By Jeff Cornwall
Two young entrepreneurs came into our classes this week and talked about growth challenges they are currently facing in their businesses. Both focused quite a bit on the human resource challenges that come with growth.
Matthew Wilson and his father own Gateway Construction in Brentwood, TN. Gateway is a commercial real estate development company. They have seen significant growth in their business since they recovered from the huge hit that commercial real estate took after 9/11.
As they continue to grow, Matthew is finding the need to step back from the day-to-day aspects of construction management. That is, like many entrepreneurs he can no longer spend time "working in his business", but needs to shift to "working on his business." At the same time, his father is beginning to step away from the business—not retire, but clearly backing off from his role in the day-to-day operations of the business. So Matthew has to take on more of a strategic leadership role in Gateway, while hiring people who can handle managing the operational level.
"People say real estate is location, location, location. At this point in our business growth, I would say that the key has become people, people, people," Matthew told our class.
They have tried to keep their overhead low—a lesson learned over the years from riding out the ups and downs in their industry. And while their current growth creates the need for more people, they are trying to develop strategies that will keep all of the people they are adding busy and productive even when real estate takes its next downturn.
They are firm believers that the key is not just finding the best people, but finding the right people for the right job.
Matthew also is thinking about the need to some day expand his team to include more expertise in IT and financial management. They are not large enough now to support this type of an addition to the team, but may well get there some day soon.
Nicholas Holland, is Founder and CEO of a web design business in Nashville called CentreSource. Nicholas has also faced human resource challenges in his growth.
CentreSource has a business model that is driven primarily by billable hours. One challenge from the very beginning has been to have staff who have the skills to meet the latest technology need in the market. Finding the right people for his business can sometimes be a daunting task.
Nicholas said that managing key staff for a business like his when it grows can be difficult if it results in a power/dependency relationship. He recommends that all entrepreneurs have the mindset that no employee is irreplaceable, especially if you plan properly.
A challenge they faced as they grew was the expense hit that each of his early hires created had on the income statement. Expenses never grew in a straight line, but in significant steps as each new programmer was added. This created a major cash flow challenge. He met this by being very conservative in cash management. He never hired until he had the money already coming in to pay for the new employee. Also, he always keeps 90 days of cash reserves to cushion any unexpected downturn. During growth keeping this reserve took careful planning. Both of these tactics restricted his growth to some degree, but they also helped him to grow at a pace that he could afford to pay for.
Jeffrey Cornwall is the Director of Belmont University.
