Stages of Development: Stage 4

Cole Abbott (00:00:09 -> 00:00:15)

So, uh, right stage three we kinda left off on, well,

Mark Abbott (00:00:15 -> 00:00:16)

That was a episode.

Cole Abbott (00:00:16 -> 00:00:22)

Went a lot of weird directions, but yeah, it's fun as they usually do that part of it, right? Yeah. Little bit of structure, little bit of,

Mark Abbott (00:00:23 -> 00:00:24)

Little bit chaos. Yeah.

Cole Abbott (00:00:24 -> 00:00:32)

<laugh>, good bit of chaos in that last one. Uh, we're at stage four, moving on from scaling Mm-Hmm. <affirmative> into

Mark Abbott (00:00:33 -> 00:00:34)

Succeeding.

Cole Abbott (00:00:34 -> 00:00:35)

That sounds a little bit more fun than scaling.

Mark Abbott (00:00:36 -> 00:03:27)

I don't know. I I love scaling it. Well, it gets back to like the, what we talked about before, right? It's, none of this is that complicated, but it is. It's just hard, right? And so in the succeeding, uh, game, right? You know, you're confident that you're building something that really has a very strong shot of becoming an enduring, you know, a great enduring company. Uh, which, you know, we define as a company where you can pass the leadership mantle to another owner. Someone's gladly buy the business from you or to the next visionary. And that's a very big thing, right? Is, is getting to the point where you've got the company so well defined in terms of, what I like to talk about is that the forever agreements they're worth fighting over and defending, right? The forever agreements. So you're compelling. Why your compelling value proposition, the culture is strong now, right? And, uh, and who you serve, right? Your ICP is very clear. So you're very clear about these four things, and you can go find someone else who's like, look, I love who you are and where you're going. Right? And I will honor those agreements, um, and I can see how to honor those agreements. And I can see, you know, the next five to 10 years, um, you know, you are at the cusp of being, that's stage five is when you have all that locked in and you've got this great organization that's consistently hitting, you know, your, your short, your medium, and your long-term goals. Um, and that stage four is where you're getting, you're getting to the place where as a, as a visionary, you are still needed, right? 'cause you're still doing that, that, that five to 10 year thing. But you've got some great people around you who are helping you with the two to five. And you feel, I would like to see it where you feel highly confident that within that great group of people that you're surrounding yourself with, there are one or more candidates who deeply understand the, who the company is, where it's going, why it does the thing that it's doing, is excited about the future, and has a vision for where the company can be in five to 10 years. And so in four, right? You're nurturing, you're developing those people. You're making, you're, you're having success. That's why you can do this stuff, right? And, and you as the founder are getting to the point where you can stop being involved in, you know, the quarterlies and the annuals. And you're really about representing the brand. You're really about the company's future and your building and nurturing one or more, um, potential successors,

Cole Abbott (00:03:27 -> 00:03:29)

Which is a lot harder to do in practice than it is in theory,

Mark Abbott (00:03:30 -> 00:03:35)

Just like everything else. It's sim it's relatively straightforward. It's not that complicated, but it is hard,

Cole Abbott (00:03:35 -> 00:04:17)

Right? Yeah. It's not as street, I think, I think a lot of people, right? They'll have the idea of what the thing is in their head, right? But being able to communicate that in a way that is so effective that it gets cascaded effectively. Yeah. It's one of those things where you see a lot of companies struggle with growth, right? And they start to grow, and then it becomes a lot harder to stay, to retain that soul, right? And make sure everyone's really clear on those forever agreements. Yeah. And a lot of times you just get so big that you kinda lose it. 'cause it's just like, it was hard. And then it just, there's like, I think there's a certain escape velocity of growth without having done that work ahead of time. So you see a lot of, it's seems like it's around a hundred people fast growing

Mark Abbott (00:04:17 -> 00:04:21)

Dunbar 150 is your classic number, right? Yeah.

Cole Abbott (00:04:21 -> 00:04:46)

But I mean, where it starts to, like if you basically, I think if you go from a hundred, this obviously completely, this is just complete guess, right? Right. <laugh> to tuition. But you go from a hundred to 150 Yeah. With, and you get from A to B without, and you get up, right? You get to 150, you're gonna start to feel it a hundred. Right? You get to 150 and you don't have it sorted. Right? It's gonna be a huge uphill battle to get it addressed.

