EGOS™ - Stage 2 Company
Ramp-up: 11-19 Employees
Congratulations to Stage 2 of your
Organization Growth Journey
You have developed a successful business prototype, and now you need to ramp up your business by increasing your sales and finding out the right source to handle the volume increase. Your activity level here will be highly challenging, and hence we call it a Flood Zone.
In the Flood Zone, you are flooded with so many activities as you have a more significant number of customers, high production, an increase in employees, and processes. Similar to Stage 1, the company will be CEO Centric, depend on the CEO to drive the vision, increase sales, and be the highest decision-maker.
This business model is derived based on extensive research done on various entrepreneurial companies across the globe. Fischer's research reveals that the complexity level of the company increases by adding more employees to the company.
Continue to read and learn how to navigate Stage 2 and grow your organization successfully.
- Forecast how growth will influence you
- Adapt your leadership skills, knowledge and insights to your specific stage of growth
- Focus on the right things at the right time
Every business is unique, and this report may have some information that may not suit you and your business, but most of them it will. We hope this information is helpful to your business growth.
After you read this information, feel free to set up a complimentary call with our advisor to discuss your
unique situation. Our advisors have over 30+ years of experience and have worked with over
110+ small and medium businesses in the past few years.
Few important facts about Small businesses (defined as less than 500 employees)
“50% of small businesses fail and close within one year.”
“80% of small businesses fail and close within five years.”
What does a Stage 2 company look like?
A Stage 2 Company has 11 – 19 Employees.
CEOs of Stage 2 companies are still the center of the business. They need to stay calm and thoughtful, and before they react to the increases in activity and workload, CEOs should ask themselves these questions:
- Am I still focused on driving profits and revenue?
- Am I beginning to let go of critical aspects of the company to capable people?
- Am I watching the critical indicators of success every day?
A Stage 2 company is CEO-centric — meaning the CEO is likely the Specialist who has created a product or service and is now getting his/her idea to take shape. Therefore, 40% of the CEO's time should be spent as a Specialist, while only 20% of the time will be spent as Manager. The other 40% of the CEO's time should be in creating and fine-tuning the vision of the company. The leader is still the center of the business, and all decisions run past him/her.
A Stage 2 leader must provide the vision — spending 40% of his/her time creating, articulating, and getting the team on board with the path and movement of the company.
A Stage 2 company will start seeing the beginning of diversification within its organizational infrastructure. In Stage 1, everyone will need to fill multiple roles at the same time.
In Stage 2, the business will begin differentiating tasks, and having people become specialists within the organization. This is a critical stage for leaders because they must begin to delegate both authority and responsibility, and this can be difficult for many entrepreneurs. Leaders, filling the leader role, within a Stage 2 company will try to hold on to all the control and make all the decisions, but the reality is they simply cannot. This is why leaders begin to feel stretched too thin, frustrated that people aren't doing their jobs and worried that things are getting too out of control. The leader, leader or otherwise, still needs to manage sales and must have the ability to motivate a small staff to achieve extraordinary results, keeping an eye on quality and customer service.
A Stage 2 company must start focusing on cost issues and recognize the need to consciously manage the growth of the enterprise. Growth, not survival, is paramount. The company needs to support a higher sales level and generate positive cash flow.
As a company moves from Stage 1 to Stage 2, it encounters a Flood Zone. A Flood Zone is the transition zone whereby the organization experiences an increase in the level of activity. There is a sense of drowning, as there is a rise in the number of people on staff, new and different processes to implement and new clients with new demands. The Flood Zone causes many CEOs to lose focus as they attempt to handle the flood of new activity.
The CEO should not let the activity distract from first focusing on the following:
- Driving profits and revenue
- Maintaining product/service quality and customer service excellence
- Monitoring success key indicators weekly
Teamwork
In Stage 2, the business will begin differentiating tasks, and having people become specialists within the organization. This is a critical stage for leaders because they must begin to delegate both authority and responsibility, and this can be difficult for many entrepreneurs. Leaders, filling the leader role, within a Stage 2 company will try to hold on to all the control and make all the decisions, but the reality is they simply cannot. This is why leaders begin to feel stretched too thin, frustrated that people aren't doing their jobs and worried that things are getting too out of control. The leader, leader or otherwise, still needs to manage sales and must have the ability to motivate a small staff to achieve extraordinary results, keeping an eye on quality and customer service.
