How many people can one person manage?
 
Harvard Business Review estimates the ideal range for an experienced manager is between five and nine direct reports. Inc. pegs the sweet spot at seven.
 
The ratio of managers to direct reports matters because it explains why some companies grow and others plateau. Every business is different, but you can loosely think of a company’s evolution as a series of stages with an invisible gate holding most owners from progressing to the next stage:
 
Stage 1: Doers (up to 9 employees)
 
In stage 1, you direct a handful of doers. You need people who can follow your standard operating procedures and execute. Your best employees will often be generalists who can do a lot of things reasonably well. They thrive on variety and like the feeling of getting things done.
 
Many owners get stuck in stage 1 because they fear delegation. Owners don’t trust employees enough to do the work without their direct oversight. However, those owners courageous enough to hire some managers will graduate to stage 2.
 
Stage 2: Managers (10–40 employees)
 
In a Stage 2 company, the owner hires a small number of managers (usually less than five), who are paid to ensure their direct reports execute. The emphasis is on managing against the plan the owner gives them. Good managers understand the process they are being asked to manage. They are detail-oriented and stick to the plan.
 
While managers may contribute to the plan, they are not usually responsible for creating it. Managers typically need their leader(s) to supply their plan, which is why many companies stall out at stage 2.
 
Stage 3: Leaders (40 + employees)
 
For our purposes here, let’s define a leader as a person who can lead a team through more than one layer of management.
 
Let’s imagine you have a sales leader who oversees two sales managers, each of whom has five salespeople reporting to them. The leader’s job is to set direction and to provide a vision and plan for their managers to execute. They are leading a team of twelve (two managers plus ten salespeople) while simultaneously managing two direct reports.
 
While most leaders can manage, the opposite is not necessarily true. Leadership requires managers to learn a new set of skills. Leaders need to be able to communicate clearly, delegate effectively, and create strategy.
 
If you’re stuck at stage 2, you have two options: either you need to hire leaders to parachute into your organization, which risks alienating your managers, or train managers to become leaders. Both strategies are hard and time consuming, which is why many companies get stuck at stage 2.
 
Half Your People, Half Your Processes
 
For an example of a company that successfully managed the transition to stage 3, take a look at Acceleration Partners. Started by Robert Glazer in 2007, Acceleration Partners is an agency specializing in partner marketing. Acceleration Partners is a people-centric business that helps brands reach and manage their influencer relationships.
 
In the beginning, Glazer began hiring people to help him manage clients and their projects. As he described on a recent episode of Built to Sell Radio, Acceleration Partners’ needs evolved as the company expanded: “Every time your company doubles in size, you outgrow half your people and half your processes.”
 
Glazer grew Acceleration Partners for 14 years, and by the time he sold it in 2021, Glazer had an entire team of leaders overseeing a group of managers who were managing the people doing the work.
 
If you’re stuck, it’s worth asking if you have the right people in place to take your business to the next stage. In the beginning, you will need managers you can trust. And to graduate to stage 3, you’ll need people who can manage and lead. Some managers may need training, while other areas of your business may need an entirely new leader to make the transition successful.

About Paul Wirth:

Paul Wirth is the founder of Blueprint for Entrepreneurial Growth, a Southern California based business and value builder advisory company that specializes in helping business owners exit their business whether one year or twenty years from now, whether they sell to a strategic buyer, private equity or pass their business down to the next generation. After a three-decade career in national leadership roles in banking, finance and homebuilding, as well as two successful businesses of his own, Paul began facilitating CEO roundtables to help business owners become better decision makers and better leaders. Paul also works with leadership teams to gain clarity of vision, develop solid strategic plans, and achieve flawless execution at every level of their organizations with his Blueprint for Growth program.

​If you want to plan the next journey of your business and life, please contact Paul at 949-933-7705 for a no obligation consultation.

​

​Survey a group of founders about the personality traits that made them successful, and they will be quick to use words like determination, sacrifice, and hard work. Others will show more humility and chalk their success up to personality traits like curiosity. Still others will credit dumb luck.
 
However, there is another personality trait that many of the most successful founders have in common: discipline.
 
They have the discipline to stick to their original vision despite the temptation to veer off course.
 
The discipline to stick to their original product or service offering despite clients asking for different things…
 
The discipline to ignore whatever shiny ball is demanding their attention and instead focus on what they set out to do…
 
Steve Jobs, the legendary co-founder of Apple, said it best:
 
“People think focus means saying yes to the thing you've got to focus on. But that's not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I'm actually as proud of the things we haven't done as the things I have done. Innovation is saying no to one thousand things.”
 