Mark Abbott (00:04:46 -> 00:04:50)

Yeah. And I, and, and I think, I mean, there's so much to go.

Cole Abbott (00:04:52 -> 00:04:53)

So I just opened it up here,

Mark Abbott (00:04:53 -> 00:11:32)

<laugh>. Yeah. And so many, there's so many rabbit holes go down here, right? Which is fun. So, um, in no particular order, uh, it's relatively well known that there's a glass ceiling at 10 million in revenue, right? Um, I don't like the glass ceiling, right? It's so used in so many different ways. It's probably not the best phrasing, but it's true. It's, it's hard to break through the 10 million in revenue. Um, a lot of companies hit that and they haven't done all the hard work that needs to be done in order to have the velocity to break through that ceiling. That that momentum. The momentum. Yeah. Um, and you know, and it, and it falls in across so many different dimensions. It could, it, you know, it's, I think, you know, could be the forever agreements. It could be just, you know, making sure that, um, you know, that they have a unique enough position, a strong enough point of view to, um, attract and retain the kind of talent that you need to, to, to, to step through stage four and into stage five and beyond. Because as we, we've talked about before, I, I, you know, I've, I've stolen it from the, the co-founder of Infusionsoft, which is now called Keep, you know, the nature of leadership changes on the ones and the threes. So a hundred thousand, 300,000, 1 million, 3 million, 10 million, 30 million, a hundred million. And you know, we knew that we had to transition to a stage five structure, which is, you know, I'm at the visionary level. We've got C-Suite members at the, at the Stratum four and department heads at Stratum three. And team leaders, obviously in departments Stratum two, and then individual contributors at Stratum one. Um, you know, we knew that the 30 to a hundred million dollars run was gonna require us to take that next step. And that next step was hard because you, you have all these people who've helped you get to stage four. And, you know, we had a couple that were capable of stepping up into that next tier of c of leadership, right? The, the C-suite. And then the rest of everybody else was like, they're great people, but they're not, they don't have what it takes for us to, to, they don't have what it takes to be one of the c-Suite members at that moment in their career, at that moment in their development, given everything that was going on. And so I think, you know, my instincts are, and it'd be great to do research on this, there's, we say that a lot here, right? But my instincts are that you've gotta commit to that moment, right? You gotta say, I am going to now go and, and, and develop a c-suite. I am now gonna go hire the people that I need to hire that have the ability to really own a bunch of different departments and own them executing against a two to five year plan who've been there, who've done that. Those people are more expensive, obviously, than they cost you more. In our case, they cost more Mon Rev, they would cost more. You, they have higher salaries, and they require, right? They, they deservedly so get more equity in the company. And so, you know, you, you, you basically have to decide, are you gonna do this? Are you, and you know, for us, when we were going from stage four to stage five, you know, one of the things, I think I've talked about this before that I worried about a lot, is our culture, right? Um, you know, I worried about, I mean, you know, you love all the people that have gotten you there, all the department leaders. I had 11 of 'em reporting to me. And by the way, that was the second time we'd stepped up, right? So the first time we stepped up, there were several people who were on the senior leadership team who did not make it to the next level, and they didn't like it. Um, and, you know, specifically one stayed and one left is an example in that moment, interestingly, when we did the C-suite move, right? Everyone stayed, but we did lose two within the first six months of the transition to the c-suite, um, from the department heads. And so, um, you know, and, and change is hard. And, and, and you worry that culturally, even though the culture, we didn't change anything, right? Our core values didn't change. I don't think the things that we emphasized changed, but there's, you know, but the way the leaders run and lead, um, what they lean into, you know, our CTPO is very different than our old head of engineering as an example. He, he's very different than our old head of product, as an example. And both of those folks who we loved are no longer with us. So, um, you know, it is just, it's just, there's a lot of, there's a lot of change there. Um, and it's not just change for me, I have different leaders now, but it's changed for the people, be below those new leaders. And, uh, it's hard. And so, you know, I can appreciate why a lot of people choose not to do this, right? But once you, you know, once you decide that you're gonna stay at, let's say, say, you know, you decide that you're gonna stay at Stratum four, you're gonna stay at Stratum four leader, and you're gonna surround yourself with stratum three department heads, and that's who you are, the probability that you're building something, that if you're a stratum five leader overseeing Stratum three leaders, there's gonna be tension because, you know, you're here, they're there and you know, you're stretching down to, to, to really connect with them, and they're stretching up to connect with you. And it's just, it's hard for you to be well aligned. I get impatient in, you know, and it's not fair to them, but it's kind of not fair to me too. So I'm being unfair to them, unfair to me, given where we wanted to go, given our vision at, at that moment in time. So, you know, I can appreciate why it's hard to, it's easy to get to stay in a, at, at stage four. You know, I think some stage four businesses, uh, are very sellable because someone sees value there and they're gonna bring it into their organization, and they don't need sort of a stage five, right? So they're buying it to bring it in, or they're buying it because now we know how to take it to stage five, right? So they see the opportunity that's there, but you know, it's not optimized for that next transition of visionary.

