How To Maintain A Growth Mindset As A FounderJun 28, 2021
Every founder would love to end up on How I Built This, having created a rapid growth business, but with growth, comes significant tension that requires an unexpected level of mental fortitude. There's a reason burnout doesn't only haunt the failures. Here is a list of 10 tips for founders on a mental approach to managing a growing business and how to maintain a growth mindset from my experience scaling my company to 8 figures in two years:
1. Stop Seeking Stability
Growth and stability are competing ideals. I remember hoping for a "stable" business during growth, thinking eventually we would land the plane and coast to a lifetime of profitability or a big sale. Growth feels like this:
I learned that there are moments of stability where you catch your breath, but growth is not a stable environment. Get rid of the stability mindset. The future is unstable. Unknown. Leadership in a growing business is about maintaining the courage to run into the unknown. Your employees will match your mindset. Employees that want stability have no place in a startup environment. It's not the right culture for them. In this article, Chris Anderson highlights what employees should consider before joining a startup. It will help if you read it to make sure you are leading the charge of the environment these employees are signing up for. You can find stability when you step away from the company or sell it.
2. Understand Opportunity Cost
Opportunity cost is the price of the opportunity you choose not to pursue in relation to the one you do. If you can only eat 5 apples or 4 oranges and pick the apples, the opportunity cost is the 4 oranges. This video will explain it more in-depth. With more success comes more opportunities. In theory, growth is a response to opportunities that put you in a position to create customers and expand your brand awareness. However, too many opportunities can become a distraction that dilutes the effectiveness of what got you there. I fell prey to pursuing new opportunities without realizing their impact on what had made us successful up to that point. I disrupted the systems we had created to make the business thrive. Don't take the success you've created for granted. Having an audience doesn't mean you can put your logo on anything and have it sell. As this article from mentorphile explains, Jeff Bezos classifies two types of decisions founders need to make: Type 1 is non-reversible and definite, and Type 2 is reversible and exploratory. The tactics for making either decision are very different. When you've had some success, it is a common pitfall to begin using one process for making decisions due to your success rate. That is a trap. Strategy exists so you can measure opportunity, not avoid it, but before you go chasing the next great thing, optimize what you have already created to the furthest extent possible.
3. Don't Die of Indigestion
Remember the days of shamelessly selling to anyone interested in trying your product or visiting your site? The days of desperation wondering if it was ever going to be worth it. We can all relate to the hope-filled days of optimism fueling early founders. Companies work hard to get fed then die of indigestion. Rapid growth or even moderate growth can be overwhelming and shock the system with a whole new batch of problems you didn't anticipate. Problems such as:
- Cash getting in a crunch as you try and supply the demand,
- Hiring quick can lead to improper culture fits or a few bad apples
- Due to increased demand, you need to enter into long-term contracts with suppliers to take advantage of volume discounts
- It can threaten sustainability by exposing shortcomings in your systems
- Increase in fixed costs to support growth can put pressure on performance
- Reduced profitability to support the growth
People. Process. Systems. Don't let growth kill by only focusing on revenue. Revenue is vanity, result is sanity, and cash is king. Yeah, growth is cool. Managing it effectively to high profitability is way cooler.
4. Don't Get Lazy in Hiring
Hire slow. Fire fast. In growth, you often bring on anyone that can take the work off your plate. Understandable. But don't rush the process. Don't hire for where you are; hire for where you are going. Companies grow faster than their employees, which means you'll have natural turnover due to the evolution of the business. Firing people who were there with you from the beginning sucks. If you have a great culture fit, look to put them in a more appropriate role before getting rid of them. Finding people that fit within your culture, are trustworthy, and work hard is not easy. If you've found them, hang on to them for as long as the business performance will allow it, and make sure every new hire you bring on is first a culture fit, then a performance fit. Here is an article from Forbes helping you with the hiring process, and if you are getting ready to hire your first employee, here is a video I created of 5 tips for hiring your first employee. Just because you've hired well in the past doesn't mean you will repeat the success in the future. Always be diligent in hiring.
5. Avoid Death By Overconfidence
The only good thing about death to your business from overconfidence is it happens swiftly. Stay discovery-driven as a founder. The second you think you've finished innovating, you're dead. Hold onto the hungry desire and lean effectiveness responsible for catapulting you and keep creatively innovating. A significant cause of innovation is the sheer volume of ideas. Adam Grant tells us in this short video, "The more original you are, the more bad ideas you will have." If you think your sh*t don't stink, you won't think you have any bad ideas, or you just won't know they're sh*t. Stay humble by constantly seeking innovation through a herd of ideas. Good, great, terrible; it doesn't matter. You got to where you are by shamelessly putting your ego aside and asking people if they will allow your product to solve a problem for them. Remain in a state of desperation. There is always someone chasing you.
6. I promise, you don't need those fixed costs.
Fight the urge for the increased payroll. Fight the desire for the epic office (easier now with remote work). Fight the urge for unnecessary expenses, increasing your burden. Keep fixed costs where you were and variable costs where you are going. Here is a great rule of thumb to practice as you increase your costs: ask yourself, "If this business started tanking what would we eliminate first? Odds are you may be able to eliminate it or optimize it while the business is growing." I remember visiting a mentor of mine asking him about what to do since we had outgrown our office - which happens to every rapid growth company. We were thinking of buying a commercial building instead of entering into a shorter team lease. Here's what he asked me: How long did you think you were going to be in your current space? How much less cash do you spend on a lease versus purchase? Are you a commercial real estate developer? How much money is required to get the space to where you need it to be? What would you do with the cash difference if you didn't buy? Great mentors don't give advice. They ask questions. His final piece of wisdom: Your best asset is the business. Your business has been around three years. It's the best place for your cash to go. Three years into a rapid growth business isn't the time to diversify. You have no idea what the future holds. Having cash keeps you deleveraged and flexible. Flexibility is HUGE in a growth mindset.
