How to Sustain Business Growth: Switch From CEO to Adviser

This article is an excerpt from the Shortform book guide to "Ready, Fire, Aim" by Michael Masterson. Shortform has the world's best summaries and analyses of books you should be reading.

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Once your business has achieved success, how should your role change? Should you grow by merger and acquisition or go public?

In Ready, Fire, Aim, Michael Masterson explains that successful, multimillion-dollar businesses progress through four stages of development: launch, expand, optimize, and sustain. For this last stage, he recommends moving to an adviser role and focusing on tactics that promote continued growth.

Read on to learn how to sustain business growth with Masterson’s strategies.

Sustain Business Growth

Once you’ve grown your business and structured your management team to handle day-to-day operations, focus on sustaining your business’s long-term growth and profitability. Masterson provides advice on how to sustain business growth, recommending that you relinquish your role as CEO and instead act as an adviser or investor for your business. Masterson explains that this strategy improves your chances of long-term success by enabling you to focus on high-level tactics that drive the continued growth of your business.

(Shortform note: Several business authors suggest that entrepreneurs can sustain growth by relinquishing their CEO roles. Jim Collins (Good to Great) suggests that great leaders build companies that can thrive without them—they achieve this by identifying and grooming successors to take over their CEO roles. Verne Harnish (Scaling Up) explains that entrepreneurs can free up time to focus on strategic planning by creating leadership teams that can take over day-to-day operations. Bo Burlingham (Finish Big) argues that entrepreneurs should plan to exit their companies from the very beginning by building strong leadership teams, developing succession plans, and preparing their companies for sale or transfer.)

Masterson suggests three tactics to consider:

Build strategic partnerships.
Acquire other businesses.
Go public.

Let’s explore how each of these tactics can help drive the growth of your business.

Tactic #1: Build Strategic Partnerships

Masterson’s first tactic, to build strategic partnerships, involves forming alliances with other businesses to achieve mutual benefits. This tactic can drive the growth of your business by helping you increase your market share, access resources, share costs, or reduce risk.

Example: Your organic plush toy business allies with a popular children’s clothing brand. The partnership allows you to leverage the clothing brand’s distribution network and customer base to boost your sales. Moreover, the partnership enables the clothing brand to offer a unique and complementary line of products to its customers, enhancing its brand value.

(Shortform note: Osterwalder and Pigneur (Business Model Generation) expand on this by explaining that there are four different types of strategic partnerships: 1) partnerships between non-competitors (eBay and Paypal), 2) partnerships between competitors (Apple and Microsoft’s patent-licensing agreement), 3) joint partnerships to develop new products and services (Ford and Toyota develop hybrid trucks), and 4) buyer-supplier partnerships (Samsung supplies Apple).)

(Shortform note: Innovation expert Rosabeth Moss Kanter (Think Outside the Building) compares strategic alliance relationships to marriage—like marriage, many strategic alliances fail to live up to expectations. In other words, both suffer from a high failure rate. However, Kanter argues that strategic alliances are more likely to succeed if businesses focus on creating strong foundations built on shared values and mutual benefits.)

Tactic #2: Acquire Other Businesses

Masterson’s second tactic, to acquire other businesses, involves purchasing or merging with other companies to extend capabilities. This tactic can drive the growth of your business by helping you expand your product or service offerings, diversify your revenue streams, access new technologies or intellectual property, or secure talented employees.

Example: If your organic plush toy business acquires a small toy manufacturer that specializes in sustainable toys, you can leverage the specialized skills of the manufacturer’s employees to expand your product line. Moreover, you can gain access to the manufacturer’s network of suppliers and retailers to reach more customers and increase sales.

Effective Collaboration Drives Growth

Though business acquisitions and mergers have the potential to drive growth, business consultant Regis McKenna warns that poor collaboration between the involved businesses often results in failure. He suggests two ways to ensure effective collaboration and maximize the potential benefits of a merger or acquisition:

1) Adequate separation. Both businesses must retain enough autonomy that they each have their own supply lines, customers, and unique culture. He warns that without adequate separation, the culture and resources of the acquiring business tend to crowd out those of the acquired business, such that the acquired company’s strengths are lost.

2) Adequate communication. While maintaining autonomy, the two businesses also need to communicate enough that they both have a clear understanding of who is responsible for what. McKenna warns that when businesses try to collaborate without adequate communication, important tasks are often left undone because each business assumes the other is taking care of them.

Tactic #3: Go Public

Masterson’s third tactic, going public, involves selling shares of the company to raise funds. This tactic can drive the growth of your business by providing access to a large pool of capital that you can use to fund research and development, expand operations, or pursue new business opportunities. Additionally, it can increase your visibility and credibility in the market, which helps attract new customers, suppliers, and strategic partners.

Example: By going public, your organic plush toy business gains access to funds to invest in high-profile marketing campaigns that increase your visibility. This makes it easier to secure cost-effective suppliers to make your products and to ally with popular retailers to sell your products.

(Shortform note: Businesses commonly go public through an initial public offering (IPO), which can be a lengthy and expensive process. An alternative approach for going public involves using a Special Purpose Acquisition Company (SPAC). A SPAC is a shell company that’s created specifically for the purpose of raising funds through an IPO. The funds are then used to acquire an existing company and take it public, bypassing some of the traditional IPO requirements and potentially offering a faster and cheaper path to going public. This approach can be particularly attractive for companies that have unique assets or operations that may not fit neatly into traditional investment categories.)

How to Sustain Business Growth: Switch From CEO to Adviser