I think small businesses have specific challenges (and specific advantages). One challenge I think has to do with the constant need for restructuring as the company grows. This is the case because what works when the headcount is 1 does not work when the headcount is 2 and things keep have to change as new people is added.
In general all the roles are initially conflated in the founders. A single founder must be the sales person, the marketing person, the person delivering the services, doing the accounting, supervising projects, supervising finance, making strategic decisions and so many other things. As the company grows these responsibilities are spawned into new roles. As new roles are added new procedures and new communication mechanisms have to be put in place: the sales person should tell the admin that the agreement has been reached, the NDA signed and the contract must be delivered. When the payment is received the admin should tell the project manager to contact the client and schedule the kick-off meeting. When an employee is ill and takes a day off the HR responsible must be notified and then the project manager must consider that in the next invoice being sent to the client. Every time a role is added many mechanisms have to be rethought, and this affects all roles which need to coordinate at any stage with that role. All of this is exciting but it also take energies and it is difficult to improve processes if they change frequently. One does not get enough experience with them.
Also, it is difficult to track things as information is sparse and it seems that no one is responsible for getting the complete picture, everyone looks at a fragment.
I think that at a certain stage things will be more stable. I think that the stage between headcount 1 and headcount 10 is the one where everything needs to change all the time. Probably things slow down and then stabilize a bit over headcount 30. I do not imagine a company with headcount 40 to be that different of a company with headcount 30, while a company with headcount 4 is very different from a company with headcount 2!
We personally had recently to improve processes in two areas, and we hope to have improved them in a way that will work for a while.
- We invested in our selection process for technical figures. It worked smoothly for us, was appreciated by candidates, and it took a limited effort. We plan to tweak it very slightly next time we will use it again, hopefully in 6 months or so. We will also improve the onboarding process
- We have been working for months to improve our accounting and project management systems. They are connected. Hopefully we should have identified a balance that should permit us to have to do very little tracking and get reasonably good indications about the performance of a project. For example, we track hours spent in a week. As a policy we do not do extra time, so everyone have to specify by the end of the week how they spent their official number of hours among the different projects they have been working on. For example, an employee working 40 hours could report that he spend 32 hours on projext X, 4 hours writing articles and 4 hours on other misc stuff that does not need to be reported. We do not care for what you have done on a daily basis. If you worked 12 hours on monday and 4 on tuesday this is your own problem. What we calculate is the margin for each project and the hourly margin. We adopt constraints based accounting, where the constraint is the number of developers hours we have.
Regarding financing, I think it is surprising how little information a typical small business has about how the business is going. Ask most entrepreneurs and they will be able to tell you how much revenues they are doing. Some of them may be able to tell you the profits (or losses) for the business but very few will be able to tell you the margin for a project or the hourly margin. To answer that you need to classify project-specific expenses and fixed-expenses. To answer what results you get a certain month you must be able to measure project’s progress. This stuff requires some dedication to be put in place and most businesses just live by checking how much they have in the bank. I think at some point that is not enough. I lived dangerously until now but I was sick of feeling like an idiot every time I was not able to answer basic questions like “which projects are profitable?” “Are you losing money on any project?” “What is the profit for June?” “What category of projects are most profitable?”.
I think that with the work we have done we should be good for a while on project management and accounting. We may need to tweak things but this new approach should work for a while.
With these foundations we look into having the day to day go more smoothly and have more energies to focus on things like market research and new business ideas.
Then, we will grow again, I think we will focus on sales. Hopefully we will streamline our processes (and increase the revenues coming from products). This will reduce the time I have to dedicate to sales, and eventually make possible to delegate them.
It will then come the time to put in place some form of middle management, and that will be a brand new challenge. This is something I reflecting on and that will for sure require to change how we work!