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It would be nice if growth was smooth and easy, but it’s not. Growth breaks things.
We spend countless hours getting things right. We create the system, we document it, we reinforce it within the firm so that everyone will adhere to the plan. Things get smoothed out.
Then we grow. And things break.
It’s not a smooth progression
Hiroshi Mikitani, the billionaire founder, chairman, and CEO of the Japanese internet company Rakuten, advises that we pay attention to what he calls the rule of three and ten. The rule basically says that every time your firm triples in size, everything breaks.
You start the firm, flying solo, and all is well. You add an assistant and then you add an associate. You’re at three. What happens?
The systems unravel. Everything you built when it was just you is overwhelmed by the three of you. You’ve got to rebuild things to accommodate three.
It’s frustrating, but you fix things. You get it all up and rolling, and you start to grow again. But don’t forget the rule of three and ten.
One step forward, two steps back
You keep growing and the team expands from three to five as you hire another associate and a receptionist. You keep going and add a bookkeeper, an office manager, and two more associates.
You’re at ten now. You’ve tripled in size.
Again, everything breaks. Yep, it’s that pesky rule of three and ten. Expect things to come undone when you achieve these levels of growth.
At least you’re growing
Things could be worse. You could be stagnating. Nobody wants problems, but if you have to have them, the problems associated with growth are good ones to have.
The rule of 3 and 10 makes sense when you think about it, but most of us rarely have time to think about it.
The bookkeeping system was built specifically for the people on your team at the time you built it. You built the process when it was just you, then you fixed it when you had a group of three. Expecting it to keep working with ten folks on board isn’t reasonable.
The rule applies to most everything happening in the firm. Client service falls apart at these levels of three and ten. Marketing is less effective. The technology has to be replaced. Management systems break as well.
We should expect it
Mr. Mikitani got it right with his rule of three and ten, and it makes perfect sense. Unfortunately, most of us don’t see it coming.
Today is your chance to take note of what’s about to happen, because I promise–it’s coming.
It happened to me. I remember having three, and I remember having ten. Things broke–lots of things. I didn’t expect it or understand it.
It happened again at thirty, and I didn’t see that coming, either. It’s only now, having heard from Mr. Mikitani, that I’m seeing the pattern–long after the fact.
If you know it’s coming, you’ll be better prepared. If you don’t know it’s coming, then what happens is that you hit an invisible plateau. You’re so used to growth that you expect it to continue. But there you are, trying to take the next step upward, and it’s like the staircase has vanished. Worst of all, you don’t understand why it’s happening. Things are breaking everywhere you turn. Team members are leaving, clients aren’t happy, and revenues hit the wall. Fires start and you spend all your energy putting them out. The growth stops and you go backward for a bit. At some point you connect the dots, and you fix things, but it’s incredibly frustrating because you’ve been so successful up to these bottleneck points.
Anticipate it and fix things before they break
I’m not sure why we don’t see it coming, but we don’t. We should, but we don’t.
It’s entirely reasonable that a business built for one person breaks when it gets to three. It’s even more reasonable that a business built for three people breaks when it gets to ten. It’s obvious that it’s going to happen–once someone points it out. It’s just tough to see it when it’s your life, and you’re busy trying to survive the day.
But you’re not required to live through the frustration of the rule of three and ten.
You can fix the problems before they happen. There’s nothing stopping you. You’re not required to let everything break. You can stop it before it happens.
The major breakdowns relate to systems documentation, communication, inadequate technology, and marketing–all of which are dependent on the owner. Anticipate the breakdowns and address those problems before the number of folks on the team causes breakage.
Look for the rule of three in everything
Be proactive about every aspect of your business, and use the rule of three to anticipate the failures before they happen. Any time something triples, it’s going to break. That’s true of revenues, expenses, the number of clients, and everything else. Tripling breaks systems and processes.
Look around and you’ll see your processes struggling under the weight of the increased load.
It’s easy to see that the performance review system you built for a team of ten will buckle when you have thirty employees. It’s obvious that the payables process will break at that higher level. Quality control systems will unravel. Even easy systems like making sure client calls are returned will flounder as you triple in size.
If you’re going to keep growing, then you’re going to need better management, marketing, technology, and financial systems. The old approaches won’t work in the new environment. More people means more money–and more problems. See it coming, head it off, stay ahead of the growth, and you won’t be slowed down by the rule of three and ten.