I was first introduced to the term “second-stage” through the Edward Lowe Foundation
. But it wasn’t the definition of companies with 10 to 99 employees or $1M to $50M in revenue that caught my attention.
It was the signs, symptoms, and stages they described.
As I read about what second-stage companies face, suddenly the pain I was feeling as a business leader made sense. Maybe I wasn’t just a terrible CEO. These were growing pains…a byproduct of success.
It finally brought into focus that I was applying the same skills and tools that made me successful when we were smaller, without realizing that the size and maturity of my company meant that I needed different skills and different tools in order to have the same success at this new level of complexity.
Over the years working with second stage companies, we have identified two kinds of second-stage companies, early second-stage and late second-stage, both with some unique pain points.
Early Second Stage: A New Emphasis on Scalability
Early second-stage companies are usually owner/founder-led, with between 10-50 employees. In early second stage, there are three areas where major pain abounds.
Most early second-stage leaders experience delegation pain on two ends of the spectrum: the stuff they love and the stuff they hate.
For the things they love doing and excel at in the business, they will find it difficult to articulate exactly what is in their heads. In brand and marketing, this often happens when branding comes very naturally to the business owner/founder. They automatically infuse branding best practices and a unique voice or design aesthetic into everything they do. When they delegate it, it all of the sudden “doesn’t look right” or “doesn’t sound right” and fundamentally isn’t as effective, because it isn’t them.
For the things they hate doing and don’t have expertise in, the owner/founder will delegate it too quickly, often to the first person who shows interest and/or aptitude, and with very little direction or oversight. In brand and marketing, the first person who shows interest in managing the website or the social media accounts will get tasked with marketing, and will be given no plan to follow or framework to work within. They are often allowed to do or try whatever they want, and then when it doesn’t work, the owner’s response is: “See, I told you marketing just doesn’t work in our industry.”
The fundamental issue is that, whether it is trying to delegate the things they want to keep or the things they want to avoid, the delegation is not being done clearly and effectively. There is no shared vision of success and no clear understanding of what is off-limits and why.
In early second stage, leaders begin to realize that the company has gotten more complex, and needs specialized expertise in order to solve some of the challenges they are facing.
One of the pains they face in this is that they often won’t exactly know what they are asking for experts to do, or they might ask for the wrong kind of expertise.
One recent experience I had with an early second-stage business owner captured both of these pains simultaneously. This business owner was convinced that she needed a marketing strategy and plan developed to accelerate the companies growth. She was talking to several different providers of these services, and getting a wide range of costs that was confusing. I was trying to help her compare apples-to-apples and discern what might be the right fit mix of services and deliverables for her goals.
After about 20 minutes of conversation, though, I learned that the “expert” she had contracted with to manage her Amazon account was doing a terrible job, and that her sales and brand share on Amazon were in rapid decline. It was clear that even if she invested in marketing, it would be wasted time and money until the Amazon problem was solved. Once we had identified this core issue, I redirected her to a trusted friend at an Amazon brand accelerator.
This business owner was doing everything right in theory, but she simply didn’t know what she should be asking for, how much it should cost, or how she should judge success. And it makes sense. She was an expert in her product, not Amazon or marketing.
At its worst, this pain point hits home when an early second-stage company gets taken in by a great sales team that can’t deliver on its promises. It can be a costly mistake, and also one that then makes the company twice-shy about engaging outside experts in the future.
Advice and recommendations from trusted advisors and peer groups becomes the easiest way to manage this leap from working with generalists to working with experts.
Consistency is absolutely essential to building trust, both internally with employees and externally with customers. It is also one of the areas in which early second-stage companies struggle the most.
Early second-stagers are still working on creating and fine-tuning processes. They often don’t have the right people completely in the right seats. The owner/founder is still pulled into the day-to-day even while they are trying to spend more time as visionary and coach for their team.
The result of all of this is a lack of consistency. Internally, employees grow frustrated with the lack of clarity, boundaries, and what might feel to them like “moving targets” as they try to focus their own efforts and perform well. Externally, customers might hear and see mixed messages about what the company’s focus is, or might experience major swings in product or service quality.
Internally, the inconsistencies can be especially difficult to navigate because owner/founders are likely the source of many of them as they navigate the transition from “teammate” to “coach.” It becomes difficult for employees to point out the inconsistencies that they are hearing or observing, either because they are fearful of embarrassing their boss, or because they think that the leader is more aware about it than they are. Inconsistencies can be read as intentional, which further undermines the lack of trust, and can lead to a toxic internal environment.
Externally, the inconsistency is unlikely to cause the kind of turmoil that it does internally. Instead, the symptoms will more likely be stagnant growth, difficult sales, and an ineffective marketing budget. If potential customers aren’t clear about how the brand relates to them and what its value is, they won’t buy.
Takeaways for Early Second Stage
For early second-stage companies, the focus needs to be on: