This article is an excerpt from the Shortform book guide to "Traction" by Gino Wickman. Shortform has the world's best summaries and analyses of books you should be reading.
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What is the key to exponential business growth? What can you do to push your business to the next level and make it succeed at increasingly higher levels?
Most companies fail to fail to reach the next level of business growth because owners are afraid to let go of total control, trust their leadership team, and delegate to them. But for their business to grow, they need to take that leap of faith.
Read about the four pillars of exponential business growth.
The Secret to Exponential Business Growth
If you want to take your company to the next level of business growth, the first step is to change your thinking. Stop treating your company as an extension of yourself and let it evolve into its own entity. To spur business growth and sustain it over the long-term, you must:
- Build a strong leadership team.
- Expect to hit ceilings.
- Choose a single operating system to run your business.
- Be open-minded and humble.
1) Build a Strong Leadership Team
Every entrepreneur must decide whether to operate the business as a dictator or with a strong leadership team.
A business run by fiat can’t grow beyond a certain size, nor outlast its leader. It stalls when the number of decisions and problems becomes too much for one person to handle. The best approach for the health of the business is to run it with a strong leadership team.
Your senior leaders should have clear responsibilities, authority to make decisions in their areas, and accountability for their decisions. Once you choose the right people and establish the expectations and communication processes, you need to let them take control. They’ll be better at running their departments than you would be at trying to do everything.
At the same time, the team needs to speak with one voice to the rest of the organization.
2) Expect to Hit Ceilings
Businesses usually grow in stages—they reach a ceiling and push through to the next stage. You must keep making adjustments in order to grow. This is the only option; the alternative is to stagnate and die.
Growth can be external—in revenue, profits, physical size—or internal in organizational capability. Usually, you need internal development first to drive external growth.
Many organizations fail to survive their first growing pains when they hit a ceiling. About half of small businesses fail in the first five years. Michael Gerber, author of The E-Myth Revisited, put the number at 80%. Further, he wrote that 80% of those that do last five years fail in the next five. (Shortform note: Read our summary of The E-Myth Revisited here.)
However, you can push through to the next level of growth when you and your executive team adopt five approaches—simplify, delegate, predict, systematize, and structure.
Your team must be able to simplify the business to enhance efficiency and focus, by streamlining the system, processes, communication, and the vision. The EOS process is designed for simplicity; the theme throughout this book is that less is more.
Reaching the next level of business growth also depends on your ability as a leader to delegate. Delegating operational details allows you to take a strategic view of where the company needs to go, which is the best use of your time and talents. By contrast, you hold back the company’s growth when you stay mired in the details. Think of it this way: when you grow personally, by taking that leap of faith and relinquishing control, your company grows.
At a minimum, you need to delegate tasks like handling customer complaints, approving most invoices, and opening the mail. You’ll set an example for your senior leaders, who also need to delegate.
A company’s leaders must be able to accurately predict where the business will be in both the long and short term.
Publicly held companies predict earnings for every quarter. If they hit their projections, their stock value goes up; if they miss, it falls. However, if small companies fail to meet their projections, they go out of business—so leaders need a strong sense of where a company is going and how it will get there.
A long-term prediction is for 90 days or longer. This kind of prediction isn’t about guessing, but determining what you will do in the future based on what you know today. The way to make long-term predictions is to start 10 years out and work backward, to three years, one year, and finally to the next three months.
Leaders need to take the long or strategic view. While your crew battles through the jungle, you need to climb a tree, see where you’re headed, and provide direction. In The E-Myth Revisited, Gerber argues that business owners must stop working so much in the business, and spend more time working on it. When you do, you’ll reach your goal faster.
The short-term focus is on what you do daily and weekly. You need to have a handle on the immediate issues and be able to troubleshoot because avoiding or solving them will affect the company’s performance in the long term. As you and your team get better at predicting, you’ll foresee problems and preempt them.
In the early stages of leading a business, you’re often reactive, resolving every complaint and issue on the fly. But at some point, instead of numerous individual responses, you need to systematize the way you handle recurring things.
Businesses need only a half-dozen or so core processes in order to function. You need to identify them and integrate them into an operating system. By simplifying and documenting these processes, you increase efficiency and reduce errors. With well-defined processes, you can delegate responsibility for each one, while you take the long view.
You need to create a structure for your company that clearly defines functions, roles, and responsibilities. Often, small businesses are loosely structured and built around the ego or personality of the leader. This kind of company may get stuck because it can’t grow without changing its structure. However, a structure with defined roles and accountability encourages and enables expansion.
3) Pick One Operating System
The third requirement for sustainable business growth is to choose a single operating system. Your operating system is like a computer’s operating system that organizes activities and data in a way that enables everyone to be more productive. It’s a consistent approach to planning, setting priorities, determining your vision, meeting, and communicating. If you have more than one system, people will work at cross purposes. For your company to succeed, you need an operating system that keeps everyone on the same page.
4) Be Open-Minded
Finally, for your business to evolve, you and your leadership team must be open to new ideas and willing to admit what you don’t know and ask for help. You, as the leader, must know your strengths and weaknesses and let those with greater skill in specific areas take charge. You also must be vulnerable or humble enough to see and address your organization’s weaknesses.
When you’re ready to let go of total control, you can build a stronger organization that continues to succeed at higher and higher levels.
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Like what you just read? Read the rest of the world's best book summary and analysis of Gino Wickman's "Traction" at Shortform .
Here's what you'll find in our full Traction summary :
- How a first-time entrepreneur can gain the traction needed to grow
- Why hard work and determination aren't enough for your business to succeed
- The 6 key principles of the Entrepreneurial Operating System