(Or, why 10x growth is smarter than starting a new business)
Every few months, an entrepreneur sidles up next to me at an event and says…
“Tim! I’m thinking about starting a new business. I’ve got this idea…”
They look so excited that I just have to let them ramble for a few minutes. They’ll tell me how smoothly things are running in their current business, and lay out why this new idea is a game-changer.
“See, my current business is doing about $5 million in revenue, and it’s pretty much running without me. I only put in a couple of hours every week.”
I keep listening.
“So…. if I build this new business I’ll basically have $10 million in revenue. I think it’s a really great opportunity to grow.”
That’s when I start asking questions.
You see, after years of seeing this pattern, I know exactly what’s driving this. And you know me – I love asking the hard questions.
Here’s exactly how this conversation goes, every time, without fail. This time, with a guy I’ll call Mark.
Tim: “Why do you want another business so much?”
Mark: “Well, I feel like my current business is at its cap. It’s not going to grow much more, and it mostly runs without me now. So I think I’ve got a good opportunity to grow here.”
Tim: “What’s the motivation beneath that? Do you want more money? To beat a competitor? To prove you’re not a one-hit wonder?”
Mark: “I guess it’s the money. I’d love to be creating more revenue and income, so I guess this seems like the best way to do it.”
Tim: “Uh huh. So, what’s the state of the current business?”
Mark: “Well, you know, it’s stable and stuff. It’s nice and steady.”
Tim: “Okay. How much time are you spending in it each week?”
Mark: “Mm… I guess about 20 hours? Maybe sometimes 30? Not that much… although I guess it’s a bit more than I thought. Definitely not as much as I used to though.”
Tim: “Right… so you’re bored.”
Mark: “No, no! No, not at all. It’s great! I just think there’s an opportunity here.”
Tim: “So… you’re bored.”
Mark: Nervous laugh followed by squirmy silence, followed by a quiet admission that he is in fact so bored he’s worried he might lose his mind.
That is the moment before a lateral step.
It’s an extremely common behaviour among entrepreneurs and founders, particularly those who self-funded their original businesses.
When their company has grown to a respectable level, and is running smoothly, the founder starts getting an itch.
They feel restless, they’re distractible, and they’re definitely not excited to go to work to handle admin and emails.
That’s an unpleasant feeling, so they start looking for ways to make it stop. The problem is, most entrepreneurs at this stage are not really interested in personal growth. They’re interested in the illusion of growth, and they’re willing to risk their current business to get it.
See, most entrepreneurs tell me that it’s low risk to strike out and build something in new territory. They have an idea for a business. They know how to grow a business from the ground up, and the new industry seems, on the surface, similar enough to make it easy.
They plan to simply take their existing skills and repeat their implementation somewhere else.
Unfortunately, that’s an extreme logical fallacy at work.
Starting a new business in a new industry actively invites chaos and risk into the stable environment of your current business.
You don’t know the market. You don’t know the customers. You don’t know the competitors. That’s not to say you can’t learn those things and hit $5 million again….
But what most people are really craving is the excitement and chaos of building something completely new. They’re missing the start-up rush, the thrill of the beginning and the sense of hopefulness it creates.
It’s not actually some deep-seated need to make something completely new. It’s an addiction to the thrill of startup life, and all the crazy chaos that goes with it.
Why is this such a common blindspot for so many entrepreneurs, just like you?
Because deep down, at the root of it all, you’ve avoided answering one key question. Maybe it’s crossed your mind before, but it’s too damn scary to actually grab on to…
What Would It Take?
By now, Mark and I have been standing in the corner talking intently for about 15 minutes. His original excitement has faded and he’s looking… squashed. The hopefulness has gone out of his face as I deliver the most important question of all.
“What would it take to get your existing company from $5 million to $25 million in the next 2 or 3 years?”
Mark looks at me and says, “I don’t know.”
And there it is. The same answer every time. The founder simply doesn’t know what to do next. They’re planning this lateral step because they do know how to build a company from scratch.
What I want to help them – and you – see, is that usually a vertical leap is much more effective.
Where a lateral step is simply a transfer of skills and knowledge, a vertical leap is a massive increase in skills and knowledge.
The vertical leap happens in 3 stages:
- You acknowledge that you have been scared and maybe lazy. You channel your inner Branson and say, “Screw it! Let’s do it. $25 million, we’re coming for you!”
- You put a proper management team in place — fixing operational inefficiencies and identifying possible new markets for your current and future products.
- You focus relentlessly on the goal, not even stopping when you reach it. $50 million comes next. Get yourself a spot in the big leagues.