Cole Abbott (00:11:33 -> 00:11:44)

Yeah. 'cause there's something to be said about, right? If you just stay at stage four and you're really mastering that whole thing Yeah. And creating a whole package around that, that that's very sellable versus trying to just optimize for growth. Right?

Mark Abbott (00:11:44 -> 00:11:44)

But

Cole Abbott (00:11:45 -> 00:12:10)

Going back to Right. Having that momentum to really break through and move from stage four to stage five. Yeah. What does that effective window look like right at the beginning of the window from when you're like, okay, we gotta start planning for stage five, right? Making these adjustments, making these decisions, having these hard conversations Yeah. To, Hey, you're really running outta time here. Right? Stuff's gonna start to plateau, right? Uh, right. What does that window look like? What does it feel like? Yeah.

Mark Abbott (00:12:10 -> 00:12:12)

So, so in terms of the humans,

Cole Abbott (00:12:12 -> 00:12:23)

In terms of humans, especially from a, right, from a leadership perspective. Yeah. So if you're CEO visionary Yeah. In a situation Yeah. Like, what are you gonna be seeing? What are your challenges you're gonna be facing? Yeah.

Mark Abbott (00:12:23 -> 00:13:55)

Well, the, the simplest way to look at it always is going back to the time spans of responsibility, right? The, the, the time span or responsibilities for stage for, for the, for stratum three is one to two years, right? So tho you have objectives that are, that are, that are one to two years out. And, um, and those objectives obviously align with all the rest of the objectives of the organization, the organization's bigger goals, right? Um, and, um, and so, uh, obviously we, everybody needs to be, you know, product and marketing and engineering and data, and everybody sort of has to be, you know, working on those, those, those one to two years and, and doing it well, and there's a lot of confidence in one another, right? But then, you know what, what, what, what can happen is, and what we experienced is you, you start to see that even though everybody's working well, the outputs aren't where they need to be, right? You, you end up with like, you know, we have our own stories here, right? But you end up with mistakes that are not inconsequential, right? So one of our mistakes that was not inconsequential was the transition from Stripe to paddle and, and, and, and, and, and ended up costing us a lot of pain and misery because we didn't do a very good job of really making sure that three different parts of the organization all really understood what it took, what it was gonna take. It's probably even more than that, right? Because you think about it from the perspective of client success, product engineering, marketing finance,

Cole Abbott (00:13:56 -> 00:13:57)

From a product marketing standpoint,

Mark Abbott (00:13:57 -> 00:16:41)

