Throughout my career, I’ve experienced many of the growing pains SMBs encounter on their road to success. From lost sales to hiring missteps, I’ve learned the challenges of moving beyond the startup phase and managing growth.
So too has Jason Lemkin. A media giant and founder of the web services blog SaaStr and software-as-a-service venture fund SaaStr Fund, Lemkin joined me recently for a four-part webcast series hosted by Oracle. Lemkin, who is a two-time founder and former CEO of EchoSign, shared some of his wisdom and lessons learned on how SMBs can position themselves for growth.
During the Q&A, we highlighted five key areas that SMBs must address to be successful:
Here are Lemkin’s insights on each of these challenges.
As your business grows, you tend to get bogged down by administrative processes and red tape. So how do you stay motivated as the business evolves?
Lemkin raised a few key strategies, beginning with alignment across the organization. As leaders, we need to first look inwardly—as individuals—to ensure success. Ask yourself, “Did I hire a start-up team that’s committed for the long haul—at least seven to 10 years?” If the rest of your founding team can’t make a long-term commitment, you need to find a way to replace them. The reason: Initial gains can quickly implode if team members aren’t willing to follow through on your strategic vision.
Another potential hurdle is burnout. Leaders often try to do everything themselves, and we’re pretty good at determining our three most important priorities. But, as Lemkin says, “The challenge is four through 400 on the list. That’s where we fall apart.”
If you’re feeling overwhelmed, take a break, and do nothing but recruit—even if that means missing a sales planning session. If you’re the CEO, stop playing the role of a vice president or manager longer than necessary.
Once you know that you need a strong supporting cast, you need to foster a culture that can sustain growth. Lemkin’s first words of advice are to “pay up.” When it comes to hiring key personnel, many of us err by trying to save a few nickels. But a great vice president who generates a half-million dollars in revenue will likely cost significantly more than a mediocre director.
Also, don’t simply hire candidates because they work for big-name companies. Candidates from larger firms may only appear to be more capable than prospects from lesser-known companies because they have access to more resources.
In addition, make sure your SMB builds a company culture built around people. You don’t build culture through paintball, foosball games, or other cliché team-building activities. A rich culture comes from ideas and activities that align with how you want your customers, employees, hiring candidates, and business partners to perceive your company. Think of the bigger picture of what message your company is trying to convey and how that resonates with your people and beyond.
A good example is a company like Toms. The shoe and apparel company’s One-for-One program matches each pair of shoes purchased with a pair of shoes for a child in need.
SMBs often grow faster than they can sell. Larger organizations know that headcount drives revenue. But for startups and smaller companies, revenue drives headcount. In the early stages, startups or SMBs may need to focus on generating leads first, and then hiring the right people to convert those leads into sales to meet their revenue goals.
Another strategic factor to consider is how you innovate and respond to competition. Everyone has competition. And the smaller you are, the bigger and scarier your competitors seem. That doesn’t mean you can’t compete. It means you need to focus on what you do best.
Lemkin discussed a “keep ourselves honest” exercise he performs with his company called 10X better. “Be honest with yourself about what your company does that’s 10 times better than your competitors and build upon that,” he said.
There’s no question that data drives everything today. In the business world, you need to follow data throughout your entire ecosystem. That means across your company and the marketplace. Lemkin suggests that companies establish about a half-dozen goals but designate three of those as core targets. In addition, each department should have three goals designed to help the company achieve its primary objectives. To measure your progress, review the related data or KPIs on a weekly or monthly basis.
Also, consider what’s happening in the marketplace. If you’re growing 60% or more per year, you’re doing something right. Double down on your competitive advantage. Go back to that 10X analysis. If you’re growing slowly, you’re likely not 10X better than anyone else. Look at your net promoter score (your customers’ ratings) and ways you can boost it.
More than 83% of companies responding to an Oracle/Inc. 5000 survey have at least two functions in the cloud. But only 36% have their finances in the cloud. In other words, many businesses don’t fully leverage the benefits of cloud technology.
According to Lemkin, we’re in the post-cloud world. Everything should be in the cloud at this point. We’re in the decade where “everything is a service”—whether it’s quality assurance, search capabilities, call centers, or voice as a service.
Also, be honest about what your technology is capable of doing. Talk to your IT team about how quickly your technology can scale with your business. On-premises systems or clouds from smaller, niche service providers might not be able to keep up with your growth. Conduct technology upgrades and expansions in stages, maybe on a quarterly basis.
While technology is certainly a key to success, overcoming any one of these five challenges comes back to people.
Lemkin closed our Q&A with the following key takeaway:
“Don’t settle on your key hires. Don’t settle. The difference between a great VP and a good or a mediocre VP, that’s where you get your magical 10X, your magical returns.… Don’t worry about rock-star individuals. Your VPs will find them.”