The Three Laws of Business Growth

In my 27 years of advising privately-held business on growth and wealth, I’ve observed three critical laws for successful growth. They are:

  1. The Law of Leadership
  2. The Law of Strategy
  3. The Law of Resources

The Law of Leadership

Every organization’s success relies firstly on its leaders and secondly on its industry. Founders often create the most dramatic growth in their companies due to their DNA for growth and the fact they started from zero. Growing from a small business (annual revenues less than $10 million) to a mid-market company requires building your leadership team.

I helped one company to grow their leadership team from the kitchen table to the board room table in one big move. They brought 15 employees into the ownership group who became the leaders throughout the company. That growth in leadership drove more than 500% growth in revenue.

To grow, you want to attract people and build a leadership team of people who have been where you want to go. They’ve worked in larger companies with formal systems that support growth and prevent disasters. They have experiences that will help you prevent mistakes.

The founder needs to let go. Easier said than done, yes. The easiest way to let go is to hire people with expertise your company needs…or will need…and that you don’t have.

Another important step often overlooked in the Law of Leadership is to formally identify and develop your future leaders. This may be family members being groomed for both management and ownership. An effective step is to hire professional management that can train and mentor your future leaders.

The Law of Strategy

How do you describe your strategy? How do your employees and customers describe your strategy?

I define strategy as the results and value you create for your ideal clients and the ways you deliver those results. This definition focuses on your client or customer and how you help them; not on how you do what you do.

The methods you use to deliver results provide you with opportunities to differentiate your business and to attract better clients at more profitable fees. How you do something is very important to strategy because it can be very difficult to replicate.

One small company that provided technology equipment and repairs changed its strategy from repairs to proactive and outsourced technology infrastructure advisor that supported their customers’ growth and operations. As you can see, strategy is about the results you create and not what you do.

Leverage means that your business is scalable. It helps to think that you want to develop a franchise template you’re your business. First, your systems are formalized so people know what to do and how to do it. Next, your brand is polished and promoted to build awareness and attract customers and repeat business. Third, your model generates sustainable and consistent profits. If you haven’t got a profitable model, expansion can kill you. Finally, you have a management development plan to grow your team (see Law of Leadership).

The Law of Resources

The most abundant resource and the most under-utilized is information. Operating information and customer information is more important than financial information. That’s because the first two are leading and real-time indicators where financial information is a lagging indicator.

Using a daily flash report that measures production, sales, and cash position can help you immensely to take better control of your business.

Capital, or specifically the lack of capital, is a major source of stress for practically every growing company. If your business model generates profitability, you can fund a portion of your own growth and create leverage by borrowing wisely. For example, always match your financing term to the asset’s life.

Capacity needs to be scalable while retaining quality and decreasing overall costs of production. Outsourcing may be viable. Often, auditing your own processes will yield positive results to increase production 10% or more without any capital expenditure. This is where daily metrics can help you increase capacity.

Focusing on the Three Laws of Growth will position your company for faster, safer, more profitable growth while avoiding the daily distractions from operational gravity and problem solving.

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