What to do when your company becomes too big

Many entrepreneurs battle with the transition from a small to medium-sized company. Cheryl Nesbitt, founder of South African cooking school Capsicum Culinary Studio, knows all about these challenges. Since 2003 she grew Capsicum from one school to six. During a recent talk at the University of Stellenbosch Business School, she shared some insights on what to do when your business gets too big.

Document everything: Nesbitt says that companies should put all business systems, processes and routines in black and white. The reason why every McDonald’s Big Mac around the world tastes the same is because everything in the company is documented, which means that everyone does everything exactly the same way. She adds that Capsicum wouldn’t have been able to successfully open six branches across the country, if every single aspect of the business wasn’t documented.

Get a mentor: “At some point in your business you realise that you need help. Being an entrepreneur is a lonely, lonely place … I went and found myself a business mentor…” explains Nesbitt. However, she notes that entrepreneurs should be careful who they choose as a mentor. “Don’t just ask the first person you meet. Look for someone you’ve got a bond with.”

She says that as an entrepreneur’s business evolves, they often outgrow their mentors, and then it is time to find a new one. “I do believe that mentors come into your life at certain times, and then you need to move on.”

Your original team often don’t have the skills to take the company to the next level: The entrepreneur’s original employees that worked at the company while it was still a small business, generally don’t have the skills required in a medium-sized firm. “Your original team, the reason why they are successful is they like working for an entrepreneur. They like knowing what is going on in the whole business. And suddenly you have to put in a management team, where you bring in experts in every field. And suddenly [your original employees] don’t know everything anymore. They now need to report to a line manager on an organisational chart … For a lot of your original team it is not fun anymore … Sure there are some people you can take with you … but a lot of my original team, very, very sadly we lost.”

Realise when it’s time to get out of the business: Nesbitt is not involved in the day-to-day running of Capsicum anymore, although she is still the sole shareholder. She says that her goal for Capsicum was to build a R100 million (US$13 million) company. She, however, realised that it wasn’t her skill to manage such a big company. “So I had to hire a CEO who earns way more than me … But that is what you have to do. You have to plan ahead. And it is a very tough decision.”

Sometimes “the entrepreneur should get out of the business because they can mess it up”. Nesbitt uses the example of a successful entrepreneur that had a photographic film printing company. Everyone told him that digital photography was going to change the industry and that he needed to steer the business in another direction. He, however, insisted on carrying on with the business as it was. Needless to say he suffered significant losses. “That is an example of someone who has stayed in their business for too long and didn’t move with the times.”

Another option is for entrepreneurs to continue working in the company in a position where they have strong skills. “If you are a technical person, stay in the laboratory, or in the technical section. If you are very good at marketing, just stay in marketing, hire a CEO above you.”

Nesbitt also shared some other business insights:

The importance of networking and attending events: Nesbitt says that when she was involved in Country Catering (an earlier events management and catering business, which she sold after seven years), she never attended any training courses or networking functions, because she was too busy working. “I realised that I have lost seven years of the latest trends … So the first day I started Capsicum, I joined the Chamber of Commerce and every other business network I could find … Don’t underestimate the value of networking, handing out your business card … phoning people for coffee. “You always think, ‘If I take some time to go and have coffee with someone, I could be doing x’. The reality is that while you are having coffee with that person, you might get an idea that could make you more money, or make you succeed better.”

“The other thing is attending conferences, and definitely international [conferences]. It is so awesome to go to these international conferences and learn international trends, and bring them back [to South Africa].”

The owner shouldn’t be the brand: Nesbitt says that the entrepreneur shouldn’t be the company’s brand, especially if they plan on selling the business in the future. “Your brand mustn’t be you. That is a hard thing because we all want it to be about ourselves. But it cannot be, because it is not sustainable in the future. You cannot sell yourself.”