A Stage 2 company must start focusing on cost issues and recognize the need to consciously manage the growth of the enterprise. Growth, not survival, is paramount. The company needs to support a higher sales level and generate positive cash flow.
Of the three Gates of Focus, The People Gate, The Process Gate, and The Profit/Revenue Gate, the latter is the main gate for Stage 2. It's still all about generating revenue and starting to generate profit.
The second gate is The Process Gate because the company has grown from less than 10 people up to 19 people, and the business cannot rely on having people keep those critical processes in their heads.
Profit / Revenue
People
Process
Required Leadership Skill Base:
- The ability to manage sales.
- The ability to motivate a small staff to achieve extraordinary results.
- The ability to keep an eye on quality and customer service.
- The ability to address cost issues.
- The ability to see the need to manage growth and fill more that one role.
Focus
The CEO's management time increases as his/her staff increases, requiring different things from the leader than experienced in Stage 1.
The Top Five Challenges in Stage 2
- Hiring Quality Staff
- Improving Sales
- Cash Flow
- Leadership/Staff Gap
- Limited Capital to Grow
Visionary
( 40% of the time)
Specialist
( 40% of the time)
CEO
( 20% of the time )
At this stage of growth, the risk is in the bustle of rapid growth. If the leaders fail to check critical indicators, cash flow gets thin, and disaster is imminent. With the business now growing, it is time to begin building organizational infrastructure and preparing for Stage 3.
Builder / Protector Ratio
The Builder/Protector Ratio (BPR) is a measurement of “confidence vs. caution.” It is critical tool to gauge the business’ ability to accept change, respond with confidence to change, and successfully navigate the change.
Builders
- Thrive on risk
- Are always looking for new opportunities
- Don’t back down from the everyday challenges
Protectors
- Thrive on caution
- Prefer to apply the brakes (and should be encouraged to do so when appropriate)
During Stage 2, the Builder/Protector Ratio should be 3:1 three builders to one protector.
While the CEO should continue to bring a builder-like mindset to the company, it's not about moving forward as fast as possible, but more about everyone being aligned. As members who are becoming leaders and specialists build their teams, CEOs must help build confidence in their ability to succeed.
Foundation Building Blocks for Stage 2
SALES
Create a simple sales system that works and can be replicated and used by all salespeople. The company should also have or be implementing customer relationship management (CRM) system
PROCESSES
Have a quality control review and feedback form (work review template) to keep the team accountable and on track.
Work Community
Develop a written plan for each employee describing expectations, performance measurements and actions that will be taken to help him/her succeed.
Business Model
Continue to refine a simple business model laying out the
- Value Proposition
- Target Customer / Channel
- Product / Service Features and Pricing
- Revenue Streams
- Marketing and Sales Strategy
- Operations Strategy
- Profitability
- Cash Flow
FINANCIAL SYSTEMS
The financial system should include a simple:
- One-year profit plan (budget) projecting revenues and expenses
- A financial model
- Cash flow forecasting
- A dashboard
The Non-Negotiable Leadership Rules
- Sell absolutely every day
- Develop, without fail, three employee leaders to be responsible, accountable, and proactive
- Create a daily, weekly, and monthly "key indicator" instrument panel/flash sheet
- Communicate any and all directions in writing
- Drive small action teams to hit goals
Summary
VRT Management Group LLC created a custom program called Entrepreneur Growth Operating System™ (EGOS™) – Corporate Growth Alliance (CGA) to help companies just like yours navigate the challenges that are typical for a Stage 2 organization. We have designed programs, services, and tools that are directly tied to the issues faced by Stage 2 leaders and their businesses.
We always welcome an opportunity to have a 45-minute conversation with CEOs, Entrepreneurs, and Business owners to understand their current challenges and share a couple of best practices to help them navigate through their challenges.
We strongly encourage you to avail of this complimentary opportunity. Over 151 of your peers have received tremendous value through these Zoom sessions.
VRT Management Group, LLC (VRT) is a Business Transformation Company with a single focus: serving our customers to solve their toughest problems by building people and transforming business processes.
Our unique strength comes from integrating people and processes best practices to address your ever evolving customers’ needs
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