As you’ve probably discovered in some of our other content, Doug Tatum’s latest work ‘No Man’s Land’ has inspired us to think about some of the challenging hurdles you’ll have to overcome while growing your business. No man’s land is defined by Tatum as that period of adolescence between rising up from a small start-up business and becoming a big player in your respective field. No doubt that each and every stage of operating a business can prove difficult, however Tatum’s work explores that this period – expanding from a small operating into a larger one – is often the most perilous for a business.
Your growth will usher in an inherent identity crisis
So, to help you navigate through these waters, we’re going to elaborate on what the author has dubbed his “five M’s”. Before we get to that however, we’re going to quickly brush over a few of the principles Tatum discusses in the book to help you decide whether or not it is right to expand your business. Speaking in an interview, Tatum said: “What's really stupid is to force a business built around an entrepreneur, or around a human-scale concept, into a transition that will make it economically unviable. If you can't come up with a scenario under which the company becomes profitable again, you'd have to be crazy to go forward."
We can see from this quote that from first-hand experience, Tatum has seen managers hell-bent on expansion plans that weren’t truly in the interest of that enterprise, and it ultimately cost them. To combat a popular misconception in business: there’s absolutely no shame, in fact it remains counter to your profitability to expand with an ‘at-all-costs’ approach.
According to Tatum, businesses that are entering ‘no man’s land’ have the following in common:
• Rapid growth has a clear beginning.
• Growth companies confront common problems.
• There is no shortcut through rapid growth.
• No Man’s Land happens only once- path is eased through brand, strong value proposition, unique selling points, customer enjoyment, and a distinct culture.
• Rapid growth has a clear ‘end-game’ – small business with continued growth expand, get acquired or stagnate.
To combat the treacherousness of no man’s land, the author offers up his ‘five M’s’ for navigating through. The first of which underlines the importance of market alignment. Market alignment is when your business is delivering upon an engaging, necessary value proposition for your customers. This may seem simple enough, but keep in mind that market misalignment is almost a certain outcome of growth – particularly rapid growth – so as you expand the scope of your operations, you’re keeping in the back of your mind the need to stay aligned with your core clientele. You’ll need to “understand the transition that will occur in the business’ market”, as Tatum explains, in order to remain an attractive prospect to your new, and existing clients. Consider in the early phases of setting up a business, where the entrepreneur or CEO was fully-able to decide which promises to make to which customers. As the business expands, that original visionary is going to be less capable of completing that same task, as their work load from auxiliary responsibilities begins to drown them. If you can provide added value to your clients by “successfully coordinating the needs of… different constituencies”, you’ll be better positioned in adapting to changes as the business continues to expand. You’ll also lower the risk of losing any of your clients that may feel violated by a new orientation for the business. Maintaining trust, and particularly your market alignment is absolutely key.
The second M we’re going to cover is Management. At some length, Tatum goes on to dispel some of the common mythology surrounding what constitutes effective management styles, and drives home the point that outgrowing your original management team is extremely common; almost a rite of passage. This presents a problem in itself: what to do with the people that helped you start and build the company? Keep them? Fire them? Whatever way you choose to deal with this scenario, the end goal is to have a management team that is qualified and ready for the challenges ahead, rather than someone that is adapting to changes as they present themselves. You want an anticipator, rather than an adaptor during this transition of business adolescence, Tatum explains. We covered some of these myths in a previous article.
Moving on, this puts your business model under the microscope, in an attempt to determine whether or not it’s encompassing all the possible stresses and changes it will surely undergo with a rising number of clients. During the early stages of your operations, you’re likely to be running under the ‘high-performance, cheap labour’ model which will almost certainly buckle under the pressure of a multitude of new clients. The natural progression, the author argues, is to switch from this to a normal labour model with implemented systems that can scale to the size of your business; this will ensure your value proposition is maintained for your customers. Some management teams are quicker to confront this than others, but the underlying message is that the step-function nature of your costs and required systems will increase as your customer numbers do; so don’t leave it until it’s too late.
The fourth and all-important M-word is: Money. Money is the fuel that gives momentum to your business’ initial foundation and its growth. However, and quite counter-intuitively, the larger your business gets, the more problematic acquiring capital can become. At its genesis, your business may have been funded with some personal collateral of some sort; maybe the CEOs house. As you move away from smaller operations and hope to break into the big league, you’ll need a substantial injection of capital, and in today’s market, private equity firms and banks alike are more cautious when it comes to funding businesses, regardless of the rate of their expansion. The answer, according to Tatum is for businesses to operate with a profitable, asset-light business model; this will hopefully give you enough cash stashed away to carry you through any stagnant months.
The fifth-and-final M is Momentum, where the author addresses ways in which management in any business can inspire motivation internally in an organisation. Techniques mentioned include maintaining optimism from the management team, which will in turn help to keep your employees optimistic. He also encourages management teams to experiment with news ways of doing business, to ‘shake-up’ the business in a sense, so long as that shake up doesn’t interfere with existing promises made to your clients. Keeping things fresh in your business will alleviate any signs of your staff members feeling uninspired or stagnant in their role, and will hopefully keep them motivated, giving them momentum.