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Think Bigger

Entrepreneur, Dec, 2000 by Cynthia Harrington

SO YOU'VE GOT A $10 MILLION BUSINESS? BIG DEAL. THAT'S KID STUFF, CHUMP CHANGE, SMALL POTATOES. WOULD YOU MIND TERRIBLY IF WE TOLD YOU HOW TO MAKE THAT A $100 MILLION BUSINESS? DIDN'T THINK SO.

MANAGING A COMPANY THROUGH FAST GROWTH ISN'T EASY. ENTREPRENEURS WHO HUNGER TO HIT THE $100 MILLION MARK AFTER REACHING THEIR FIRST $10 MILLION IN SALES ARE OFTEN OVER POWERED BY BOTH INTERNAL AND EXTERNAL OBSTACLES. WHAT SEEMED LIKE A NATURAL PROGRESSION TURNS INTO AN INSURMOUNTABLE SUMMIT. SOME GIVE UP AND DECIDE TO STAY WHERE THEY ARE. OTHERS HAVE THE DESIRE AND STAMINA BUT CAN'T LET GO OF CONTROL AND MAKE ROOM FOR THE NECESSARY ADDITIONS TO THEIR STAFFS. AND THEY ALL FACE THREATS FROM EXTERNAL OBSTACLES LIKE ECONOMIC DOWNTURNS, INDUSTRY REALIGNMENTS AND SHIFTING CUSTOMER NEEDS.

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But companies do make it. AT&T, Microsoft, Cisco and the like weren't always revenue behemoths. Somewhere along the line, they made the decisions and changes that took them to the top. So how can you join the ranks of these superstars?

Start with this inarguable notion: During the growth from $10 million to $100 million, you will give up control--at least some of it. Think "professional management." The reason is simple: Growing tenfold usually takes outside capital--lots of it. Many companies go public or bring in investors to get capital, so the founder has to lose a percentage of ownership. Some make it through and continue to grow. Most do not. According to the growth consulting practice at Deloitte & Touche, the average sales growth rate for all companies, public and private, with less than $100 million in sales is flat to negative.

So how do you beat those odds? While there is no one single factor that explains the success of companies that have grown to $100 million, certain themes recur. If your goals for revenue growth are in the stratosphere, take note:

1. HIRE GOOD PEOPLE

Owners of $100 million companies invariably point to the great people they've hired--specifically, the professional management teams they've surrounded themselves with and given partial control of their businesses to.

Ralph Rubio and his father, Ray, started Rubio's Restaurants in 1983. By 1994, they had reached $10 million in sales with 13 restaurants in San Diego and two in Orange County, California. Aside from Rubio and his dad, the business also employed his brothers and sisters. "It was a nice family business," explains Rubio, 45, president and CEO.

But they made the decision to grow that year, and they needed professional management to pull it off. The new COO came from a long career at Taco Bell, the CFO came from Carl's Jr., and the new vice president of product marketing from Foodmaker (now Jack in the Box). "I know the key to success is to surround myself with great people to free me to do what I do best [which is advertising and marketing]," says Rubio. Rubio's Restaurants now number more than 120 and extend throughout the West. The company expects to cross the $100 million mark in sales in the 2000 fiscal year.

Debbi Milner, president and CEO of Long Island City, New York-based Jade Systems Corp., underscores the philosophy of delegation. She and her husband, John (currently COO and CFO), 41, opened the doors of their IT solutions company in 1993. They ended that first year with sales of $14 million. "Until this year, we existed on four hours of sleep a night," says Milner, 42. "Now that we have a senior management staff, I've cut my hours back." Cutting back for Milner means stopping after a 10-hour day ... and still hitting $100 million in sales.

Experts say the transition to professional management is the most significant factor in a company's "coming of age." Thomas L. Doorley III consults with growth companies as a partner at Deloitte & Touche. Doorley's practice tracks the top growth companies in the world and uses the research to counsel companies on practices and beliefs that sustain long-term, value-creating growth. As Doorley explains: "When a company is little, they can trade on that fact. They can attract good people by describing their intimate culture. A company comes of age when he founders no longer have their hands on every aspect of the company--when they have to rely on secondhand information."

2. THEN LET THEM WORK

Once entrepreneurs hire new managers, they must hand over the reins to the new team. "I used to micromanage," confesses Rubio. "I had to learn to delegate, to give people around me the space to succeed or fail on their own merits. And I had to change fast because our business was changing fast."

Judi Paul, co-founder and chair of Renaissance Learning Inc., agrees. "To build an organization, you have to turn things over to your people and let them do their jobs," she says. "I don't have many talents, but I can recognize talent. That way, those around me make me look good."

Paul's Wisconsin Rapids, Wisconsin, company sells software-based learning information systems to teachers of grades K through 12. When she founded the company in 1986, she filled orders from her kitchen table. By 1995, Renaissance Learning crossed $10 million in sales; this year, it will top $100 million.

Business Services Industry

Think Bigger

Entrepreneur, Dec, 2000 by Cynthia Harrington

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