What breaks when a services company grows fast

Winning more clients creates a new challenge for a services company: keeping delivery, hiring and cash under control as the business grows. In the early years, the founder or a small leadership team sees every client, knows every team member and catches problems by being close to them. More accounts, larger clients and a bigger team take that closeness away, and decisions start happening where the leaders can no longer see them.

I went through this growing Content Allies, my B2B podcast company, and wrote about it in a December 2023 essay on preparing for growth. This post takes the strains I described there, in delivery oversight, hiring, ownership of functions, finance and cash, and sets out what I would put in place before each one breaks. It also draws on a 2021 podcast episode on systems and a 2020 essay on how a business learns to run without its founder.

It is written for the CEO or COO of a services business, such as an agency, consultancy or professional services firm, that is growing faster than its structure.

DisclosureJake Jorgovan co-founded Alpha Apex Group, which this essay links to.

Five strains of fast growth, and what to set up first

Delivery: measure what you can no longer see

As Content Allies grew, I reached the point where I could not be involved in everything I once was. In the early days I had seen every piece of work and known every customer and every team member. After that, the team had to run delivery and make the decisions.

What replaced my own oversight was a set of management structures. We held a weekly management meeting to walk through accounts, challenges and roadblocks. We also tracked a few measures on every account. The first was whether we had delivered the agreed scope to every client that month; any miss went to the management meeting so we could understand why. The second was each client's health, recorded as green, yellow or red, with a quantified definition for each. Red meant a client complaint, a mistake on the account, a missed scope or another problem with the account.

The reason for measuring is simple. People rarely volunteer that something is going badly, so a casual "How's it going?" tends to get "great" as its answer. You need quantitative data and ways to measure the key performance aspects of your business.

A larger firm can use the same discipline. Agree what each status means before anyone needs to use it, in terms two account leads would apply the same way, and review it at a fixed weekly meeting. Your definitions will differ from ours; writing them down in advance is what makes the weekly review honest.

Hiring: recruit before a rushed timeline limits your choices

When I started growing the business, I asked entrepreneurs who ran larger companies what their biggest challenge had been. They all said hiring. The two mistakes I saw were not learning to hire properly and waiting until the team was overloaded before starting to recruit.

Because I got that advice early, hiring was mostly not my biggest roadblock. Where my hires did go wrong, the cause was the second mistake. Every bad hire I made came from being in a desperate spot, without enough applicants to choose from. I had chosen the best of a short list of people who could start on my rushed timeline, and those were the hires that did not work out.

Two things helped. The first was recruiting capacity. By 2023 we were hiring often enough to justify a full-time HR team member who was always recruiting. Where that is not justified, I suggested a good recruiter, with the warning that recruiters vary a lot in quality.

The second was the job description. I wrote that "A job post should be a document you can refer back to evaluate if this hire did a good job or not." It defines the role, the responsibilities and the skills, then the expectations at 90 days and at the end of the first year. You assess every applicant against it, and you assess the person against it after they start.

Ownership: hand each function to someone who runs it

Handing over tasks is one step. Handing over a whole function is a much harder jump. At Content Allies I hired a COO to run operations, an HR lead, a finance lead, a strategist for reporting and analysis and a production manager to oversee production. Account management was the function I held on to longest.

I meant ownership in a specific sense: "they take your vision and leadership, but you trust them to run it on their own." You may still coach them or work alongside them at times, but your hands come out of the work. The leader's own job changes too: you grow into the CEO and leader of the organization instead of its chief doer.

Give the next owner a basic system to improve

How I handed functions over is something I described in a December 2021 episode on systems: "I build and document systems for it. And then I hire someone to replace myself in that area."

Podcast production is the clearest example. For our first clients I project-managed every episode myself, pulling in the designer, the audio editor and the writers by hand. I then built the steps into a system in Process Street, where entering an episode set off every task that followed. A head of production took responsibility for it and later hired people under her. Hiring project managers without that system would have been less reliable and more chaotic.

Sales went the same way. I had a closing process that roughly worked when I brought in an outside closing team, Add1Zero, and they improved it. Asking them to build one from scratch would have taken longer, and I would not even have validated that we had a working sales system. The same episode makes the wider point: "even if you want to hire someone for sales for your business, you need to be able to do sales first."

For a CEO hiring someone to take over an established function, the practical lesson is to document how it works before the handover. A strong hire can improve a system that roughly works faster than they can build one from nothing, and you will know what they started from. A leader brought in to build or repair a function may need to design the system as part of the job.

Split roles that look too hard to hand over

Some functions resist this. Guest scheduling for our podcasts was one: writing the scripts, running the email campaigns, handling replies and arranging each interview. My first job description put all of it on one person. I ended up splitting it into three roles: a researcher, a campaign manager and guest schedulers who handled the responses. If a role looks too hard to systematize, or you cannot imagine anyone else doing it, it may be several roles.

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Jake’s historical account, summarized from this article. These results describe his experience and are not a performance forecast.

Start with the lowest-value work

The order matters while a founder is still doing much of the work. In the same episode I called it a big mistake to hand off high-value work while still doing low-value work, such as hiring a salesperson while you still handle all the project management. Project management is cheaper and easier to hire for, and handing it over frees time to build the next system.

A useful check comes from my January 2020 essay on the stages of freedom from a business. Can the service be delivered without you? Can the company operate without you, meaning bookkeeping, payroll, accounts receivable and internal systems? Can it sell without you? I wrote then that building the systems for any one of these stages could take three to six months once you are ready. That lead time is the reason to start before growth forces it. For a leadership team, the same questions apply to any one person the company depends on.

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The approach described in this article, shown as a visual guide.

Finance: the books outgrow whoever kept them

Growth also adds management costs: people who are key to the operation but do not generate revenue directly. A COO was one of ours: hiring one made a big difference to our growth, but the cost was notable and it drove no direct revenue. Transactions, team members and expense categories multiply, and the books become far more complicated than they were in a small business.

I held on to the accounting far longer than I should have. When I could no longer run it, my first three finance hires failed, and the fourth got our finances to a good place. It was a long nine months of financial chaos without clear visibility into the numbers.

The lesson I took was to test the work first. In retrospect I should have given each finance hire a quick test project before ramping them up. For tactical roles like this, test their work before you make the hire.

Cash: larger clients, longer payment terms

For us, growth meant bigger enterprise accounts. That brought bigger deals and often 90-day payment terms, so we paid for the work up front and waited three months to be paid. One account on those terms was manageable. Once they covered more than half of our revenue, it became a serious cash problem. The business was healthy on an accrual basis, but I had not built the cash reserves for growth that fast.

My conclusion in 2023 was direct: "Build a cash reserve so you can weather any growing pains." Cash also lets you take opportunities as they appear; with more of it, we would have been better placed to make a few strategic acquisitions.

If larger clients are part of your growth plan, look at their payment terms alongside the deal size. Forecast the cash you will need for delivery before those clients pay, and use that gap to judge the reserve you need.

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Jake’s historical account, summarized from this article. These results describe his experience and are not a performance forecast.

Where to start

There is no formula for which part of your role to hand over next, or when. The questions I used in 2023 were what drains me, what the business needs and what we can afford. I also recommended planning ahead: how many team members you will need at each next stage of revenue, and which functions you will need to reach it.

Once a leadership team is past the founder stage, a quick test is to ask which function in your company would stall if one person were away for two weeks. Use that to find the dependency, then weigh what the business needs and what you can afford. The next step may be documenting the work, training a backup or appointing an owner.