The benefits and challenges of running a slow-growing business | February 22, 2016

It’s understandable why we’re all so interested in fast-growing businesses, thanks to the drama involved. Will the company in question be able to raise the next round of funding, or will they hit the end of the runway in a ball of flames? Will they be able to hire fast enough to meet their demands, or will the culture implode on itself as people flee to Google or Facebook? Will the company fight off unwanted takeover bids and gain an even bigger valuation, or will they end up regretting not taking the deal? Will the founders end up as multi-millionaires, or just another Silicon Valley casualty? Each option is a juicy as the next, and equally deserving of comment and speculation.

As rapid growth is considered the yardstick of start-up culture, it’s unsurprising that the majority of how-to articles focus on the challenges of running a fast-moving business. So how do you embed culture when your team has grown from 30 to 100 people in less than a month? How do you ensure your infrastructure is up to the task when your user base is doubling every few weeks? And how to you keep the company going when your monthly payroll is in the millions, but your income is in the thousands?

These are all very interesting questions, and ones that will help many budding entrepreneurs. However as the founder of a deliberately slow-growing company, there is a real lack of articles charting the challenge of slow growth; and challenges there are a-plenty.

For instance, when fast-growing companies hit problems around team management, marketing and sales, or HR, they can usually hire their way out of the problem. So they’ll create a new management layer, build a sales and marketing team, or hire HR professionals. The speed they are moving, combined with the funding they have raised, is often enough to power through these inevitable growing pains and get to the other side in one piece.

By comparison, slow moving companies often have to live with these challenges for years, until they have the revenue or work available to justify even a part-time position. Until that point, slower moving companies need to make do with the resources they have available, figuring out ways to self manage, spreading sales and marketing across the management team, or using external agencies for ad hoc HR work.

That’s why smaller companies end up having to focus on their core commercial offering, be that building, maintaining and supporting software if you’re a tech start-up, or offering design and development services if you’re an agency like Clearleft. This means that the traditional business functions you’d find in a large company (finance, marketing, HR etc.) end up taking a back seat; either by being distributed across the whole team, or concentrated amongst a small number of operations staff.

Neither of these approaches is ideal. For instance, you can adopt a “many hands make light work” attitude by distributing common admin tasks across the team. But having experienced (and expensive) practitioners spend time on admin isn’t particularly cost-effective. It can also be a little demoralising, especially if colleagues at larger companies don’t have to do this. The other option is to centralise typical business functions amongst a small group of operations staff. This works well for general admin duties, but can be challenging when you start to need specialists skills like sales, marketing or HR. So in the end you just struggle through until you grow big enough to justify these additional roles.

In fast-moving companies, hiring new people is less of a cultural challenge as the team are used to job descriptions fluctuating and new people joining all the time. In a slow-growth company, people get used to the status quo. It can be hard to relinquish part of your job to a new hire, or suddenly find yourself working under a manger when you never had one before. These changes need to be handled with much more care and sensitivity than the typical start-up environment.

Fast-moving companies obviously have their fair share of cultural problems. Still, the pace of change can make it easier to shape the direction of growth. For instance it’s common to see companies between 20-50 people start to define sets of company values. A fast-moving company may reach this point in a year, when the culture is still fairly new and malleable. By contrast a slow-growing company can take years to reach this point, by which time the culture has already solidified. This solidity has many benefits, such as cultural resilience; but it also makes culture change much harder.

These challenges aside, there are a lot of positives in running a slow growth company. For a start there’s a lot less stress involved, and a lot less risk in something going spectacularly wrong. You have much more time to build the right team, and ensure the culture sticks, rather than just papering over the cracks. More importantly, you get to build a sustainable business under your own terms, rather than those of external funders. The biggest benefit for me is where you place your focus.

If you’re focussed on growth above everything else, it’s easy to sacrifice things like quality of service provision. Sometimes this is deliberate—like hiring less talented staff to meet current staffing needs, or winning less interesting work than you want, just to pay the bills. More often than not it’s just accidental; the natural result of managing so many spinning plates at once. For me, slow growth allows a company to focus on what really matters to them, building a sustainable business focussed on quality.

Of course some businesses need to grow fast in order to gain the economies of scale they need to survive; to jump over that chasm to a world of profitability. There are plenty more businesses who have found themselves forced to grow needlessly fast; either as a result of pressure from investors, or the founders’ own desire for scale. Many potentially sustainable businesses end up growing beyond their means and burning out too soon. I know the goal with many businesses is to “go hard or go home”, but I’d prefer to see 100 successful start-ups making 10 million in revenue each, than one billion dollar unicorn and 99 failed ventures.

Posted at February 22, 2016 1:58 PM