(Editor’s note: Clate Mask is the co-founder and CEO of software company Infusionsoft. He submitted this story to VentureBeat.)
Starting and growing a business is not for the faint of heart – especially if you want to grow fast. When I say “grow fast” I’m talking about rates of 80-100 percent per year. It’s achievable, even in this economy, but it results in spectacular highs and lows and tests and stretches the entrepreneurial venture in every imaginable way.
Our company has gone through this type of growth over the past seven years. Here are five of the biggest lessons we’ve learned about managing a growth-stage company:
Set your prices higher – Most entrepreneurs simply don’t charge enough to make a profit. This hampers the business’s growth because there isn’t enough dough to share with marketing partners. Consequently, the business struggles to grow at a fast rate, not because the product wasn’t good, but because it was too inexpensive.
I remember many years ago when we were launching our first product. I had a price in mind, based on competitive research and what seemed reasonable to me. Fortunately, a couple of partners talked me into charging a higher price, and that made all the difference in the marketing of that product, which paved the way for us to eventually launch our flagship product. I often think that we might have never escaped those early years if we had set a lower price on that first product.
Work relentlessly to establish the vision of your company – For most of us, vision doesn’t dawn on us overnight. Sure, there are seminal moments when glimpses of the vision come together, but usually, it happens over time, only through much reflection, deliberation and practical application of your business plan.
Corporate vision guides everything – and it becomes clear through constant, iterative planning, execution and reflection. Some people give up hope of clarifying the vision. Others establish a notion of the vision only to obliterate it beyond recognition for arcane reasons.
Constant, iterative planning, execution and reflection are needed to establish, clarify and maintain your vision. Once we got serious about it at the end of 2006, the magic in our business began to happen. I wish we had pushed ourselves to establish a grand vision, a “BHAG” as Jim Collins puts it, earlier in our company’s history.
You need more cash than you think – As you grow a business quickly, it’s amazing how much cash is consumed. Investment in equipment, systems and personnel are constant. You’re always leasing more space than you presently need so that you can accommodate the growth. Customer acquisition is critically important, which requires a bunch of cash. And, of course, there’s the normal need for working capital to account for the receivables that begin to mount.
It’s frustrating to realize just how much capital is required to grow the business. Timing when raising venture capital is crucial, but many entrepreneurs resist or deny the need for capital because it frequently implies dilution. As a result, the venture grows slower than it could and sometimes a market opportunity is lost. I’ve certainly learned a few lessons from bootstrapping, but it is also heart breaking to see how much capital is required to grow a business. It’s always more than you think.
Your culture is your most valuable asset – Your competitors can knock off your products, replicate your process and steal your customers. But they can’t swipe your culture. They can’t compete in the marketplace if your positioning is based on you and how you operate. (By the way, this is why the vision work is so important-because it establishes who you are, why you operate and how you attack the market.)
Your culture attracts the right people, ejects the wrong people and clearly guides your path. The trick is to stay true to it. When we were looking for venture capital, we were fortunate in that we had many VCs interested in us. By that point in the company’s history, we knew who we were and we wanted a VC partner that would support that. So, we made it clear to VCs that we were about serving small businesses. If the VC was looking for us to move upstream and serve a larger customer, we were not the right fit for them.
In the end, the fact that we clearly communicated that helped us attract the right VC partner and repel the wrong ones.
A high growth rate will demand the heart and soul of you and your people – I am convinced that most of corporate America couldn’t hack it in a high growth venture. The change is constant. The pace is blinding. The required “figuring it out” is taxing. You must be highly adaptive… and you must devote an incredible amount of energy and intensity to the venture.
This is true not just for founders, but also for employees. I have learned that striking the work/life balance is incredibly difficult in a high-growth venture. Which means you and your employees need understanding families. And it means your heart better be in the venture. Because if it isn’t, you won’t find the balance; you’ll burn out.
I always say that I need missionaries as employees, not mercenaries. The hired gun will never last in a startup. You’ll use him up, wear him out and move on to the next person. And that’s a lesson I learned early on: don’t hire mercenaries… and do your best to help your missionaries find some life balance so that they can keep fighting the crusade.