Um, I, I maybe, right? But certainly customer success, product engineering and finance, there was a breakdown there, right? Yeah. And you could say, that's my fault, right? That I didn't make sure that everybody had walked through everything. And, and, and so you could say, well, that's why you could say, well, one thing to do is instead of having a c-suite, you needed to have a chief operating officer or integrator as EOS would say, right? They really made sure everybody had really thought through everything, and that the reasons we were doing this made sense, and that we were all confident that when it was done, it would be done well. And, um, and we would be serving, you know, our customers well throughout the process. And it did, it didn't work. And you could say to, to me, um, well, why didn't you get an integrator at that stage? Well, the reason I didn't get an integrator is I knew that the speed, right? That we were growing, that, um, I would eventually need a c-suite. And so the idea of getting an integrator in there for one or two years max didn't make sense to me. Right? Um, and so we were in that, in that transition between stage four and stage five, where we had the gaps, clearly exploited it, for lack of a better term, right? We were exposed, and it ended up, I would, I would tell you, you know, that ended up, um, from an enterprise value perspective and a revenue growth perspective, I mean, it, it cost us millions and millions of dollars. Now, you know, ultimately you can say, well, you, but it's not like you've lost them forever. But when you're in the game of fast growth, and ultimately, you know, you're either gonna need, you know, you're either gonna take the company public or you are going to sell it, or you are going to raise additional capital. If the business is worth, let's just say for the sake of a stupid conversation, if the business is worth $20, right? And if you had done it well, it would've been worth $30. And you go out and you sell 10% of the company, well, you're selling, instead of selling 10%, you're selling 15 or, or 12 or 13%. So it does genuinely cost you, right? And so, you know, that was a classic example of where, you know, we experienced the transition from four to five, the exposure of being in that four to five, um, spot.

Cole Abbott (00:16:42 -> 00:16:51)

Yeah. I think I just wanted, the product marketing thing is about all the people that have to deal with the consequences of it, right? It's not just the money thing. It's like, okay, all these things, all these people have other jobs,

Mark Abbott (00:16:51 -> 00:16:52)

Right? Right.

Cole Abbott (00:16:52 -> 00:16:58)

Have things that are really normally prioritized, but in this situation, in this chaos, like, oh, you're getting redirected to doing something else.

Mark Abbott (00:16:58 -> 00:18:07)

Yeah. That's, it's a fair point. 'cause you, because you could, you could say, you know, it's an interesting way of looking at it, and you always bring interesting ways of looking at these things, but you know, you're right. If you think about product marketing is not being just around communicating what's going, what, what's new about the product, but what's messed up a little bit about the product, right? Because what happened is, uh, we had a bunch of billing issues, right? And so now, and, and because we're predominantly a PLG company, right? We don't have, you know, a horde, you know, we're all small, mid-size businesses, we can't afford every single one of our customers to have their own customer service person, right? So how do we communicate? We communicate by email, right? And, uh, and, and who owns that, you know? Yeah. Product marketing or marketing, but, you know, or you could say customer service owned it. But there's no question that, um, some part of our organization, whether it's product marketing or marketing or customer service, um, you know, got hard hit by that.

Cole Abbott (00:18:08 -> 00:18:45)

And that's not part of the normal roles and responsibilities in terms of that is a specific activity. Right? And I think the biggest thing, right, to sum up all the, you're losing time, you're losing money, and you're losing resources as people Yeah. To go deal with these things. And you could say, oh, but you're basically just setting yourself back X amount of time. Right? But the big thing is that no matter what's where you're at time-wise or in a moment, is you're basically removing options from the table, right? You had these options. And one of the big things with anything is preservation of options. Yeah. You make sure you have as many avenues to go down as possible, but when you make a mistake like that, yes, you're still in the game, but it shuts a lot of doors. It

Mark Abbott (00:18:45 -> 00:19:14)

Did shut a lot of doors, right? I mean, it set back our product development. Um, I, I, you know, globally, I would argue at least six if not 12 months. Yeah. Yeah. And that, and that's, and you know, and that was the second time. That's, it's, it's, it's big, right? When you're growing, you know, don't brag, right? But when you're growing, you know, whatever, 50 to a hundred percent right? Growth rates, that's big.

Cole Abbott (00:19:15 -> 00:19:41)

Well, it obviously depends on the industry, right? Yeah. Six months could be like, you know, you take Formula One, for example, you lose six months. Like, oh, okay, well that's just it. You're done. Yeah. Cool. <laugh>. Yeah. Right? And so you'd see examples of those issues pop up, and it's interesting to see different types of people comment on those things. Yeah. 'cause some people understand, it's like, well, that's what you gotta do if you wanna succeed in the future. And so you're like, well, you don't really have a future if you keep doing it this way. And it's

Mark Abbott (00:19:42 -> 00:19:42)

Yeah.