We bought the building. Straight cash homie into down payments, interest, increased monthly rent expense, and property taxes.
You don't know what's next. You don't see what potholes lay in the road. You're still growing and innovating. Don't get yourself buried in fixed costs. They often come with contracts and long-term commitments. Employees. Leases. Supplier contracts. If things go sideways, which they almost always do, you want to be as flexible as possible. Run lean, efficient, and throw that cash at the opportunity. It feels way better thinking you blew money on chance marketing that didn't work than on an employee who took advantage of you, and you now owe months of severance to while they eat flaming hot Cheetos watching The Office re-runs on your dime.
7. "Billion Dollar Vision, Million Dollar Tactics"
This quote is from Vinod Khosla, owner of Khosla Ventures, one of the biggest VC's in the world. I love it. Another way of saying it, "Think Big. Act Small." Stay convicted and courageous amid growth. A massive vision is only as useful as how well you execute the tasks required to get you there. Stay laser-focused on the obstacles in front of you and what your company needs to overcome immediately. When thinking about strategic execution, here is a way of breaking it down:
0 - 6 months - operational planning; thousand dollar tactics - these are given to mid-level managers to control and make sure the basic day to day of the business is dialed in
6 - 18 months - tactical planning; hundred thousand dollar tactics - these are managed by your department leads to ensure the operational planning is working toward a long-term goal.
18 - 36 months - strategic planning; million-dollar tactics - this is big picture planning with top executives to make sure the company has aligned strategic priorities making sure our goals are moving us toward the bold choices.
3 - 5 years - visionary planning; billion-dollar vision - the founder/ceo is responsible for setting this vision and articulating it to the team to guide 2-3 year strategic priorities and big, bold choices as a company.
Start with the billion-dollar vision and work your way down to the thousand-dollar tactics. If you can master the base of the pyramid, you will see traction putting you on the path to the big dream.
8. Crave Accountability
I remember sitting in a board meeting giving constructive feedback to a founder to have them argue with me and tell me I was wrong. I nodded and lost all desire to help. That is a founder who is going to learn a lot of lessons the hard way.
You aren't as great as you think you are. I remember believing my hype growing a company to 8 figures in 2 years; then, we had our first board meeting. My shareholders came in and poked holes in what I thought had been flawless execution and strategy. It hurt. It shook my courage. It knocked me on my ass. Then Monday came, and I knew what I needed to get done. Accountability forces extreme ownership. There is freedom once you crave it. Whether it is a board, an advisor, or a coach, you need someone who will bring you back to earth—no astronaut founders. You don't need a cheerleader; you'll have plenty of those. It's necessary to have someone who cares enough to make sure you don't sabotage the great thing you created. Momentum is ruined by founders who can't get out of their own damn way. Practice radical candor, and you will maintain your growth mindset.
P.S. Your employees are not there to hold you accountable. That's amateur leadership. If you use them for that, you are on a path to destruction.
9. Understand Finance
I had never taken a business course in my life. I thought I was a brand guy. I was a culture guy. I was a storyteller. The most remarkable story your business is telling is the one that you find in its financials. Real-life is always better than fiction. My business grew, and it forced me to play catch up. Not easy to do when your business is getting more expensive, distribution channels are expanding, and people are relying on you to feed their families. Here is an incredible resource created by Marcus Lemonis on what it means to know your numbers in your business. I would encourage you to take the quiz and dig deep into the numbers. Understanding finance will not grow your business. I repeat. Just knowing how finance works will not grow a business. However, if you have investors, you need to track every dollar, and it will become the most significant liability once you figure out how to generate customers and see growth. Some fundamental changes may be:
- Margin adjustments as your COGS (Costs of Goods Sold) change.
- Increased fixed costs as the company grows reducing the profit margin
- Variable costs based on the performance of the company will serve as crucial levers you will need to pull to generate more cash
- Cash flow changes based on terms with suppliers, buyers, and contractors
- Burn rate adjustments if you are in a negative cash flow position
I took an accounting class after selling my business and was shocked by how little I knew about the ins and outs of finance. Once you have success, finance can become a real strategic weapon that, if used correctly, will lead to massive financial gains.
10. Competitive Advantage Doesn't Last Forever
Initially, during your driving a convertible hair in the wind feeling of growth, competition doesn't feel like much of a threat. You're focused on your value creation, not the performance of your competitors. However, thinking you have a sustainable competitive advantage is a trap. It doesn't last forever. Rita McGrath, a great business strategist, says the era of competitive advantage is being replaced by an era of flexibility within a growth mindset. Her book and this talk go into detail regarding the attitude required to innovate faster than your competitors. If you are a first mover, there will be a second. If you have low CPM's they will increase. If no one is bidding on those keywords, they will. If your product has a unique attribute, it will get copied. The advantage that has generated your growth has a lifeline. It is your job to recognize when it has peaked. It happens. The great founders accept it and discover another advantage. Please don't put all your best employees on problems; put them on the opportunities. What got you here will not get you there.
And I'll leave you with a must-watch interview with this mind-blowing quote, "We're a very poorly diversified portfolio. It either makes it to the moon or it crashes down to earth." - Jim Balsillie, CEO RIM (Creator of the Blackberry)
Maintaining a growth mindset is easier said than done. Please don't lose sight of who you were and what was required to get where you are. Channel that desperation and instinct it into the new skills needed to be successful to hit the billion-dollar vision. The King or Queen who sits in their castle on their throne, thinking they've conquered the world, will be the first to find the sword.
Creator of Solving Hollow
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