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The success, or failure, of any organization depends on its ability to meet the challenges presented by growth and change, and to make healthy transitions from one stage of development to the next. But in order to do this you need to know where your business is in the business lifecycle?

Show highlights include:

  • One of the biggest mistakes new founders make when starting their business that forever stunts their growth (3:43) 
  • The insidious way success seduces you into making lethal business mistakes (5:14) 
  • How the “Founder's Trap” prevents most construction companies from reaching their full potential (and how to avoid the “Founder’s Trap”) (11:21) 
  • The weird way managing a company with a laundry list of problems that can tank your business is easier than managing a successful company (12:22) 
  • Why having too many meetings in your construction business may be a sign your company’s heading towards a slow death (15:36) 

If you’d like to take a business LifeCycle Assessment so you know exactly where your business is at, you can take a quick quiz at https://corplife.com and diagnose your symptoms. 

To get the most out of this podcast, head over to https://buildernuggets.com and join our active community of like-minded builders and remodelers.

Read Full Transcript

Success is a lousy teacher.

Welcome to builder nuggets hosted by Dwayne Johns and Dave young. Hey, our mission is simple, build freedom. We are a couple of entrepreneurs turned business coaches who have dedicated ourselves to helping our builder remodeler clients create the most rewarding businesses in the industry. My co-host Dwayne has been a successful builder and remodeler for over 30 years. He's seen the highs and the lows. From the beginning though, Dwayne has been on a quest to find a better way to run a contracting business. In 2016, he found that better way. That's how I met Dave, a lifelong entrepreneur and visionary who measures his success by the success of those around him. He reached out one day with a formula on how to transform my business and the rest is history. Since then, we've teamed up to help hundreds of contractors like you build better businesses and better lives. Now we've decided to open up our network and share our secrets so we can start moving the needle with you. It's collaboration over competition. Each week, we bring together industry peers and experts who share their stories so that we can all build freedom together.

(01:08): Our guest today is the founder of corporate life. A consulting firm, which specializes in organizational change. The mission of corporate life cycles is to change the way management is practiced and taught one company at a time.

(01:19): His consulting work has taken him around the globe from the mainland of China, the United Kingdom, Europe, Canada, Africa, Australia, even Iceland, as well as most every state in the United States.

(01:32): I first met today's guests during a group presentation to a Vistage group that I was a part of. I think it was back in 2015. The topic was around the various stages of the business life cycle. It had a really lasting impression on me. I enjoyed it and it helped me understand where my business was, which I think is critical to understanding that before you can successfully plan for the future. So it's my pleasure to welcome Ian McDougall to today's show. Welcome Ian. Oh, thank you

(01:59): To be here. I see her born in Scotland and educated in Scotland, England, and in the, in the U S and you work all around the world. So where's, where's home for you now in home right now is Boca Raton, Florida. That's pretty nice. Yeah. It's always sunny in Boca.

(02:19): And in 2015, when you spoke to our group, the way you kind of summed it up and talked about the different phases of the business life cycle. I mean, with me, it really resonated because I don't think a lot of people put a lot of thought into that. They kind of think of their business. Maybe it has a beginning, then they're working in it and then it has an end. Well, there's a lot more to it. You know, maybe that's a good place for us to start it today is for you to just talk a little bit about what are those. I mean, I think anybody that runs any business kind of knows where they need to know where they are in that phase. What are some of those different phases in the life cycle?

(02:49): The best way to answer that is to just very, very quickly identify the behaviors or the symptoms of the stages that goes through when it's, what I call growing or right where it is when it's trying to reach the optimum stage, which we call prime courtship stage. There is no organization, a founder, an entrepreneur sees an opportunity. They're willing to take risks, although there's no organization, there's a tremendous amount of excitement. And that's why it's not. For example, we see this a lot. It's not that unusual at that stage to find company founders, constantly telling people how wonderful it's going to be when they start this company turns out, they're basically trying to convince themselves, throw against the wall phase. Yeah, exactly. A big mistake that many founders make at that stage, which must be avoided at all possible costs is in exchange for promises of support.

