4 Management Growth Stages

by Paul DiModica

Are You a Professionally Managed Company . . . or an Entrepreneurially Managed Company?

• Are you a $1 million or $100 million company trying to manage growth correctly?
  
  
• Are you growing your top line revenue through organic revenue capture?
  
  
• Is your current business model scalable and replicable?

Money and success often hide business mistakes. Your business may be growing 10% a year and you think you are successful. But maybe your business should be growing 30-50% a year and you just don't know it or know how.

Sit with any CEO and ask them questions about their business model and instantly you can make an accurate judgment call on their operating approach. Do they manage their business entrepreneurially or do they manage it professionally.

At the DigitalHatch - Value Forward Consulting Group, we have identified four primary management growth stages in which companies operate.

Stage 1 - Entrepreneurially Managed - The CEO is the founder or a family member, is actively involved in all day-to-day transactions including operations, client sales and accounting, and feels more comfortable in the field than in the office. Corporate growth is achieved through organic revenue capture and the CEO manages their business based on their needs, not the needs of the company. Often the CEO sees the company as an extension of their own self worth and manages their business emotionally.  Many times the CEO uses corporate cash flow and profits as a reward to themselves. The company may have general P&L statements, but they are used mostly for tax purposes and payroll.

Stage 2 - Entrepreneurially Managed - The CEO may not be the founder or a family member but manages the company by gut feel, past experiences and what competitors do. The company may have a corporate management team and infrastructure in place but still manages its business autocratically. The CEO uses company cash and profits as tools to help hit corporate and personal goals. Additionally, the CEO has rudimentary business operational metrics and monthly P&Ls but prefers less data than more data when making decisions.

Stage 3 - Professionally Managed - The CEO understands that this is a business and is not emotionally attached to their decisions. Business growth is planned through strategic acquisitions, outside business funding, business analysis and a planned revenue capture process. Additionally, the CEO uses cash and profits as investment assets that can help maximize the business valuation and reach corporate objectives. The company uses some operational business metrics but does not manage all departments and management team members from a P&L point of view.

Stage 4 - Professionally Managed - The CEO and the executive team manage their business by metrics only, tracking each department's financial and operational objectives through detailed weekly reports that are consolidated monthly. The CEO evaluates and compensates the management team based on their P&L performance and all decisions are based on a studied, logical approach.

At the DigitalHatch - Value Forward Group, we have worked with over 500 companies on growth methodologies. The principal driver for business to have year-over-year growth of 25% or more is having the management team operate in a professional management stage 3 or 4 environment.

The key success drivers between entrepreneurial management and professional management are business metrics and detailed P&Ls.

Can entrepreneurial companies that are in Stages 1 and 2 grow 25% year over year? Yes, but it is harder.  Without detailed financial statements and management metrics, the valuation of their business for future exit strategies, private investments, and/or mergers is diminished.

Add department metrics and detailed financial management to your business and you increase your growth success.

How do you run your business?

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