How to Make Bigger Better

Managing your company's growing pains doesn't need to be a one-person job. Sometimes, the key to growth lies in combining forces

by Karen E. Klein

For four years after he started DrinkWorks, a company that makes custom drinking cups, Richard Humphrey was routinely logging 100-hour weeks. "I was concerned that if I wasn't there every minute, the company would fall apart," he says. Humphrey's Newport Beach (Calif.) company thrived, winning Sea World and Circle K convenience stores as customers, but he deteriorated. "I lost a lot of weight, I got sick, I had an engagement break off," Humphrey says. "I lost touch with people."

Doing it all may be encoded in entrepreneurial DNA, but it's hardly the best way to manage a growing company. Entrepreneurs risk burning out and taking down their businesses and their personal lives with them.

Even when an entrepreneur can physically withstand such a grueling lifestyle, it's hardly ever necessary. After a close relative fell ill in 2002, Humphrey was forced to leave the business in the hands of his five employees. He was stunned by how well they handled things. "They stepped up to the plate, and it worked out," he says. "After that, the whole company balanced out."

DECISIVE ACTION.

Managing growth successfully comes down to getting the right help at the right time. At the outset, it's important for entrepreneurs to develop relationships with professionals such as accountants and lawyers, then make sure the right hires come on when they're most needed. As the company grows, it may be wise to explore partnering or outsourcing -- or even stepping back from the helm of your company.

The trick is to make sure you act decisively before your clients feel neglected, your checks are bouncing, and your personal relationships are crumbling. As Dale Carman, the founder of a 100-person animation studio, says: "The problem with success is that it can kill you unless you put the right people in place and give them the authority and responsibility and power to do their job."

It's important to keep an eye on the future, even if you're working out of a spare bedroom. "Start out acting like a big company from the beginning," advises Marty Schmidt, president of Solution Metrix, a small business consultancy in Boston. At a minimum, create professional accounting procedures and hire an accountant who specializes in small businesses. Even after DrinkWorks had contracts with big-name clients, Humphrey was using a bookkeeper at tax time and winging it the rest of the year. Drafts of contracts got sent to a friend who was an attorney for an informal overview. "I lost a lot of time and money trying to do things myself," says Humphrey.

LEGGO YOUR EGO.

The next step is to bring financial expertise on staff -- the sooner the better. "Even as they grow into big companies, many small companies don't put in place the disciplines and structures you would see in a company that was a subsidiary of a larger corporation," says David S. Lobel, managing partner of Sentinel Capital Partners, a private- equity firm in New York. "An outside accountant may come in once a quarter to close the books, and the CFO is more like a bookkeeper. So the forecasting suffers and the understanding of how much profit the company makes on each item is underdeveloped." An experienced CFO can regularly generate projections and detailed financial statements, giving you the building blocks to manage growth.

As head count rises, try to put aside your ego long enough to figure out which tasks can be done by someone else. "The fundamental thing entrepreneurs don't get is to stop taking pride in their own accomplishments and start taking pride in the accomplishments of the people they hire," says John Delmatoff, owner of PathFinder Coaching, a small business consultancy in Murietta, Calif. You may have a background in finance, but if your company depends on your working closely with clients, hire a CFO.

Getting started on the right foot extends to office space, too. Yes, cost can be an issue. But Humphrey found that several would-be employees who sounded promising on the phone failed to show up for interviews. "I realized later that candidates had been driving up, seeing this ugly building, and driving off," says Humphrey.