Evolution Capital Partners has seen a lot of good businesses over the years that are not performing at the level they should be given the quality of the product or service they are selling. While this can be attributed to many things, it’s often a result of the founder getting bogged down in micromanaging the business.
To avoid this fate, we encourage founders to work on the business and not in it to maximize their company’s potential.
Founders often begin with the right intentions. In the early stages of a company’s development, with limited resources and capital, everyone pitches in on whatever needs to get done. Regardless of job description, employees to a degree, but mostly the founder, are wearing many different hats. It’s the founder’s credibility that is on the line because he or she has been entrusted with the business. The company itself has yet to earn any credibility, and with so much at stake on a personal level, founders tend to seek control and get involved in every aspect of the business.
This is OK, initially, as the founder needs to understand each job within the business and develop job descriptions that clearly articulate expectations. But as the company gets bigger and more sophisticated, not only are founders less equipped to address certain specialties in the business, such as the controller position, they also have too many people reporting directly to them to sustain this formula.
It is at about this point that growth begins to slow and the quality of the product or service begins to suffer. Many founders continue to believe they are the best ones to solve every problem, no matter how specialized or minute the decision may be. Rather than being the facilitator of growth, the founder becomes the bottleneck.
At this point, the founder needs to build out a middle management team that can be trusted to make decisions in their area of expertise and independent from the founder’s input to unlock the company’s growth potential. Importantly, the founder not only needs to trust, but also put in place a system that holds all people accountable to what they said they were going to do, as well as a reporting system that improves communication flow and the sharing of data throughout the organization.
To grow the business, the founder needs to focus on the issues he or she is most qualified to solve and prioritize work on the two to four key initiatives that no one else can do. This is what we mean by working on the business and not in the business.
Founders need to let go of the minutiae and leave it to those more capable of solving problems in their own area of expertise. Of course people are going to make mistakes, but that is why the accountability system is so important. These mistakes can be turned into learning moments for everyone. If everyone becomes better at staying in their lane, the sky is the limit.
Jeffrey Kadlic is co-founder and managing partner at Evolution Capital Partners
