In an ad for legal staffing company Legal Network Ltd., in an unmistakable parody of the cover of the Beatles’ “Abbey Road,” Karl Schieneman, co-founder and managing director, strides last in the queue.
Those looking for symbolism in the image may find it in the fact that Schieneman doesn’t take the lead on every initiative his company undertakes. He knows first-hand that fast growth can be an opportunity as well as a challenge that can tax the talents of any entrepreneur, especially one who tries to do everything himself.
Schieneman’s not the only entrepreneur who does battle with the demands that rapid growth can bring. It can impact a business at every turn, from creating financial cramps to bringing growing pains to the HR department. Entrepreneurs can get so busy building their business that they neglect adding to the structure that it needs to support it.
Ad agency Giant Ideas tries to figure out just the right time to add people, while apparel maker Earth Sun Moon Trading Co. struggles with identifying the right time to pick up the pace of growth and when to slow it down.
Legal Network offers corporate and law firm clients temporary or permanent lawyer talent from a pool of 5,000 screened attorneys. Last year, Schieneman opened an office in Cleveland, stabling top-notch lawyers in Midwestern cities, which allows him to offer their legal expertise to clients in large metro areas like Washington, New York and Chicago at a cost as much as 40 percent less than the going rates in those cities.
Schieneman and his firm have earned more than a dozen awards for their accomplishments since the company’s start in 1999. His company grew its revenue nearly 1,500 percent between 1998 and 2002, earning it a place on the Inc 500 list of fastest growing companies in 2001 and 2003. Schieneman says the company likely will make the list this year, too, and is a cinch to break the top 20 on Inc‘s Inner City 100.
Schieneman learned quickly that fast growth can swamp even someone like himself, an entrepreneur with a law degree and an MBA, when he tries to do everything.
“As the initial entrepreneur, you tend to get your hands into everything, and you become the bottleneck,” says Schieneman.
Although he continues to keep his finger on the pulse of virtually every aspect of his company, he’s learned that the best way to navigate through rapid growth is to delegate responsibility to his staff, to the point where he doesn’t always reserve the right to the final say on the company’s next project or initiative. And he sees a lot of projects at the approval stage at the same time everyone else in the company sees them.
To engage his staff, Schieneman devised a strategy that calls for each employee to create a business plan that recognizes their responsibilities to the organization and the strategies that they intend to implement. Contract staff can earn rewards for reaching agreed upon objectives with clients, satisfactory completion of projects and achieving performance goals.
His willingness to let go, he says, has allowed him to develop relationships with companies, law firms and lawyers in other cities that have expanded his business and allowed the growth to continue.
“The only person I micromanage is myself,” Schieneman says. “I never could have dropped what I was doing and focused on the markets where no one knows me.”
And there are other pluses. Schieneman is able to pursue other business segments, including other staffing ventures that he expects to roll out this year.
Giant Ideas, big decisions
Bryan Ward, president of Giant Ideas, an ad agency that came from nowhere in late 2001 to place among the top six agencies in town, faces the task of figuring out how to deal with his business’s fast pace of growth.
“Right now, the biggest challenge I have is keeping up with the growth,” says Ward.
To date, Ward has turned to an array of strategic partners and independent professionals to complete some of the work that can’t be done using in-house staff. But he wrestles with a dilemma that confronts every growing business: When do you add employees, and how many do you hire?
Ward ponders: “How many hats do I need to keep up with the growth?”
Companies in the midst of growth spurts often get themselves into trouble when they hire in a panic to fill slots, says Jack Roseman, director of the Roseman Institute, a consulting firm that helps companies deal with growth-related issues.
“When you’re in a fast-growth mode, it’s tempting to compromise your hiring standards because you need people, you needed them yesterday,” says Roseman.
The HR factor
Earth Sun Moon Trading Co. launched a direct-to-consumer mail campaign last year that brought in more revenue in six months than the rest of its operations did for the entire year. That meant a hiring binge for the company, which now has 35 full-time workers and employs an additional 35 part-timers during peak periods.
“We literally had to hire 20 people in the last six months,” says Nathan Depew, president and founder of the Grove City company that manufactures and distributes screen-printed apparel.
Earth Sun Moon Trading has doubled its revenue every year since Depew launched it in 1996. It posted sales of $2.1 million in 2002 and $4.7 million last year, and expects to do $7.2 million in 2004.
