Understanding Entrepreneurial Adolescence
Like children, companies reach a point in life when they are awkward, unsure of who they are, hostile at times, and clearly in need of guidance about how to recognize and fulfill their potential. We call this adolescence when talking about children; author Doug Tatum calls it “No Man’s Land” when talking about companies. His similarly titled book explains what’s really going on in companies enduring this difficult time, and he sketches some broad strokes to coach entrepreneurs through it all.
The Nature of Teenage Angst
Emerging-growth companies with 20 to 100 employees and an average annual revenue of $50 million all encounter what Tatum dubs “No Man’s Land” –– that uncomfortable time during which the business’s growth poses all sorts of challenges that the entrepreneur is not equipped to handle. So No Man’s Land: What to Do When Your Company is Too Big to Be Small But Too Small to Be Big offers tips for surviving the four primary areas of the maelstrom (what Tatum calls the Four Ms): market misalignment, outgrowing your management, outgrowing your model and outgrowing your money.
Market misalignment is little more than an identity crisis, and Tatum advises entrepreneurs to systematize processes and hire outside experts to help. These outside experts often help secure funding, allow entrepreneurs to concentrate on their own work, and execute a plan well. But beware then of the next M (outgrowing your management), warns Tatum. Entrepreneurs must protect their turf to avoid competing for stimulating work, and they must make sure a hired CEO is a good cultural fit above all.
Outgrowing the model often happens when companies fall into the habit of doing good work too cheaply. Eventually employees will want to eat and maybe even have the heat on in winter, which requires the company to pay market wages. And if it can’t generate enough cash to do this, says Tatum, it doesn’t have a sustainable value proposition and doesn’t have reasonable growth potential. And yet giving those raises is one way to get to the fourth M: outgrowing your money, which boils down to being unable to predict cash flow. Solve this with a good CFO, says Tatum, because cash flow problems affect the entrepreneur’s broader decision-making abilities.
The four Ms may seem insurmountable, but they are part of a phase that is unavoidable if the entrepreneur wants to grow the company, says Tatum. Momentum –– what Tatum calls “the fifth M” –– helps entrepreneurs get through the hard work in No Man’s Land; it’s part of an institutional self-esteem that comes from optimistic entrepreneurs who create clear decision-making processes and aren’t afraid to shake up the inner circle occasionally.
From Teen to Titan
Frequently, the companies traversing No Man’s Land are “Gazelles,” companies with at least 20 percent revenue growth over four years. They represent a small percentage of American businesses, according to Tatum, but they create the majority of the new jobs and spearhead innovation.
It’s clear Tatum recognizes how much work it is for entrepreneurs to slog through the adolescent stage of the business life cycle. Although the four Ms make up the bulk of No Man’s Land, what may be more helpful to the reader who needs a “you can do it” pep talk are Tatum’s five corollaries: (1) that rapid growth has a clear beginning, (2) that growth confronts companies with common problems, (3) that there is no shortcut through No Man’s Land, (4) that No Man’s Land happens only once, and (5) that rapid growth has an endgame. The last one is perhaps the most important because it is a reminder that there are only four things to do with a business: nothing (that is, keep it small), grow it, sell it, or shut it down. Tatum’s message for entrepreneurs is to choose one of the four paths thoughtfully and purposefully before entering No Man’s Land.
Tatum’s book is a navigational guide to growth, but the broader theme is about how entrepreneurs can survive the stress of growth. There are very few entrepreneurs for whom No Man’s Land will be a technical manual for effecting change, nor will it be the final word on whether to take the plunge, but its sage advice, exercises, questions, and appendices will help forewarn those peering over the ledge.