Stage 0 to 9 employees: One-person shows
Research shows that there are 6 stages along the evolution from 0 to 100+ employees, each with unique characteristics and milestones. Here is a description of Stage 0 to 9 employees. This is a section in the article in Cool Companies magazine 2007 Vol.2 Issue 2: What are your company’s next growth stage?
Content by Donald Rumball, Chair of Cool Companies magazine’s Editorial Board, and past Business Editor of The Financial Post. Interview by Claudia Sammer, Founder and Editor of Cool Companies magazine.
Top challenges identified by CEOs in Stage 0 to 9 employees
1. Access to capital
2. Marketing and sales
3. Visioning and strategic thinking
Operational focus: CEOs focus on finding and creating a winning product or service that is supported by sales from a growing customer base.
Marketing and products: The company is very product driven and very sales driven. The product line is limited with 72% of companies having 5 or fewer product lines. Focus is on initial sales of the product. Only 36% of companies export to the U.S., only 9% of which is to countries other than the U.S.. CEOs drive all sales and handle all customer relationships. This stage has the fewest clients compared to later growth stages. With a successful product, CEOs realize that they could charge a higher price and need to for profitability. CEOs don’t choose to compete so heavily on price again until they reach some economies of scale at 50 employees.
HR: The CEO makes most of the key decisions and does not delegate core responsibilities. Employees are viewed as support staff and the CEO may feel they do not have the skills to grow with their job. There is little organization of employees into departments, and there are few or no other managers. It’s the classic E-myth described in Michael Gerber’s book. By the end of this stage, CEOs realize that to have a business that runs independent of them and is strong enough to be duplicated from place to place, they need to work on the business, instead of in the business.
Financing, ownership and shareholders: In 67% of companies, the CEO has 100% ownership control. This is the highest number in all the 6 stages. Access to capital is a problem, and of the highest concern of all stages. It decreases in later stages because it’s easier to raise money with a demonstrably successful product. In order to secure capital, CEOs sometimes have to reduce their ownership position. In the companies were the CEO does not have 100% ownership, 38% of the outstanding shares are held by private investors and 34% by employees.
Planning: Only 38% of CEOs at this stage have written business plans and those who do only review them about once per year. Attitudes toward business plans are quite complex. Despite the almost sacred status bestoed to business plans by banks and other institutions, entrepreneurs have always been pragmatic about them. They do not write up a full business plan if a budget forecast will do. And once they do decide to plan in the upcoming stages, they grow into it: at first they may use their business plan primarily as a discipline to force them to think through their ideas clearly, but as they become accustomed to planning, they start to use them as a tool to help them regularly monitor the implementation of their strategy.
Core competencies: CEOs always perceive quality has the #1 core competency in all stages. It’s what CEOs rank after this that’s interesting. At this stage below 10 employes, CEO also see flexibility and then low price as core competencies. CEOs are generally nervous of charging too much, so they often charge too little. More important, they can afford to keep their prices low, because they can keep their costs down – they don’t pay well and they have low overheads.
The Entrepreneur Quote
Marc Cloutier, General Manager, MBRP Inc. is the leader in performance diesel exhaust technology, 42 employees, 153% growth in 3 years, founded in 1995, one of Profit’s 2007 fastest growing companies, www.mbrp.com, based in Huntsville ON.
- Finding a killer niche isn’t always intuitive
We have found a niche in the diesel performance exhaust sector selling primary to the US market as an after market product. In spite of manufacturing dropping and automotive dropping, we’ve found a little spot we’ve been able to grow quickly in. We are almost like a salmon swimming up Niagara Falls.Those niches aren’t intuitive. There were a couple of false starts. We started in 1995 with silencers for snowmobiles. MPRP is now the world’s largest manufacture of them. The snowmobile market is good but it’s certainly not going to make anybody fabulously wealthy. So we took the same ideas and applied them to muscle cars and hot rods. The problem that we found there is that there are already huge companies in Asia, North America and Europe serving these sectors really well.
So we went along at modest growth until 2001 when we came across the idea of diesel light trucks. The diesel market was really left untouched except by commodity players that just bent a pipe. So MBRP took the commodity product and enhanced it to become a complete exhaust system for diesel trucks. All of a sudden there were all these diesel pick-up truck owners just scooping up performance exhaust systems from MBRP.
Then in 2003, we took the next big leap which was actually building dual exhausts for diesel pick-up trucks. Most of our competitors considered duals as something no one would ever want. {What the advantage to having one?} They sound and look cool! That’s entirely it. It’s all about the cool. Power and performance are expected. This is what has really fueled MBRP (and its recent triple-digit growth). We recognized that even mom and pop pulling their trailer across the Rocky Mountains or some construction guy using a diesel pick-up to haul his front end loader appreciates looking and sounding cool.
For more descriptions on the stages of growth in a company’s evolution from 0 to 100+ employees, return to this article in Cool Companies magazine 2007 Vol. 2 Issue 2, What are your company’s next growth stage?
