In this perceptive episode, Scott Ritzheimer, Founder of Scale Architects, shares why chasing arbitrary revenue goals traps founders and how to determine the right size for your organization based on your unique vision. If you feel stuck growing a business that no longer excites you or wonder if bigger is truly better, you won’t want to miss it.
You will discover:
– Why bigger organizations scale problems faster than benefits
– Why revenue numbers are a poor way to measure business size
– How to choose the smallest organization that fully achieves your vision
Episode Transcript
Scott Ritzheimer
Hello, hello and welcome. Welcome once again to the start, scale and succeed. Podcast, the only podcast that grows with you through all seven stages of your journey as a founder, I’m your host, Scott Ritzheimer, and today we need to talk about one of the biggest questions you’re going to face as a founder. How big should my business be? Now, don’t worry if you’re a nonprofit founder, this episode is for you and your organization too. This applies to every founder in every respect, and there’s so much noise. And if I’m honest, like just outright lies about this issue, we don’t have to name them. You’ve all heard them. And the real tragedy of this is I see it all the time. The vast majority of founders who feel trapped by their own organizations feel that way because they believe those lies. And here’s how you can know, even if you don’t necessarily feel trapped today, here’s how you can know if one of those lies, if not more, is affecting you. When I ask the question, How big does your organization need to be if the first thing that you think of is a number, especially a revenue number, you are running the risk of spending all your blood, sweat and tears building someone else’s vision. I’m serious, and let me explain what I mean by that in a rather humbling story. So I am not a long distance runner.
I’ve been active in sports my entire life. Played soccer for 30 some odd years now. Love it. Love running around, doing all kinds of stuff, but I hate running for distance. It’s terrible. And knowing that I hate this a friend of mine who absolutely loves it, multiple Iron Man, like just crazy. He talks me into doing a half marathon, and I begrudgingly accept. And what I found out about this, for anyone who hasn’t done this yet, just don’t like save yourself, because the challenge is not the 13 some odd miles. And we’ll get to that in a moment here, because I found a way to not run 13 miles. The challenge is the like hundreds of miles that you have to run in preparation for these things. The training plan was just mile after mile after mile. It was miserable. I hated it, but I did it. So after all this training, I’m finally at race day, finally, glad that this thing’s gonna be over, and it was held downtown Atlanta. We live outside the city, so I too, both of my boys at the time were pretty young, and so didn’t want to drag everybody out of the house at the ridiculous hour in the morning.
So I went down by myself, and I knew that parking and travel downtown with the race there was going to mean that everything was at a standstill. So I very intelligently thought, I’ll take the Marta into town. I’ll take the train. And so I drove down to the train station, took Marta, and it was great, walked to the starting line, got my bib on all the deal the whole nine yards, and set off. Now, mind you, these things are supposed to be, I always get this number wrong, which is part of the problem. They’re supposed to be 13.1 miles. I believe I managed to run something like a 14 and a half mile half marathon. And if you do the math there, that doesn’t quite work, like what happened. So the race starts, and they have these folks in the race that are called pacers, and they basically are people who just do this all the time and can run at a specific pace. And so in all my training, I’d kind of figured out what I thought my race pace was going to be, and so I found my race Pacer, and kind of ran at their race. So by this point, I’m running someone else’s race, right? My buddy’s race. This is what he wanted to do. He thought it’d be fun if I did it. He ended up not coming. By the way, I run at someone else’s pace, right? I didn’t just run naturally at whatever pace I could run. I’m running at someone else’s pace, which ironically turned out to be a little too slow, and I paid for that at the end and and so it’s just mile after mile of this, and once I hit about mile 10, I was done.
I hated everything. I hated the ground that my feet were on. I hated the noise that my feet made when they were hitting the ground. I hated the air that was pushing against me. I hated the sun that was shining on me. I hated me for choosing to do this. It was bad. It was really bad. And there’s still three, some odd miles left, and so I’m running, I get passed by some like 70 year old lady who’s just crushing it power to her. I don’t know who she is, but she’s amazing. And I get to the point where I can see the finish line right? It’s like the moment you can see the finish line, you can literally see the light at the end of the tunnel. And I just give everything I’ve got, and I’m running and running and running, get across the finish line, and it’s exactly the same, like nothing else. Was different. I crossed over the finish line. The tarmac is the same on that side it was on this side, I look around. I didn’t know anybody. I was there by myself, and there’s people cheering, but nobody knows who I am.
