You are the bottleneck to your business’s growth

The Peter Principle is real, but it starts with yourself, the business owner. What is your level of incompetence?

Starting a business and scaling a business requires two very different types of skillsets. They may be found in the same person, however, that is rarely the case unless nurtured and developed. Most startup founders hit a wall at around 15-20 employees unless they learn up on some key business skillsets and concepts …or get out of the way and hire someone that does. A business owner’s self-awareness of their own incompetence ends up being the true agent for growth. I only know this because I was ignorant of my own incompetence for far too long.

The type of personalities that start businesses are normally very confident in themselves. After all, they had the gall to think they could provide a product or service better than the existing marketplace. Launching a startup pretty much just takes ego, making it a real business takes skill, luck, grit and execution. These traits are found in most entrepreneurs who get businesses off the ground and build them up to about $3M in revenue for service businesses ($5M for product businesses) or about 15-20 employees. This is about as big as I have seen companies get with startup entrepreneurs – generally A players with loads of skill, grit, luck and an ability to execute on their business plan. These can be very successful businesses – driving tons of value to the owner and staff and providing a great service or product to the community. These are called “lifestyle businesses”. I didn’t know that is what it was called at the time, however, a lifestyle business is what Michelle and I had built Domain up to in 2012. About $2M-$3M in revenue and 10-15 employees.

Some other indicators of a lifestyle business are:

  • Most decisions made by owners, not managers.
  • Very few to no managers other than owners.
  • Staff reviews or one-on-ones are limited to non-existent.
  • Very little focus on staff career plans, HR, culture
  • Very few documented processes.
  • Owner is involved in almost everything.
  • Sales methods are driven by personality not process.
  • Goals or budgets are informal or not tracked.
  • No regular meetings, only ad hoc guidance as needed. If there are meetings, one voice dominates – that of the owner telling everyone what to do.

To scale a business requires new skills that startup entrepreneurs may not have or take to naturally. Necessary skills to scale a business such as delegation, documentation and process may not be natural to many startup entrepreneurs. Actually many entrepreneurs who have a taste of success growing to 15-20 employees may falsely think their “superpowers” can take them much bigger without hassling themselves with things that don’t interest them – like delegation, documentation and process. They incorrectly think that their personal skills that brought them this far will be the same skills that will take them to future milestones. They are wrong. There is a Peter Principle and they are Peter. Business owners who are “stuck” at 15-20 employees need to either own the fact that they are going to be a lifestyle business, learn the skills to grow past their incompetence or hire a manager/coach to get them there.

It takes a hard look in the mirror to realize you are the bottleneck. It is much easier to blame your staff as being the reason only you:

  • can have critical conversations with clients
  • make purchases
  • make hiring and compensation decisions

They’re just not good enough or can’t be trusted? Ok, maybe that is the case with one hire or maybe two, however how many does it take for you to realize you might be the problem? You likely are a great lawyer, accountant, IT nerd, advertising pro; but maybe you just are not very good at hiring or developing people. It can be a shot to the ego, but don’t despair. Problems identified are problems that can be fixed. Either learn the skills to get better at managing people or hire someone else who can.

…and by the way, after you remove your own incompetence as the bottleneck don’t be surprised if new managers repeat the same mistake when you grow to 20-50 employees and beyond. Bigger businesses also give more Peters in the org chart now the opportunity to rise to their own level of incompetence.

These Peters need to be identified and mentored so they don’t repeat the same mistakes of the owner and become new competence barriers to growth.

Here are some great books to help you and your managers get past their incompetence:

Author: Rashaad Bajwa

Father, Husband, Brother, Son, Entrepreneur - 2019 - New Jersey, USA