Cole Abbott (00:19:43 -> 00:19:53)

Yeah. You don't, but when you're in that situation, you don't have the choice. Right. We'd love for things that have gone differently. We'd love to have the choice Yeah. To focus on something else right now, but you don't Yeah. You have a fire that you gotta put out. Yeah.

Mark Abbott (00:19:53 -> 00:20:43)

And I, I think one of the, one of the things that I, that I, I think we're hoping to do with sharing all this with, with people is, you know, just, you need to understand what stage you're in and what stage you're going into next, and what are the implications, right? Am I ready for going into that next stage, or am I not right? Is do I have structural issues? Do I have people issues? Do I have leadership issues? Do I have product issues? Do I have marketing issues? Right? Where, where am I? Like, I'm confident I'm strong, and where am I? Ooh, right. I'm exposed here. And then what's the, you know, what's the risk associated with the exposure? Is it, you know, you know, uh, if you would've told me that the, you know, obviously we had, we completely underestimated the risk associated with the transition from Stripe to paddle.

Cole Abbott (00:20:43 -> 00:21:48)

Right. And you need to understand the whole game you're playing, and are you ready and are you not? Yeah. I think, you know, there's a bunch of analogies you could go with, but in all of those, your hand is sort of being held, like you're playing a video game and you gotta go to these levels, and Right. Once you get one, you go to the next and it's like, okay, well you making it to the next level means you're ready for that level. Right? Right. Or you go to college and it's like, okay, you went to these classes Yeah. And there's a whole system to make sure that you go through each thing accordingly. Right. And they're not gonna let you just fall through. And if you screw up, like that's entirely on you kind of thing. Yeah. Yeah. But this is no, you are responsible for everything. Right. You can kind of cut some shortcuts, right. Biggest shortcuts here and there, but you gotta stay super disciplined and be aware of everything's going around what you've done in the past. Right. If you skipped over anything, you gotta make sure that's good. Right? And then you gotta make sure that you're ready to move from stage four to stage five. And in your example right? You're like, I'm gonna take on the burden. Right. 'cause for you it was, you're gonna take on pretty much all the burden of not having the integrator. Right. And that was a sacrifice that you made. Yeah. Right? That wasn't like, oh, I just, whatever. It's like, no, it's gonna be a really tough two years, basically. Yeah. To get from here to there. Yeah.

Mark Abbott (00:21:48 -> 00:21:49)

But Right.

Cole Abbott (00:21:49 -> 00:21:51)

You're weighing your options. Like this is probably the best way to do it.

Mark Abbott (00:21:51 -> 00:21:57)

Yeah. And, and, and just to state, uh, well, I shouldn't say state the obvious, but to share, right? There

Cole Abbott (00:21:57 -> 00:21:57)

Was

Mark Abbott (00:21:58 -> 00:23:45)

Disagreement in the senior leadership team in terms of whether we should go out and get an integrator, right? Because I am not the perfect integrator. Um, and, uh, but I explained why I thought that was the wrong thing to do. Uh, you know, one could say, well, what about a fractional integrator? And my answer would be no, because, you know, what we're trying to do is complex and, um, and, and, and I strong opinions about what we need to do and what's important for right now and where we're going, and to bring someone on board, and then in theory to give them as much, uh, you know, accountability as, you know, your classic integrator would want Mike know. Right? Not, not, you know, this is not gonna be a long enough game for that. And then you could say, well, you know, what happens if you bring on an integrator who, you know, ultimately can end up just being one of your C-suite members? Well, it's interesting Right? Conversation and we had it, of course. But, you know, I think to be a really, really good integrator, you know, you need to have a lot of experience with all of the facets associated with all the different departments and, and, and all the facets associated with running a business. By the way, I have a stronger opinion on this than I think some do. But, you know, if that's the case, they're not gonna want to step backwards and go into, you know, running, you know, marketing as an example, or being the CMO or being the chief Revenue officer. Right. And then certainly, you know, finding an integrator who would be a great CTPO and then, you know, shoot 'em back to being CTPO. It just didn't seem, didn't, didn't seem like it was the right set of options to explore, in my opinion. So paid for it.

