Shrink and Restabilise

Last week we spoke about the 7 stages of a business lifecycle – quick recap below:

Business Lifecycle

I am encouraging business owners at present to diagnose where they feel their business is currently sitting in this lifecycle.  Understanding where you are enables greater clarity on why you are there.

This week I wanted to dive deeper into the Launch / Startup period through to the fifth stage, Shrink to Stabilise.  

The Journey through the Lifecycle

There’s a kind of electricity at the start of a business.  One spark, whether that be an idea, a client, a frustration with your old job, and you’re off.  At this stage, everything feels possible. You’re building from scratch, often alone. No rules, no playbook, no permissions. Just a blank page and the stubborn belief that your way might actually work.

The reality then kicks in.  You have to wear every hat: sales, creative director, head of delivery, IT support, accounting etc.  You win a client, deliver the work, send the invoice, chase the payment: rinse, repeat, rinse, repeat. Your days are powered by adrenaline and good intentions. Your nights, by spreadsheets, worry and second-guessing.  You might also find yourself underpricing just to win work, and overservicing to keep it.  You’re saying yes to everything as you are not really clear on what you do and why you do it.  However, revenue is growing!

Trying to do everything, alone, ultimately feels isolating, overwhelming and a struggle.  So you take a decision to hire and invest in a team.  If you replicate what you were doing, but just faster and with people to feed work to, the growth will work, right? So you sell more aggressively to cover the increasing costs. In the background, however, no-one has time to look at building systems which remain either non-existent or at best struggling to keep pace with the growth.  You are still too ingrained in delivery and direct client interactions, and so you fail to delegate properly; you spend nights wondering how you have more staff, but you’re the one picking up all the extra work.  

Suddenly the lack of cohesive systems beyond closed doors starts to impact on client delivery, and you lose customers faster than you can win them. Delayed payments start to have an impact on your cashflow and ability to settle your own bills on time. You take the hit directly to make sure staff get paid, but now your personal Suddenly the lack of cohesive systems beyond closed doors starts to impact on client delivery, and you lose customers faster than you can win them. Delayed payments start to have an impact on your cashflow and ability to settle your own bills on time. You take the hit directly to make sure staff get paid, but now your personal finances are directly suffering.

And so inevitably this leads to tough conversations, layoffs and a realisation that you grew revenue, but not in a profitable or sustainable way.  You cannot grow past a revenue ceiling and with that revenue you simply cannot run with the cost base you have.  

If any of this resonates with you, you are somewhere on that chart between startup and stage 5.  If you are unsure here are some questions you can ask which may help:

1. Are your systems well documented? If you put three times as much through each system tomorrow would they stand up or break in an instant?
2. Do you know who you do your best work for? Do your current clients fit that model?
3. How much profit do you build into your pricing and can you accurately stand over this data post project finishing?
4. Can you clearly articulate what you do and why? Your why is the very essence of what you started out to do.
5. Do you have a team that you can rely on, trust implicitly and that contribute to a fantastic culture? Or do you spend most of your time dealing with the fallout of underperformance and apathy?

Golden State Warriors

You will know by now I love illustrating advice with sporting examples.  And I love watching NBA.  From 2015 to 2019, the Golden State Warriors were the NBA dynasty. They won 3 NBA championships (2015, 2017, 2018) and set the regular season win record (73–9).  By 2019, however, Kevin Durant left, while Klay Thompson suffered serious injuries and was soon joined by Steph Curry.  With the loss of these 3 key players, unplanned and at once, they went from NBA Finals to the bottom of the league.

Why? They didn’t fall because they weren’t talented.  They had hit a natural plateau, lost key players, and the system they’d scaled wasn’t sustainable without those players.  So, for two seasons, the Warriors stepped back, through necessity.  They developed younger players while letting senior players go, freeing up salary cap space. But, they kept Coach Steve Kerr and the core culture intact, with star player Steph Curry returning from injury.  By 2022, they became NBA Champions again.  

The lesson? 

They stabilised without panicking.

They rebuilt their house from the inside out.

They grew again, but they grew differently.

Summary

The Warriors’ story isn’t just about a comeback. It’s about:

• Knowing when not to scale
• Holding your nerve during lean years
• Investing in development, not distraction
• Having the courage to evolve while staying true to your values

In your business you are not going to dominate every year and most likely have had as many downs as ups so far.  My advice here is to be intentional during a plateau, stabilise well, to position yourself to win again when the time is right.

Final Word

If you are unsure about how to self diagnose exactly where you are to identify what action to take, I’ll speak about this next week.