There’s nobody to celebrate it with. And then here’s what happens. This was the real gem. I pull out my phone to see where the Marta station is relative to the finish line, and it’s like a mile and a half away. So not only did I just run this whole stupid race at someone else’s pace, on someone else’s time, now I’ve got to walk another mile and a half to the finish line. It was ridiculous. And what I’ve realized in coaching for years now is that a startling number of founders are running this race at someone else’s pace and on someone else’s terms. And we have this idea that when when we can get across that finish line, and usually, I would say, tragically, that finish line is usually a number. It’s usually a revenue number, depending on the industry. Sometimes it’s a evaluation number, which is probably a little bit more relevant, but almost equally as vain. And I did it myself. For me, I thought I needed to build a $10 million company, and I built a $10 million company, and when we got to 10 million to one, it felt exactly the same way that that race did. It was all exactly the same as it was before, just there were more problems that I had to deal with, and another mile and a half that I had to walk. And so ask anyone who’s done it. And while there’s some joy that comes with that momentary, you know, almost bliss of like, hey, we hit this thing that we said we were going to hit. There’s almost nothing fulfilling about pursuing some revenue number.
So why in the world do we base our business off of that? Why do we have to think of business size in terms of revenue? Is there a better way? And there absolutely is. And so when I was working on the book that’s coming out later this year, I had to spend some time on this, and what I realized is there’s a few key things that we have to pay attention to when we’re thinking about what size our organization needs to be. Number one is that the dollar amount doesn’t really matter. It’s a poor metric. It’s helpful about five steps down the road. But in terms of size, there’s really, actually only one thing that matters, and that is, what size organization, what size enterprise, what size operation does your vision demand? Because if you’re setting out saying, Hey, I’ve got a vision to do great work and take care of my family and leave a little bit behind for my kids and grandkids when I’m gone. You can do that. In fact, you can actually do that better if you stay small. One person shop, maybe a couple of folks helping you. Stage two, for those of you who are familiar with the stages, you can do all of that better at that size than you can at other sizes, because there’s far less to distract you from it. There’s no point in time than in a small organization like that where you can do more of the great work that you want to do.
Scott Ritzheimer
And if you if you really dial in on that, you really focus on why you’re doing what you’re doing, you can actually be far more profitable at, you know, 100 200 500 a million dollars than you can at 10 times. That it’s true. Just ask anyone who’s gone through this process. Sounds outrageous, but it’s true. I see folks who have $5 million organizations who take home less than folks who have $500,000 organizations. In fact, I see folks who have 20 and 30 and $40 million organizations who because they’re so invested in that growth and what they’re building, or they’re so consumed by the complexity and challenge of it, actually take home less than some of the solopreneurs that I work with. It’s a real thing. So it really is. What is your vision? If your vision is to change the way that something’s done in your city, maybe you need a few people around you. If your vision is to change an industry, well, then you’re probably going to need a bigger organization to do that. It doesn’t mean that those bigger organizations are better.
In fact, one of the things that you are guaranteed to learn, if you haven’t already as a founder, is that organizations do get bigger when you invest in them, but that does not make them better. In fact, the bigger that they get, the harder they are, the more problems they are, because your problems scale a lot faster than anything else. And so there’s this idea in some weightlifting circles that I think is helpful for this for a very different reason. And the idea in weightlifting is to get stronger, right? And so we might think, well, to get stronger, you have to lift more weight. And that’s not necessarily true. When you get down into the nitty gritty of it, you actually to get stronger you want to use the least weight that you can effectively. And for reasons we’re not going to get into here. Uh, building a business is kind of the same way. You want to make the smallest organization that you can, the least complex organization that you can and still achieve your vision. And so that doesn’t mean that smaller is better, don’t I’m not saying that you need to stay small or think small. What I’m saying is you want to choose the smallest organization possible to achieve the vision that you have for that organization, and to do that, that means you’ve got to know what your vision is, and that’s something that we can unpack a little bit more in another episode, if you’re not real clear on what that is already. But let’s just move on from that for a second. So what that means is we have to start thinking about how big our organization is in a different way, right? One, it’s not revenue based, it’s vision based. And there’s something that I call the want to need to choose to framework. And you’ll see this language come up with founders when you ask them this question, and they’re processing through it. And you’ll, you’ll ask someone like myself early my career, how big do you want your organization?