Cole Abbott (00:23:45 -> 00:23:52)

Well, with that type of individual, it's kind of hard to do this for two years and then res specialize, right. As something Yeah.

Mark Abbott (00:23:52 -> 00:24:00)

Especially nowadays with every single one of those areas sort of evolving as fast as they're evolving. Yeah. Because you

Cole Abbott (00:24:00 -> 00:24:12)

Have to go out and get someone, right, who is a CTO, and then they're like, oh, you wanna be temporarily COO, and then, but you're gonna go back to, it's like, that doesn't, it's not ideal situation.

Mark Abbott (00:24:12 -> 00:24:13)

Yeah, yeah.

Cole Abbott (00:24:13 -> 00:24:19)

Right. And I, and I think it's probably harder to, right, like you said, I think it's probably harder to do that these days than it was historically. Yeah.

Mark Abbott (00:24:19 -> 00:24:21)

Just 'cause of the rate of change, especially

Cole Abbott (00:24:21 -> 00:24:44)

In a fast growing and larger organization, it's hard to do that, right? Yeah. So you can kind of step in in a smaller thing and are, I think, uh, I completely wrong, but like Chris Snyder did something like that before, right? Where he moved and he was like, oh, he got that rolling. He is like, wasn't for me. Then went, did other things. Uh, yeah, go watch his origin story to podcast <laugh>. Uh, but yeah, yeah,

Mark Abbott (00:24:44 -> 00:24:44)

Yeah.

Cole Abbott (00:24:45 -> 00:24:48)

It's kinda wrap everything up here. Um,

Mark Abbott (00:24:48 -> 00:24:52)

Should we talk about like, what it looks like to be solidly in stage four? Or

Cole Abbott (00:24:52 -> 00:24:57)

Ask me the question? Yeah, yeah, yeah. So what does it look like to be solidly in stage four,

Mark Abbott (00:24:57 -> 00:28:03)

Right? So, um, I would, I would say you, you are very confident about, um, your two to five year focus, right? This is what we're all about. This is what we're focused on. And so you've got a lot of confidence. Confidence without competence is, you know, is, is dangerous. So then we move into the competency level, so we're confident this is where we want to be. Now, the competence is we have really strong leaders across our departments, right? Who can handle the, you know, they're, they're the, they're the, the, the, the objectives that the one to two year objectives, hopefully they're, they're pretty closer to two year objectives than, than than the one year objectives. So they're, they're strong there. You've now got specialists, right? So you've got a really good head of marketing, you've got really good head of creative that, that's the thing. You have a really good head of data, really good head of product. You've got a really good head of engineering, you've got a really good, um, uh, you know, head of finance. So you've got really good sort of core function leaders. You've properly layered the organization so that everybody understands sort of what, what it takes to succeed at stratum one, it's stratum two, it's stratum three, and so that's all strong. Um, you're still involved as a founder, right? Because you're, you're still, you're there, you know, you're getting the organization to move to the place where you can really be focusing all of your time on the five to 10. But the reality is, is you're still, you know, you're, you're in the two to five, right? That's your, that's where you're spending the majority of your time. You've got lots of thoughts on the five to 10, but you're not, it can't take a lot of time, right? Um, and so, um, and then, you know, at this point in time, uh, you should be able to raise, raise debt for sure. Um, and, uh, and you should be able to raise, raise equity. But you know, part of the reason you can raise equity is because you're now saying, Hey, we're gonna raise equity to make, to help our organization go from stage four to stage five, right? And, um, and so, you know, as the founder, things are working really pretty well around you, and they're strong enough for you to be able to now move toward, right? Stage five, which is what we talked about that we did, right? So you're moving forward that towards that stage five and, and, um, and you're willing to take the risks associated with the culture strong enough to tolerate bringing on a new level of senior leadership or promoting, you know, several people in, in across the, across the organization. So you're, you're, you're confident and competent enough about where you are so that you can move to right to towards the next step, which is now right. Going out and, and either doing the chief operating officer slash integrator thing or doing the c-suite thing. Does that make sense? That does. Cool. That's a good way to wrap it. All right. And, uh, yes, the proof and guide will be in the description below. Bueno. Thank you.