(03:55): Many founders give up equity in their organization. So there's somebody who comes along and promises. I can get you access to these markets or access to these suppliers or whatever the case might be to say, great, I'll give you 10%. Because at that point it's 10% of nothing. That's courtship infancy is a huge wake up call for a company because it's, we're not dreaming anymore, right? It's sell, sell, sell, sell, like how a baby needs milk every four hours. And the infant company needs sense. It needs sales because it needs proof of concept. It needs sales because it needs cash because without cash, the infant will literally not survive. And mistakes that are made in the infant stage basically could be running out of cash, right? The business is just too successful. They're out of cash. They run out of credit or they make promises.

(04:53): Oftentimes they make promises that they can't keep, they overbook their schedules. They have to postpone delivery. And so on go-go stage is the terrible twos. The company is growing like crazy, right? You know what? This is, this is the realization of the company, founders green. They did it. But success is a lousy teacher because success seduces many, otherwise smart people into believing. They cannot lose. And seeing their companies flourish, many founders begin to believe they can do no wrong. So you have, I mean, almost a lethal combination there, many times of ego, arrogance and hubris, what does that often lead to the company becomes opportunity. Driven, not opportunity driving. Then you get the difficult stage of adolescence, which is the separation of ownership from management, right? That's that's the toughest stage for an entrepreneur, because think about it. When this company started, it was their baby, right?

(06:11): And now if the company is successful, we have multiple projects, multiple branches, you know, a whole lot of activity going on in the organization. Founders don't know how to manage that. So that's when they start to think, I need to bring in professional managers to help me figure this out. And that's when the difficulty starts, because these are, you have one person who is incredibly flexible. That's the founder, the entrepreneur, right? That's why I often say when there's an entrepreneur around Monday morning is the most dangerous time in the company because they had the entire weekend to think Monday morning, people are rolling their eyes, then go, God, here it comes. Now what new direction? New strategy. So now you bring into that situation. Somebody who's more administrative oriented, whose job is to create control systems and budgeting and cost accounting and scheduling, right? And they just don't mix. Well, adolescent organizations usually easily to identify because there's tremendous internal conflict between those who wish things would stay the same. And those who are trying to bring discipline and control into the system

(07:33): With the EOS coaching that we do with the visionary and the integrator. And Duane's nodding his head in the background, there it's a classic headbutting scenario or when done well, it turns into a beautiful marriage where they get on the same page and the secret mutual respect. Yeah. Valuing each other. Exactly. So where are we? Where at adolescents? Where, where, where do we go?

(07:59): The next stage is prime accompany in prime is flexible. It's able to meet customers, constantly changing needs, but it has disciplined accompany in prime. They have the energy of a toddler and the maturity of an adult and a company in prime delivers consistent. And that's the key word, consistent above average growth in sales, consistent above average growth in profits for its segment. A company in prime seeks out new markets, launches new products and services. Priorities are clear. People know what to do, and they know what not to. And how about this? Not only do people enjoy working in the company, there's actually in many prime companies, a waiting list of people who want to join the company. They set stretch goals. And these stretch goals are consistently achieved. Goals in a prime organization are not easily accessible because they're stretch goals, but they consistently achieve them.

(09:24): Isn't this the sweet spot. If you're an owner looking to exit or to bring in additional people into your business, we're going to take over some of the burden from you. If you're the founder and still, still involved, isn't this the prime time to be looking at an exit strategy as well, or is this a prime time to be milking? This thing?

(09:42): Most founders actually sell the company when it's in Gogo, trying to get to adolescence because that point is just, oh my, you know, it's just like, this is, I'm losing some of my best people. There's all this problems. It's not fun anymore. There's no fun. Yeah. It's not fun.

(10:03): All the funds going out, the business, people are complaining data, et cetera. That's when most founders sell, when they're trying to make that transition from go-go to adolescence, not when they're in prime.