Now, that’s all pretty easy to say. So let’s break down what those steps really look like.
Set your vision. Aim that sucker high.
You wanted to start a new company so you would have the excitement and chaos of building something new in your life again.
Deciding to take your company to $25 million will give you exactly that. There will be a bunch of new skills to learn, new products to launch, new channels to test, new people to hire… It will be just like being in a start-up again.
Except that this time, it will be way better. This time you’ll have resources. And a team to help you.
You’ve already got some money in the bank. You’ve got the domain expertise nailed down. And you’ve got an existing customer base.
You’ve got every advantage you wished you had back in the day, and you know how to use it.
So set yourself a massive, scary, thrilling goal. Then get the people you need to make it happen.
- Don’t let yourself reach the horizon again.
Bring in the pros.
Every single founder who ever brought me their lateral step idea was missing one crucial thing: professional management within their existing company.
If you are going to move beyond this nice quiet phase of your business, you need people who are going to rock the boat, while keeping all the passengers happy and excited.
A layer of professional managers will unleash you from the boring daily grind of the existing business and let you start chasing the real opportunities in front of you.
Step 1: Hire an operations manager.
I’ve talked about this again and again. Get this person into your business now. You should not be involved in operations or daily processes. This is not your job. Find someone who is excellent at operations, give it all to them, and get the hell away from it. Hire someone who has a global enough perspective to be able to become your COO one day.
Step 2: Hire a financial controller.
If you are going to become a serious player in your industry, you need to have a tight grip on your money. No funds should ever be unaccounted for, whether incoming or outgoing, and they should also be good at forecasting. They, too, should be sufficiently global in their thinking to be a candidate for CFO in the future. This is an absolutely critical hire, so get it right.
Step 3: Hire a sales manager and a marketing manager.
Making more money requires getting more customers. A skilled sales manager will find the right team to sell the right products to the right people. A talented marketing manager finds the right channels to reach the right people with the right message. Put those two together and you’re on your way. Again — global focus with long-term C-suite potential.
Ideally, you’ll promote these people from within the company, as they’ll bring a wealth of knowledge and context to the role.
But if you don’t have people that fit the bill, then hire the best people you can get from the outside and prepare for them to catapult you forward.
You and your management team will also have to evaluate the other staff.
Are they excited about the new direction, or resistant?
(This often depends on how long you’ve been in business, and what the company culture is like.)
If it’s a cruisy, mildly interesting workplace that’s been stable for 10 years, people are going to push back on a sudden change of pace. These people may have to go. If so, do it quickly.
If you’ve been going hard for 2 or 3 years, your team will probably be excited about the new goal and be ready to step up.
Your team is absolutely critical to reaching your new goal. Get the right people and keep them.
For many entrepreneurs, hitting the $5 million mark is the business equivalent of reaching the horizon.
What the hell am I going to do now?!
You’re not supposed to reach the horizon. You’re supposed to keep moving towards it, forever.
If you’ve hired the right management team, your trajectory will go nuts. You’ll start making crazy progress in a very short period of time. That $25 million goal? You could hit it in 12 months instead of 2 or 3 years. Hell, you might even hit it in 6 months.
If that happens, just blow right past it.
Go for $50 million. Go for $100 million. Just keep going.
The biggest players in your industry didn’t get to the top because they set themselves a modest goal and worked slowly towards it. They set crazy ambitious goals and were ferocious in their pursuit.
You want a seat at that table?
Don’t stop when you reach the horizon.
Have you been thinking about taking a lateral step lately? If so, I’ve got some questions for you, because 99% of the time a vertical leap is the better decision.
- What’s the vision that gets you really excited about the future? Is it a revenue amount, or is it a way of better serving your customers? What makes you absolutely amped to get to work?
- What would it look like if you hit a vision like $50 million in revenue? How will it effect your team? How will it effect your customers? How will things be different, and better?
- What would it take to increase your current business by 5x or 10x?
- Have any of your competitors done this? If so, what products can you reproduce to start getting in on that growth?
- Who do you need to hire or promote to take care of every part of the business, and start really winding up your growth trajectory?
- What’s the biggest, most insane thing you can think of for your business? What’s the wildest dream you can bring to mind? Can you see yourself working towards that, once you’ve hit the first big goal on the way to the horizon?
If you can answer those questions – and I’m willing to bet you can – you’re ready for a vertical leap. Forget the lateral step; it’s a waste of your talents.
Commit to the vertical leap and drive your company towards that incredible horizon.