Evolution of a growing business: the S-curve journey

Most of us take the evolution of our business for granted. We don't pay much attention to how it's changing, or why. I think that's because we haven't set an aim: where we're going, what the business has to look like, and how it has to run to get there.

Every business has an S-curve

You've probably seen the S-curve before. A new technology starts with slow adoption, hits a stretch of dramatic growth, then flattens out. Flat-screen TVs used to cost $10,000 to $20,000. Now you can pick one up at Walmart for about $400. We're living through the steep part of that curve with AI right now.

Businesses follow the same shape. At zero, you're inventing an idea. You'll do whatever it takes to make a sale, maybe even lose money on a few, with plenty of stress and very little process. Then you get traction. At $500,000, with a handful of people, you can run the place in your sleep. Then you push toward $1 million and things get wobbly. You have to rethink what your business is, how you hire, and how the work gets done.

Growth always slows

Plateaus are part of the natural cycle of business. You can't get away from them any more than you can get away from gravity. As rough numbers, they tend to show up around $1 million, $4 to $6 million, $10 to $12 million, and again around $24 to $30 million.

If you aren't evolving your business for the next curve, you'll plateau, and you may even slide back down. Picture the business that just reached $1 million. Quality dips. Long-time customers start asking questions you've never heard from them. A reliable old account drops off, and eventually you're back at $500,000. Nobody chose that. As I put it on the show, "we will naturally fall back to the capabilities of our system, of our processes."

You can't skip ahead

Getting from $1 million to $20 million takes two S-curves, maybe three. You can't install the $20 million structure today and grow into it. You can't carry those costs as a $1 million business, and you can't yet meet the expectations of the customers who'll depend on you at that size. That's why capacity planning matters. If you're at $1 million and aiming for $4 million, you probably need to start evolving at $2 or $3 million.

Simplify as you grow

Intuition says a $20 million business must be more complex than a $1 million one. My challenge to you is the opposite: at each evolution, look to simplify everything you're doing. Some structure is healthy. But once the team grows past what an owner can put their arms around, we tend to pile on performance management, KPIs and bonuses tied to performance. All of that is overhead. Start instead in the Gemba, the place where the work is actually done, and simplify and improve your processes there.

Stop asking your team to pedal faster

I think of a $1 million business as a bicycle. You can ride it reliably at 10 to 25 miles an hour. A $4 million business runs at 40 or 50. If you had to go 50, you wouldn't tell your cycling team, "I just need you to pedal faster." That's absurd. Yet it's what we do in our businesses when we're in a dynamic growth curve.

I hear a version of this from owners who've been stuck for years: "Paul, I can't get over 12 million." Usually they believe they don't have the right people. Sometimes that's true. More often, the business needs to evolve from a bicycle to an e-bike, a moped or a motorcycle. As the owner, it's my job to "buy a new system, invent a new system, create and evolve a new system."

Know your aim

So start with your aim. Where are you going, and are your systems capable of getting you there? Are you a bicycle today, or a motorcycle? Maybe 50 miles an hour on a motorcycle is right where you want to be. That's fine, as long as you stay vigilant, because your industry and your competitors keep moving. Most of the time, though, it doesn't take long before you start wondering what 100 miles an hour feels like. Then you ask yourself again: how do I evolve to achieve that aim?

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