The stages to entrepreneurial (family business) success are:
Tinkering. He says, “Ideas for startups don’t just emerge whole from founders’ brains; they are developed over time.” At our shop, we say, “It takes 20 years to be an overnight success.” We both mean the same thing. Most entrepreneurs started their businesses in their 30s because they were good technicians. A gifted project manager or a top salesman or a terrific electrician rationalizes, “Why should I be working so hard and making money for this other guy? Why don’t I do this on my own and just keep the money for myself?” They confuse their technical prowess with having the skills and talents necessary to run an entire business with all its moving parts. Through dogged perseverance, hard work, and constant tinkering, many figure it out and manage to survive.
The Blade Years. Martin writes, “This is a bumpy time of highs and lows, during which many founders lose heart, or become overwhelmed.” Overwhelmed is certainly a word that can be applied to many, many family business leaders. The blade years can lead to a stable plateau, but the enterprise still has modest sales and borderline profits and is very vulnerable. The transforming idea or strategic partner or new customer opportunity which accelerates growth has yet to manifest itself. The blade years are a grind, and survival is the mantra.
The Growth – Inflection Point. This is the place where the company leaps off the plateau which may have lasted a few years or a quarter century. For example, it took Walmart founder Sam Walton about 12 years before he opened his second store. Most of us will never experience the explosive growth Walton created, but the growth – inflection point can nonetheless be a wild and exhilarating ride. This is the point at which you might say a family owned business has “made it;” it’s no longer struggling along day-to-day with scratchy profits. Sales, profits, and complexity increase rapidly during this stage.
Surging Growth. If an entrepreneur manages the growth – inflection stage well, he’ll progress into the surging growth stage. This is the point where entrepreneurs come to many crossroads and have plenty of decisions to make. Founders must “grapple with the difficult transition from scrappy entrepreneur to corporate manager. He or she has three main choices: remaining CEO by learning how to further professionalize the business; hiring a CEO to manage the business, most often either than taking on another role such as heading up research and development or becoming chairman of the board; or selling the company. Many founders stumble when making the transition to corporate chief and fail to recognize that they must master the requirements…” This transitional period is a critical one for a family business and presents stakeholders with an emotional roller coaster ride as critical decisions are made – for better or for worse.