“I think the most challenging thing is constructing things as far as people go and trying to manage people throughout this,” says Depew.
Depew says that Earth Sun Moon Trading periodically will launch a new initiative that requires additional employees and organizational structure. After each growth spurt subsides, Depew finds that it’s best to allow the company to catch its collective breath.
“What I find myself doing is putting the pedal to the metal, then taking my foot off the gas for awhile and letting the organization catch up with the growth,” says Depew.
That’s a good strategy, Roseman says. In some cases, the pace can burn out employees before the entrepreneur notices, leading to a drop in productivity or a loss of valuable talent.
“When you’re going like a bat out of hell,” says Roseman, “you don’t realize that everyone else is going like a bat out of hell, too.”
“People like to grow a company, but change is always unsettling as well,” Depew says.
Fast growth — the slow way
While few entrepreneurs build a business solely on luck, serendipitous circumstances can contribute to the good fortune of some enterprises.
Gib Zilner, a pharmacist by profession, opened Diamond Drugs as a 1,000-square-foot retail operation in 1970. Zilner began to serve nursing and personal care homes, getting his feet wet in the institutional market.
The superintendent at a state correctional facility in Greensburg suggested he bid for the business at his institution, and Zilner started serving the prison segment. Today, the 480-employee company has contracts with prisons in 39 states and brings in more than $120 million in revenue. An Inc 500 company, Diamond Drugs expanded at a 429 percent pace between 1998 and 2002.
But Zilner says he never tried to grow the company faster than its structure could support it, or so rapidly that it would fumble its existing book of business.
“We wanted to do the best we could so we wouldn’t lose accounts,” Zilner says.
Growth is one thing, but sustainable growth is quite another, he points out.
Says Zilner: “It’s easy to expand, but you can collapse very quickly if you don’t have a good foundation.”
The typical track that many young pharmacists take — and often reject — has contributed to Diamond Drugs’ success. Many pharmacy graduates find entry-level positions with large retail drug store chains as retail managers. While pharmacy grads often prefer to practice their profession, the retailers are interested in store profits and operations.
“They’re worried about selling the two-liter pop, the light bulbs and the Christmas lights,” Zilner says.
For pharmacists who want to compound and dispense drugs and not bear the additional burden of overseeing a retail operation, the institutional pharmacy environment is one that has appeal. As a result, while there is an overall shortage of pharmacists, Zilner says Diamond Drugs has never had a problem in attracting them, even though it’s not in the middle of a large urban area.
Cash is king
While fast growth– and, presumably, bigger revenue — might seem like a problem that a lot of business owners would like to have, it can put a strain on a company’s finances.
“You can get into deep trouble by growing too fast, spending money on inventory and all kinds of things that you need and find yourself without cash,” says Roseman.
When Earth Sun Moon Trading was launched, Depew followed the track that a lot of entrepreneurs take when it comes to financing their ventures: He took out a home equity loan and charged purchases to his credit cards.
“It’s hard to get a lot out of banks at the beginning,” Depew says.
Depew eased his growing pains by bringing on two investors who were willing to take a minority position in his company and leave the management up to him. As a bonus, his partners are business owners and MBAs, able to give Depew valuable advice for running the company more efficiently. One of the tools that they helped Depew develop to manage finances was a weekly analysis that forecasts cash flow out for several months.
Earth Sun Moon Trading developed a track record that has led to a helpful banking relationship with First National Bank of Pennsylvania and a lending officer who Depew says “sees beyond the paltry surroundings of a start-up company.” The banker has been willing to extend the company’s credit as it has grown, allowing it to finance its expansion without being restrained by a shortage of capital.
Roseman says business owners need to think both strategically and tactically, looking out over time to forecast when the peaks and valleys in cash flow might occur and how to prepare for them. Taking on too much at any given time, he says, can place excessive strain on a company’s financial and human resources. In some cases, the business owner needs the discipline to turn down work.
Says Roseman: “There are times when you’re better off saying no to a contract.”
How to reach: Diamond Drugs Inc., www.diamondpharmacy.com; Earth Sun Moon Trading Co., www.earthsunmoon.com; The Roseman Institute, www.rosemaninstitute.com; The Family Business Center at Citizens; www.citizensnatl.com; Giant Ideas, www.giant-ideas.com; Legal Network, www.legalnetworkltd.com
