6 Roadblocks to Growing Your Business

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Companies often encounter barriers as they mature. Here are six big ones and how to break through them.

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Customers aren’t all equally valuable; some can even be unprofitable. So CEO Scot Lowry of digital marketing firm Fathom, in Valley View, Ohio, had his CFO draft a profit and loss statement for each. That helped him phase out the costly customers — and identify the ideal ones, such as health care and financial services firms that need very customized service. “Our strategy is based on deep customer intimacy,” he explains. “We have to focus on select clients to deliver on this.”

2. Failing to scale systems

Many companies don’t want to invest in brand-new software for accounting, customer-relations management, and other operating systems as they grow because they’re pricey. But procrastinating will lead to chaos and mistakes when you need to tackle tasks that should be easy to do instantly, like updating customers’ addresses in all your records at once. If your company has hit 50 to 150 employees without upgrading its systems, don’t delay any more. It’s an emergency.

3. Using an old org chart

It’s tempting just to stuff this important document in a drawer and forget it. Don’t. With his now nearly 150-person team squabbling over priorities and resources, Lowry shredded his org chart and reorganized everyone into teams dedicated to specific accounts. He is listed at the bottom, with the role of helping employees serve clients at the firm, which expects $20 million in sales this year. “I stopped talking about my ‘direct reports’ and switched to calling them my ‘direct supports,’” he says.

4. Trusting your gut

In the startup phase, you’ve got to rely on your instincts because there’s no historical data to guide you. But intuition often deceives CEOs as their businesses become more complex, says Sunny Vanderbeck, managing partner at Satori Capital, a Dallas-based firm that invests in growing, profitable companies. If you’re not letting data drive decisions, such as what products to develop or which customers are worth pitching, he says, “you’re missing out.”

5. Letting your skills flatline

Companies often outgrow the founders’ ability to lead them because the CEOs don’t sharpen their management skills. “If your company is growing 30% a year, you have to be 30% better by this time next year,” says Vanderbeck. Learn from other CEOs by joining a peer group like Entrepreneurs’ Organization or Young Presidents’ Organization. “If you aren’t a learner, you are the reason the company isn’t as big as it could be,” Vanderbeck says.

6. Not investing in team training.  

Out-learning the competition is a powerful and sustainable growth strategy. To get everyone playing the same music, CEOs must focus training where the company needs it most. Studies have proven over and over again that training has the highest ROI compared to any other investment a firm can make. Jeff Frushtick, CEO of industrial equipment maker Leonard Automatics, found this to be true: Training employees on Lean production resulted in a five-fold increase in profits in a single year at the 35-employee, Denver, N.C., firm. Look into training that can boost your firm’s profits similarly.

 

Verne Harnish is the CEO of Gazelles Inc., an executive education firm. Robert Fish is founder and CEO of Insight CXO.

This blog is adapted from a story in the May 19, 2014 issue of Fortune.

Image: Nicholas Canup / Flickr