(10:17): Yeah. Because when they're in tribe, they have no, no desire, no reason to sell. Everything's going to, well, do you find, I don't know if it's a percentage or, but how many, how many companies,

(10:29): I'm not an academic, right? So I don't do research. I'm pretty confident. Let me put it this way. If you look at the entire United States of America and you look at within the United States of America, all the businesses in whatever corporate entity has been formed, you're going to find most of these businesses are somewhere between Gogo and adolescence or possibly in the founders trap. Want to level up, connect with us to share your stories, ideas, challenges, and successes. The builder nuggets community is built on your experiences. It takes less than a minute to connect with us@buildernuggets.com, Facebook or Instagram,

(11:13): Access to the resources that can take you and your team to the next level. One call could change everything. Just like it did for me. The founder's trap is when I found her cat let go, right? They have to make all the decisions. So the company is stymied. That's where most companies are not in prime,

(11:33): True for the construction industry as well. We see that a lot where the founder is there a vision they've been trying to do it on their own. They get in the rut of this as the only way to do it. And it's hard to get other people on board to come in and shape the vision to change it so that it becomes something else. And they get stuck.

(11:54): At some point, when the company gets to a certain size founders, of course are not stupid. And they say, you know what? I need to delegate. And with the best of intentions, they try to delegate. What's the problem at the first sign that this person's going to make a mistake or in the founder's eyes, they make the wrong decision. The founder has to step in change it let's

(12:18): Say you move on from prime. What's coming after that. Well, it depends. It's harder to manage to my mind a company that is successful versus a company that's having problems. Success breeds, complacency. The question only now becomes how is the company going to die? Because for sure the company is going to die. Isn't going to be you know, blockbuster death right here today, gone tomorrow. Or is it going to be long, slow, painful, agonizing, terrible to observe Kmart death, but it's going to be death Devore, the lights companies that become successful. They have to have the radar on to detect complacency in the organization, confronted and or arrested immediately because you know, that is to my mind, that is the root cause of why organizations go to the wrong side of the curve and eventually basically die.

(13:23): It seems to me fairly simple that there, that accompany that has struggles knows what they have to focus on. When you have problems, especially in the construction industry, they are rearing their head. They make themselves undeniable and they force you to work on them, come together as a team. And, and your, your, your path is dictated to you or your activity is largely dictated to you. There's plenty of work to do. It's putting out fires, but when everything seems to be running smoothly, yeah. That's when the complacency comes in. You're not sure what to do next. You haven't been here. The problems are under control. How do you focus on taking the company to the next level? How do you continue to scale? And you don't necessarily have a need to do that, to do those activities the same way you have a need to put out a fire. So I think that's, you know, when you look at that complacency factor there, I can totally understand why people would say that success breeds complacency, because you don't have to, there's not the same sense of urgency that there is around solving a problem. That's going to tank your business, correct?

(14:27): Yeah. Again, I think a very indicator that very few construction companies really do get to that prime phase. Very few. Yeah. Very few. There's a lot going on. I mean, they get to the adolescence phase. I think they kind of, in this industry, people will revert back to maybe that Gogo, which is kind of the ego. The, this is my baby. I've done it myself. You know? And that's where the fires come from. The Dave talks about really that struggle on a daily putting out fires because they haven't quite gotten to the prime close, but you know, that's the purple unicorn. So to speak. That's, that's where we want to get to.

(14:59): Well, it feels like prime can only happen if you attract other exceptional people to your vision so that they can do it. They can perform at that success level as well. If you've got to go go owner, who's got a stranglehold on everything that strangle is on the people as well. The thing's never going to grow.

(15:16): And here's the thing. A classic symptom of a company not in prime is when all the big strategic ideas, all the new initiatives and so on. Come from one individual who was that founder of the company, What could be some of these other stages leading to death?

(15:39): Well, late prime, the company has become a prisoner of its past success. And the more successful, the more of a prisoner after that aristocracy, excessive emphasis on external signs of respectability dress titles, office decor, they begin to assume exaggerated important, right? Is a classic example is where our meetings held in our organization, says everything about their livestock infant company. We don't have time for meetings. The founder says, I'm going on a sales call, join me. And we'll meet on the way to this client. That's called staff meeting, infant government, Google company meetings are held in the founder's office because that's the center of power. They don't have space for a meeting room outside the founder's office. They did have space, but they are now, they filled that space with customer service because they're growing so rapid adolescent companies, meetings are held in the hallway because we don't like to meet with them.

