Land: Where Growing Companies Fail
Douglass Tatum, Tatum CFO Partners,
No Mans Land is the awkward,
adolescent stage of corporate growth. Its a transitional time,
when a company is too big to be small and too small to be big. Every
growing company encounters that forbidding territory and
not everyone makes it through alive.
If you want to be a survivor
if you want pass through adolescence into adulthood there
are four steps you will have to take. Call them the "4 Ms
Understand your Model
generally achieve success by providing great service. Their business
model is high performance coupled with cheap labor. Customers find
it easy to do business with such companies. They have a direct line
to you, the business owner, who ensures that their needs are met.
At a certain stage of growth, however,
this model no longer works. Providing personal attention to each
of your customers is no longer feasible. To continue growing, you
need a different value proposition to keep clients coming through
your front door. If your company doesnt have any other differentiation
if your only competitive advantage is high performance, cheap
labor you must remain small to survive.
Thats certainly a valid option,
not to be lightly dismissed. It may be most profitable for you to
limit the company to two or three individuals, target the clients
you want, and deliberately stay small. The alternative might be
to grow yourself right out of business!
Realign with your Market
As your customer
base increases and the demands on you as the entrepreneur rise accordingly,
your contact with customers inevitably decreases. Youre no
longer simple to do business with and your business suffers.
To continue growing, you first need
to be aware that your business is misaligned. Then you need to act:
You must identify your real and potential competitive advantages
and take steps to implement them. Hint: If youre constantly
putting out fires, it might be time for realignment.
Hire your senior Management
a right way and a wrong way to do this. Typically, companies in
No Mans Land promote from within. For example, you take your
best salesperson and make him or her the vice president of sales.
The result? Your top employees arent doing what they are good
at, and your management staff doesnt have any experience in
If you decide that you can and want
to grow your company, hire an experienced vice president of sales
who knows how to build a sales group. Think thats too expensive?
So is losing your business. Besides, the right hire can increase
the value of your shares or make your company more attractive to
a venture capitalist.
Raise your Money
enter No Mans Land without enough capital to leave it. The
key to raising money is lowering risk that is, proving to
potential lenders and/or investors that you can escape No Mans
Land. If you take steps one, two and three, you are well on your
way to reducing your perceived risk and obtaining the cash you need
to keep growing.
Still, theres one more hurdle
most growing companies have to leap the No Mans Land
Capital Gap. That gap occurs when businesses need less than $1 million,
an amount that traditional lenders generally shy away from as both
too risky and too costly to administer.
This is a difficult hurdle without
a specific solution. However, one potential solution is the BRIDGE
Act (Business Retained Income During Growth and Expansion), a tax-deferral
bill originated by Tatum CFO Partners that is designed to help small
businesses escape the capital crunch. Now pending in both houses
of Congress, the BRIDGE Act would ensure that more growing companies
have an opportunity to cross the No Mans Land Capital Gap.
We will have to wait and see the outcome of this bill.
In summary, the growth that leads
your company into No Mans Land will not lead you out of it.
To cross that desolate territory, you as the entrepreneur need to
step away from day-to-day operations and honestly evaluate yourself
and your company in light of the "4 Ms." Only then can your
company begin redirecting corporate energies to transition the business
through No Mans Land to success.
Douglass Tatum is the Chief
Executive Officer of Atlanta-based Tatum CFO Partners, LLP (www.tatumcfo.com).
Tatum CFO is the largest CFO firm in the nation, with more than
400 CFO partners in 25 cities who serve as permanent, interim or
project CFOs for companies at all development stages. Tatum CIO
Partners, LLP, composed of veteran CIOs, was launched in 2000. Mr.
Tatum can be reached at (800)828-8623 or by email at email@example.com
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