The Rule of 40, 50 or 60

Starting and growing a company is not easy.  If it was, everyone would do it.

Typically, an entrepreneur or a group of entrepreneurs are working in the proverbial factory where they get an idea for a new innovative product or service.  They generally figure they can do a better job of monetizing that idea than the factory management or others.

Often they are right since creating the product of service is fundamental to what they have been doing.

They start out with their own capital, from family and friends, and at times from an investor.  Or they attempt to grow organically, a process that enables them to retain control, but it is slow, and frequently fraught with challenges.

Those who have the “right” idea start to do well.  They are able to produce and deliver.  The company starts to grow.

Before long, the rule of 40, 50 or 60 sets in.  The entrepreneurs must decide what they most want to do with the 40, 50 or 60 hours per week they work.

It is not unusual for the founders/leaders of the company to be hands on practitioners.  They are skilled at the product or service, but not necessarily at the myriad of other details that they need to attend to from a business point of view, details that are essential for success.

These details include such administrative functions that were handled behind the scenes at the factory such as personnel and HR matters, finance and legal, marketing and at times, even supply chain management.  Many founders and entrepreneurs had little direct involvement in those matters at the factory, putting them at a disadvantage in their start ups.

When the founders need to attend to matters related to those functions, work stops being fun and becomes work.  That’s no fun for many entrepreneurs.  The entrepreneurs revert back to the functions they are most comfortable with, leaving the various admin matters to others or not handling them at all.  This hampers growth.

We have studied and advised numerous companies through the years that have been in the foregoing situation in one way or another.

In our work, typically an organizational analysis or working to develop growth strategies, we tell the entrepreneur that as a part of our assessment, they need to determine how they want to spend the 40, 50 or 60 or more hours per week they work.

Once this is determined, filling in the other boxes on the organization chart becomes easy and our implementable recommendations often include identifying which functions need reinforcement and engaging the types of personnel required for those functions.

As you look at your organization, ask yourself how does the rule of 40, 50 or 60 impact you?   If the answer is negatively, let us know.  We can help.

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