How Saying No Led to a 7-Figure Exit
 
Andy Cabasso studied law at university but never really practiced. Instead, he co-founded JurisPage in 2013, an agency specializing in helping law firms with their marketing.
 
Cabasso understood the marketing services lawyers need, and his partner, Sam Brodie, knew how to build websites that ranked on Google. Their service was popular among lawyers but also attracted the attention of other service businesses that needed a website that ranked organically as well.
 
Cabasso and Brodie were tempted to wander outside of their niche but ultimately turned down the opportunity to work with other types of companies, knowing they had something unique to offer lawyers.
 
They also knew the importance of recurring revenue so insisted that their clients use JurisPage for website hosting, which gave the partners a base of recurring revenue. Prospects offered JurisPage thousands of dollars to build them a website for someone else to host, but Cabasso turned them down, knowing that the recurring website hosting revenue was a fundamental component to building a valuable business.
 
In the end, Cabasso and Brodie’s discipline paid off because they attracted the attention of Uptime Legal, an Inc. 5000 business specializing in technology and practice management software for law firms.
 
The two companies fit together like peanut butter and jelly, which is why Uptime Legal acquired JurisPage in a seven-figure deal that closed in 2016.
 
The moral? While curiosity and grit are important personality traits for any would-be founder, the ability to remain discipled in the face of opportunity may be the most important attribute of all.
 
About Paul Wirth:

Paul Wirth is the founder of Blueprint for Entrepreneurial Growth, a Southern California based business and value builder advisory company that specializes in helping business owners exit their business whether one year or twenty years from now; whether they sell to a strategic buyer, private equity or pass their business down to the next generation. After a successful three-decade career in national leadership roles in banking, finance, and homebuilding, as well as two successful businesses of his own, Paul began facilitating CEO roundtables to help business owners become better decision-makers and better leaders. Paul's Blueprint for Growth process helps leadership teams gain clarity of vision, develop solid strategic plans, and achieve flawless execution at every level of their organization.
If you want to plan the next journey of your business and life, please contact Paul at 949-933-7705 for a no-obligation consultation.
 

What’s your greatest strength as a CEO?

Sales?

Marketing?

Operations?

Whatever you do well, know that it might become your Achilles’ heel. As owners, we tend to invest in areas where we know we’re weak. We know we have limited resources, so we spend what we have on backstopping the places where we’re most vulnerable.

This tendency leads many founders to under-invest in areas where they have natural strength. Two of the most common functions are sales and marketing. Most owners are decent salespeople, so they figure they can compensate for a weakness in generating revenue through force of personality and sheer will.

But determination only goes so far, and you may reach a plateau where your greatest strength becomes what’s holding you back.

How Gold Medal Service Got Stuck at $700,000

Mike Agugliaro is an electrician by training and a natural salesman in practice. He’s a gifted speaker, and his warm personality makes him a magnet for customers. When he started Gold Medal Service with his partner Rob Zadotti, they didn’t invest much in sales and marketing. When Agugliaro was interviewed on the Built to Sell Ratio podcast, he admitted the extent of their marketing in their first decade of operations was pinning a business card on the corkboard of the local coffee shop.

Over 12 years, the business grew slowly to around $700,000 in revenue, which was when Zadotti announced he was leaving. The news made Agugliaro re-evaluate what they had been doing. He realized they had been massively under-investing in sales and marketing.

Agugliaro convinced his partner to stay, and together they started investing heavily in sales and marketing. At the time, the yellow pages were still the primary way homeowners found service providers, so they invested in a double-page spread. They tried radio, fliers, and just about any marketing technique they could measure.

Then the partners started to think of their trucks as giant rolling billboards. Agugliaro’s wife did some research and discovered that humans are hardwired to notice the color yellow. Agugliaro and his wife reasoned that humans must have evolved to avoid bees, so they added black lettering. Gold Medal’s 65 trucks were bright yellow and black and became a mainstay on the streets of New Jersey.

The investments in marketing paid off, and Gold Medal went from $700,000 in revenue in 2004 to a whopping $32 million in sales by 2017. Months later, Sun Capital acquired Gold Medal for a significant premium over the 5 x EBITDA multiple typical of the home services industry.

​The takeaway? Your greatest strength can help you start a business. Still, at some point, you may be tempted to underinvest in your strengths, which is when they switch from your most significant assets to a hidden liability. As your business grows, you may need to invest in areas you never considered necessary in the past

​How many people can one person manage?
 
Harvard Business Review estimates the ideal range for an experienced manager is between five and nine direct reports. Inc. pegs the sweet spot at seven.
 