To be honest, I would have said, I want it to be a $10 million organization. And so there’s this idea that we can build the organization that we want, and that’s kind of a rubbish idea. Like, I get it, it’s part of the process. But if I’m honest, I want lots of things. Like, I want to eat a pint of ice cream and I want to be physically fit, like those two don’t necessarily go together unless you do a heck of a lot of cardio to compensate for it. I want to watch Netflix and chill out. And what I really should be doing is sleeping. And so because I want to be alert and ready to go the next day. Our wants are fickle. Many times they’re mutually exclusive. They’re not a good thing to stake your life on your wants, your you know, oftentimes flippant desires. And so, okay, let’s move past wants. Maybe it’s it’s more vision based and say, Hey, I need to do it this way. I need to create an organization that does this well. Needs are a little interesting, because then you’re really getting down to some motive stuff. Do you need to do it because you’re trying to prove somebody wrong? Do you need to do it because you’re trying to get a chip off of your shoulder? Do you need to do it because somehow that’s going to make you successful. When you hear folks say, hey, I need to create an organization of this size, many times that’s coming from some type of Keeping Up with the Joneses or proving somebody wrong. It’s not actually their own race or their own pace. So want to not great because they’re they move all over the place and will rarely sustain this. When the going gets hard, need to not great, because it actually produces a whole bunch of resentment, because really, it’s someone else’s vision, and not your vision. And so how can we, how can we navigate this? Well, again, we want to grow to the size that is the smallest that our vision, that allows us to achieve our vision. So what size organization does our vision demand? Does your vision demand? And once you know that, then the most powerful thing to do is to choose what size you’re going to make your organization. And that may, for some of you, mean choosing to make it smaller.
In fact, that’s surprisingly common a lot of folks that I know, a lot of founders, when they realize, Hey, I’ve actually built someone else’s organization and it’s bigger than it needs to be, they will intentionally make it smaller. Now, there’s lots of ways to do that. You can sell some of it. You can just trim it back. There’s there’s all kinds of different ways that you can make that happen. But the reality of it is, you need to choose what size organization you want to build, and you can do that by being ultra clear on what size organization your vision demands. Now, for those of you who’ve listened to the show for a while, you know that we organize all of this by the stages that founders go through, and there’s kind of a one to one relationship here, because one of the things that happens is each or each life, each founder stage has a limit on how big the organization can get. You can’t get gigantic as a solopreneur, right? It just definitionally doesn’t work. As you add more people, what happens? You become a reluctant manager. As you add more people, from there, you start running into the realm of being a disillusioned leader.
Interestingly, a big part of why people get disillusioned is because of this exact issue. So you can kind of skip some of that to some extent and and really dial into the contented leader if stage, if that’s for you. But we can boil this down and say, Hey, you can choose which stage. How do you choose which stage? Will you choose which stage based on what stage you need to be in to accomplish your vision? It really is that simple and that powerful. And what this does this this really is it’s a big part of the genius of why Collins and porous and all those guys Drucker talked about culture and purpose was the same thing for founders. What this does is it ties us to a purpose that is far more meaning. Painful and far more powerful than chasing after some arbitrary number, because when you find that, when you fulfill that purpose, you find a much greater fulfillment. When you pursue that purpose, you find even greater fulfillment still. But when you find yourself chasing a number, especially when it gets hard, especially when there’s setbacks, especially when you cross that finish line and realize you still got another mile and a half to go, it’s not going to be able to sustain you. And if you own the thing, you can’t just leave right. There were so many days in my organization where I just wanted to quit, and I would have quit if I wasn’t the owner, but I had to, because I owned the thing, and it was up to me, don’t do that. It’s not fun.
So how big does your organization needs to be? Need to Be it needs to be however big you choose to make it. How do you choose how big to make it? You choose to do it based on what your vision demands. Can you focus a little bit on your own? Can you focus on your own work, build a small organization and thrive. Absolutely, many of you, that’s the answer. Some of you, it needs to be a little bit bigger. Some of you, it needs to be a little bit bigger. Still. Some of you will need to fight that good fight and make that journey all the way to stage seven to fully accomplish the vision that you have. And if so, if that’s right for you, it will be a wonderful journey. But that doesn’t mean that it’s the same for everybody, and so for many of you, you can find so much more joy and fulfillment by building an organization that you choose to build, instead of one that you need to or want to so with that, I’m going to leave it there. You guys know your time and attention mean the world to us. We try and keep it short. I hope this was helpful for you as you’re looking forward at the next year and and planning what you’re going to do and what you’re going to build. If you have any questions about any of this, please feel free to reach out. We’d love to hear from you, and I will look forward to seeing you right here next time. Take care.
Contact Scott Ritzheimer
Scott Ritzheimer helped start nearly 20,000 new businesses and nonprofits and with his business partner started led their multimillion-dollar business through an exceptional and extended growth phase (over 10 years of double-digit growth) all before he turned 35.He founded Scale Architects to help founders and CEOs identify and implement the one essential strategy they need right now to get them on the fast track to Predictable Success.
Want to learn more about Scott Ritzheimer’s work at Scale Architects? Check out his website at https://www.scalearchitects.com/