(16:52): We're the partisans who started this company and these professional managers who joined us, don't understand our culture. Don't understand our business prime functional room, well lit sturdy furniture, sturdy chairs. It looks like a place. It's a mess. It looks like a place where work gets done. By the time you get to aristocracy meetings are held in the boardroom. And what does the boardroom look like? First of all, the lights are dim. The walls, dark paneling, the windows are covered with heavy drapes. The carpet is thick and luxurious. The armchairs are excessively comfortable and staring at you on this wall. What are you going to find a portrait of the phone and growing companies it's function over form in aging companies it's form over function. That's what our restock receipt looks like. If that's not arrested full blown bureaucracy emerges. What does that look like? Well, study the government, you get an excellent idea. They have incredible systems in a bureaucracy and it can do incredible processes, but their output is negligible or have very little value. People know what the rules are, but they can't remember why they exist. Companies there. Of course, rightly to my mind, quickly die. There's no entrepreneurship at the top. It's all bureaucracy and administration. So that's the tail of the organization. Life cycle,

(18:41): Give the listeners out there an opportunity to, yes, they can do one of these assessments on, on your site. They can go in there and kind of do an assessment of where they are, how it, how can they find, and that they can find that www.kortlife.com, C O R P L I F e.com. There's a link there to a quick lifecycle assessment where basically your screen gets populated with a whole series of symptoms. You select the symptoms that you think that, that you believe apply to your organization, and then you just submit it to me. And I look at the symptoms and I say, based on these symptoms, this is what it's saying about your life cycle. And these are the things that you need to be concerned about and pay attention to pretty much immediately, or you're going to go off this curve and you're not going to get, you know, you're not going to progress along the normal part of the curve. One thing I would say though, I always encourage companies to do this as a team process. So in other words, you should get into your meeting space and pull up the website on a larger screen that everybody can look at. And what that does is that raises different perspectives in the organization. So I see something that you don't see, and that's a learning opportunity and you present one set of data that the team agrees up just doing that by the way, without getting a report from it is extremely valuable. And that's what I would encourage.

(20:14): So folks can go out there. They can do that assessment. Obviously they could land all over the map in any one of these different stages, but I wouldn't, I think they would probably support me here. I think a lot of our listeners, a lot of folks that are for the most part had a fairly successful businesses. They're probably falling in that adolescence category. They're just getting in adolescence or trying to get out of it. So what, what would you say if you, bit of advice for somebody that's say pretty close to that adolescence phase, what kind of things did they really need to be thinking about? Focusing on to ultimately get themselves to the prime stage where any

(20:47): Organization is in its lifecycle is a function of two competing forces. And it turns out that these forces literally compete within every organization, literally anywhere in the world for profit organizations, nonprofit organizations, and these two forces that are constantly intention within the organization are flexibility and control. So in other words, early stage companies are flexible, but they're unpredictable. Why they unpredictable because they have insufficient control systems. Aging companies are predictable and inflexible. Why? Because they have excessive control systems and they've lost flexibility. So my advice to founders of companies who are trying to navigate this stage and why it's so difficult by the way is you want to have more, better discipline, more better control, but you don't want to lose the entrepreneurial qualities that got your organization to that stage in the first place.

(22:03): And this was some, some good stuff. I mean, there's really some, some nuggets in there for people to think about, again, encourage anybody to go do one of these assessments. It's good to know where you are and your company. I think if all of us were honest with ourselves to your point to bring in your team and talk about it, probably be pretty pretty apparent where you, where you fall in the business life cycle. So thanks again for your time. It's been fun. Thank you. Thanks for having

(22:29): Sometimes it's important to bring in these third, this third party context. And we really like what you said about involving your team, because if, if it's all just the founder and the founder gets it wrong and where they are and what they need next, then you know, that's a guaranteed way to never get out of your way, but bringing in your team and then bringing in a third party expert who can come at it from the outside, looking in and share with you. What they've seen with other companies is always valuable. We encourage everyone to do this. The reality is is you can't figure out all this stuff by yourself. You really, you really can't. You get in your own way. None of us, none of us can. And that's why, you know, your business can feel like a wobble board it at times. So finding that equilibrium, that balance between flexibility and control, you're probably not going to be able to find it all on your own.

Hey, thanks for listening. Dwayne and I love hearing from you. Your stories are inspiring and your challenges can be overcome. Got a cool tip? Idea for a show? Problem that you haven't been able to solve or maybe just struggling to figure out what you need next and where to get it. We can help. Hit us up at BuilderNuggets.com and start building freedom.

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