How to Find What Is Capping Your Company's Growth

Why growth stalls

Growth rarely stops because of the market. It stops because something inside the company can't carry more weight.

Founders feel it as a plateau. Revenue flattens, the team is busy, and nobody can say exactly why.

Most companies have one main constraint

A company is a chain. It only moves as fast as its slowest link. Improving anything else just builds up work in front of that link.

So the question isn't what could be better. Everything could be better. The question is what's stopping everything else.

The usual suspects

• The founder. Decisions wait for one person.
• Sales. Only the founder can close, so deals are capped by their calendar.
• Delivery. New customers break the way work gets done.
• Cash. Growth costs money before it makes money.
• People. The team that got you here can't run the next stage.

The bottleneck is usually the founder

Between $1M and $10M, the most common constraint is the founder. Not because founders are doing it wrong, but because what worked at five people doesn't work at fifty.

The signs: your inbox is the team's to-do list, nothing ships while you travel, and your best people ask permission for things they could decide. How do I stop being the bottleneck? walks through the fix.

How to find yours

1. List the last ten things that were late. Look at where each one waited.
2. Ask your team what they're waiting on right now.
3. Notice what happens when you're out for a week.

The answer that shows up in all three is your constraint.

Common mistakes

• Hiring more people in front of a constraint that isn't headcount.
• Spending on marketing when the constraint is delivery.
• Fixing everything a little instead of one thing completely.
• Assuming the constraint you fixed last year is still the one.

When it isn't internal

Sometimes the cap really is outside: a shrinking market, a new competitor, a technology shift. If you've fixed the internal constraints and still can't move, step back and look at where the market is heading. The Business section is where I write about those shifts.

The idea behind this

Looking for the one constraint isn't new. It comes from Eliyahu Goldratt's theory of constraints, which he laid out in his 1984 business novel The Goal. The book follows a plant manager trying to save a failing factory.

Goldratt's point was simple. Every system has one step that limits how much it can produce. Making the other steps faster doesn't help. It only piles up work in front of the slow one.

He described five steps for dealing with it:

1. Identify the constraint.
2. Exploit it. Get the most out of it with what you already have.
3. Subordinate everything else to it. Set the pace of the rest of the company around it.
4. Elevate it. Add people, money or tools only when the first three steps are done.
5. Repeat. Once it's fixed, a new constraint appears somewhere else.

Goldratt wrote about factories, but it works the same way in a 30-person company. The constraint is usually a person or a process, not a machine.

What this looks like when the founder is the constraint

Applying the five steps to a founder looks something like this.

• Identify. Track for two weeks which decisions wait for you.
• Exploit. Block time each day to clear them, instead of handling them between meetings.
• Subordinate. Write down the rules behind your common decisions so others can make them.
• Elevate. Hire or promote someone to own the area that keeps landing on your desk.
• Repeat. Look for what's waiting now. It will have moved.

The hardest step is usually the third one, because it means letting go. I've written about that shift in be the CEO your company needs and hire for your bottleneck.

Fix one thing completely

The most common mistake I see is spreading effort across five problems at once. Each one gets a little better, and growth doesn't move.

Pick the single constraint. Fix it all the way. Then look again. Growth usually comes in steps like that, each one unlocked by removing the thing that was holding it back.

Signs the constraint has moved

Fixing a constraint feels good for a few weeks. Then something else slows down. That's normal, and it means the fix worked.

• Work that used to wait on you now waits on a different person or team.
• Sales can close more deals, but delivery starts falling behind.
• Delivery catches up, but now cash gets tight because you're hiring ahead of revenue.
• Everything runs, but nobody is thinking about what comes next.

Each of these is a new constraint. Go back to the first step and start again.

Over time, the constraints move away from the founder and toward the market. When the main thing holding you back is how many customers exist, the internal work has done its job. At that point, it's worth reading how to find your ideal customer again with fresh eyes, because the next stage of growth usually means a new customer.

Keep a short note each quarter of what the constraint was and what you did about it. After a year, you'll have a record of how the company actually grew, and a much better sense of where it will get stuck next.

Fix one thing at a time

Most companies try to fix everything at once and fix nothing. Pick the single weakest area, give it one owner and one number to move, and check it every week. When it stops being the weakest area, move to the next. I wrote about finding the root cause in fix the problem behind your other problems.

Find your number

The Founder Diagnostic asks about how your company runs today, names your stage and your likely constraint, and gives you three next moves. About three minutes, no signup.