The ratio of managers to direct reports matters because it explains why some companies grow and others plateau. Every business is different, but you can loosely think of a company’s evolution as a series of stages with an invisible gate holding most owners from progressing to the next stage:
 
Stage 1: Doers (up to 9 employees)
 
In stage 1, you direct a handful of doers. You need people who can follow your standard operating procedures and execute. Your best employees will often be generalists who can do a lot of things reasonably well. They thrive on variety and like the feeling of getting things done.
 
Many owners get stuck in stage 1 because they fear delegation. Owners don’t trust employees enough to do the work without their direct oversight. However, those owners courageous enough to hire some managers will graduate to stage 2.
 
Stage 2: Managers (10–40 employees)
 
In a Stage 2 company, the owner hires a small number of managers (usually less than five), who are paid to ensure their direct reports execute. The emphasis is on managing against the plan the owner gives them. Good managers understand the process they are being asked to manage. They are detail-oriented and stick to the plan.
 
While managers may contribute to the plan, they are not usually responsible for creating it. Managers typically need their leader(s) to supply their plan, which is why many companies stall out at stage 2.
 
Stage 3: Leaders (40 + employees)
 
For our purposes here, let’s define a leader as a person who can lead a team through more than one layer of management.
 
Let’s imagine you have a sales leader who oversees two sales managers, each of whom has five salespeople reporting to them. The leader’s job is to set direction and to provide a vision and plan for their managers to execute. They are leading a team of twelve (two managers plus ten salespeople) while simultaneously managing two direct reports.
 
While most leaders can manage, the opposite is not necessarily true. Leadership requires managers to learn a new set of skills. Leaders need to be able to communicate clearly, delegate effectively, and create strategy.
 
If you’re stuck at stage 2, you have two options: either you need to hire leaders to parachute into your organization, which risks alienating your managers, or train managers to become leaders. Both strategies are hard and time consuming, which is why many companies get stuck at stage 2.
 
Half Your People, Half Your Processes
 
For an example of a company that successfully managed the transition to stage 3, take a look at Acceleration Partners. Started by Robert Glazer in 2007, Acceleration Partners is an agency specializing in partner marketing. Acceleration Partners is a people-centric business that helps brands reach and manage their influencer relationships.
 
In the beginning, Glazer began hiring people to help him manage clients and their projects. As he described on a recent episode of Built to Sell Radio, Acceleration Partners’ needs evolved as the company expanded: “Every time your company doubles in size, you outgrow half your people and half your processes.”
 
Glazer grew Acceleration Partners for 14 years, and by the time he sold it in 2021, Glazer had an entire team of leaders overseeing a group of managers who were managing the people doing the work.
 
If you’re stuck, it’s worth asking if you have the right people in place to take your business to the next stage. In the beginning, you will need managers you can trust. And to graduate to stage 3, you’ll need people who can manage and lead. Some managers may need training, while other areas of your business may need an entirely new leader to make the transition successful.

If you were to draw a picture that visually represents your role in your business, what would it look like? Are you at the top of an organizational chart, or stuck in the middle of your business like a hub in a bicycle wheel? The Hub & Spoke model is a drive that shows how dependent your business is on you for survival. The Hub & Spoke model can only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. Acquirers generally avoid these types of managed businesses because they understand the dangers of buying a company too dependent on the owner. Here’s a list of the 5 top warning signs that show your business could be too dependent on you.

1. You are the only signing authority

Most business owners give themselves final authority… all the time. But what happens if you’re away for a couple of days and an important supplier needs to be paid? Consider giving an employee signing authority for an amount you’re comfortable with, and then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review everything coming out of your account and make sure the privilege isn’t being abused.

2. Your revenue is flat when compared to last year’s

Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider narrowing your product and service line by eliminating technically complex offers that require your personal involvement, and instead focus on selling fewer things to more people.

3. Your vacations… don’t feel like vacations

If you spend your vacations dispatching orders from your mobile, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business.

4. You know all of your customers by first name

It’s good to have the pulse of your market, but knowing every single customer by first name can be a sign that you’re relying too heavily on your personal relationships being the glue that holds your business together. Consider replacing yourself as a rain maker by hiring a sales team, and as inefficient as it seems, have a trusted employee shadow you when you meet customers so over time your customers get used to dealing with someone else.

5. You get cc’d on more than five e-mails a day

​Employees, customers and suppliers constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval or that you have not made clear when you want to be involved in their work. Start by asking your employees to stop using the cc line in an e-mail; ask them to add you to the “to” line if you really must be made aware of something – and only if they need a specific action from you.