast without personal growth leads to burn out.
Some key skills to develop are leadership development (driving problem-solving down), process optimization, and coaching leaders versus just managing.
Transforming Challenges into Opportunities
We utterly failed to address these three critical points. Our vision was rudimentary at best—simply to continue doing more of the same, which hardly qualifies as a vision. Regarding people, our strategy of promoting from within proved detrimental. The then-president, who had climbed the ranks from the factory floor, lacked the necessary management skills to handle an expanding business across multiple locations—a recipe for disaster. Moreover, the personal growth of our founding leader culminated in retirement, which did nothing to propel the business forward. Instead, it underscored a dire need for strategic change.
Fortuitously, my response to these challenges was swift and transformative.
Our vision was easily crystallized in the fire: in a consolidating industry, you either acquire or get acquired. As selling was not a viable option given our undervalued state, we decided to aggressively pursue acquisitions to build our value.
I replaced the previous president with an interim COO, a change agent, while we sought a more permanent leader. Our search criteria were ambitious; we targeted executives from vastly larger operations, and eventually found someone who hailed from a $300 million company with 17 locations, despite our being a $45 million business with just four.
Concurrently, I committed to my personal development, joining peer advisory groups like TEC (now Vistage), attending Tony Robbins seminars, and engaging in dialogues with potential buyers—not to sell, but to glean insights into how our business was valued and to understand what truly constituted value. I also consulted numerous investment banks to explore ways to infuse capital into our business.
Was it dumb luck, intuition, or perhaps a blend of both? Whatever it was, the stars aligned just enough to allow me to implement the pivotal changes necessary to revitalize our business. Reflecting on this, I often wonder if my experiences with the Genius Network might have preempted some of these challenges. While the answer remains elusive, one thing is certain: hearing Clate Mask speak years later brought unparalleled clarity to the recollections of those turbulent times. The insights I gained from that talk alone justified the cost of membership.
Access to the original talk by Clate Mask is exclusive to members of the Genius Network. If my story resonates with you and seems applicable to your own business challenges, I strongly recommend exploring membership. In the meantime, you can access some of Clate's insights through his interview on EntreLeadership, linked here.
As an additional resource, I've included select sections of my personal notes below. While these notes cannot replace the depth and impact of Clate's original presentation, they are intended to serve as a catalyst for deeper exploration. They may inspire you to seek out more comprehensive insights from Clate or others, potentially helping you find a more direct route to long-term success.
Clate refers to "business stages" as distinct phases of growth that companies tend to go through as they scale. Here are some key points about business stages:
They are typically defined by revenue and the number of employees. For example:
Stage 1: Solo founder
Stage 2: 2–3 employees, $100k-$300k revenue
Stage 3: 4–10 employees, $300k-$1M revenue
Companies face predictable challenges and need to make changes to scale successfully through each stage.
The stages are grouped in sets where a company scales 3X from one stage to the next (e.g. $100k to $300k).
It typically takes two contiguous stage advances (3X each) for a company to grow 10X (e.g. $1M to $10M).
The transitions from $1M to $10M, and $10M to $100M are particularly challenging.
New vision, people, and personal growth are required to successfully navigate each "two-stage" leap of 10X growth.
The business stages framework helps entrepreneurs diagnose issues with scaling and realize they need to "level up" their business.
Going from $10M to $100M requires making changes across three main areas:
Vision - Having a clear vision aligned to your purpose, values and mission is critical for getting your team united and avoiding "entrepreneurial terror". Jim Collins' book "Beyond Entrepreneurship" has the best framework for creating a vision.
When a company is small (under $1M revenue), everyone is aligned because they are working together day-to-day. As you grow to $3M and beyond, you need a team aligned to the vision to avoid "entrepreneurial terror." Entrepreneurial terror is when you walk into your company one day with many employees you don't know, and realize it's not aligned to your vision anymore. A clear vision allows you to scale the team rapidly while staying true to your purpose, values and mission. It ensures everyone is rowing in the same direction.
Jim Collins' framework has 3 components:
Purpose - Why the company exists beyond just making money
Values - Core principles and beliefs
Mission - What the company aims to achieve or contribute
Getting your team bought into this vision is critical before rapid scaling, so you don't lose what made the company great. It avoids the constant back and forth of growing fast but then pulling back once terror sets in. With vision, you can confidently move to the next stage. The vision gives you conviction to make the tough people decisions required to scale, because you know it's in service of something bigger than yourself.
People - Good people can grow with you 1 stage (3x), great people 2 stages (10x). To scale, you likely need new leaders who have perspective beyond where you currently are. This is painful but necessary.
As you grow, you realize you can't do everything yourself. You need leaders to help manage subgroups of your team. Clate realized even great people generally can only scale with you 1-2 business stages, about 3-10X growth from where you are now. This is because the challenges that arise at each new stage require new perspectives and experience. What got you here won't get you there.
His key insight was that leaders who have never scaled past where you are now likely won't be able to lead you through the next 1-2 doublings without major issues. You need to mix in leaders who have experience and perspective beyond where you currently are. It's painful but necessary.
If you want to take longer to scale while developing current leaders, that's an option. But know that scaling 10X+ requires new senior leaders with experience beyond the current stage.
Hire advisors or consultants with 2+ stages more experience than you to get advice without overhauling your team. Clate learned this the hard way by prolonging transitions, which stalled their growth for 2+ years.
Personal Growth - Your success will never exceed your personal growth. Investing in your own development through coaches, mentors, reading, etc, is essential to leading the company while maintaining balance.
Early on, a lot of entrepreneurial drive comes from financial motivation. But when you achieve financial success, you find out if you're truly passionate about your vision. Clate realized even with investment in coaching and development, he was still the "governor" limiting the growth of the business. This is because his personal growth had not kept pace with the rapid scaling of the business. His mindset was still stuck in an earlier stage. He learned success will never exceed your personal growth. You have to level up your leadership abilities, emotional intelligence, and problem-solving skills as the business grows.
Tactics he used included hiring an executive coach ($150K per year), reading 6 books per quarter, and programs like Dan Sullivan's Strategic Coach. But it took 2-3 years of focused personal development before he could lead the company beyond $100M. He wished he had seen the connection sooner.
You have to be honest about your personal growth gaps and invest to fix them quickly, whether through coaching, mentors, or experiences. This focus on 10x'ing your life vs. just your business ensures you avoid burnout and can sustain success.
The key is focusing not just on 10x your business, but on 10x your life. Growing the business fast without personal growth leads to burn out.
Some key skills to develop are leadership development (driving problem-solving down), process optimization, and coaching leaders versus just managing.