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This article is part of the America’s Favorite Mom & Pop Shops series. Read more stories
If you’ve ever worked for a mom-and-pop business, as well as a startup, you may have noticed some striking similarities. Founders often like to make choices straight from the gut and they have a hand in almost every decision.
Every March, we celebrate National Mom and Pop Business Owners Day, the scrappy founders who bet on themselves and start something real. But Harvard Business School researcher Noam Wasserman found that within three years, half of these founders are no longer running the company they started. For many, the business outgrows the way they ran it. The informal systems and gut calls that worked early on start to work against the team as the company grows. The founder at the center of every decision often stops being an asset and starts being a bottleneck.
Signs you’ve hit the ceiling
Does this sound familiar? I once worked with a founder who had to be copied on every email and asked about every decision. When a key hire was struggling, a client was about to walk or cash was tight, nobody wanted to talk to the boss. Issues got passed around until they became too big to ignore.
Here’s another early signal that the founder is a bottleneck. When someone joins and has to spend their first two weeks figuring out who actually has authority over what, there’s a structure problem. A few things founders hear regularly at this stage:
- “I didn’t know who to ask”
- “I thought you wanted to approve that”
- “I was waiting to hear back from you”
If any of those sound familiar, the bottleneck may be the founder.
This is another signal that’s hard to see at first. In early startups, relationships are everything. The team is small, and the founder may personally own most of the connections that are relevant to the bottom line. The closeness is an asset early on because it brings faster growth, but later it may become a liability. Let’s say there’s a disagreement between two team members and it stalls a project, or a personal falling out changes how work gets assigned. The business is running on mood rather than actual strategy.
Four areas that need structure before anything else
So, how do you transition your small company into a more professional operation? Some popular ideas involve hiring an operations person or bringing in a consultant and hoping the chaos sorts itself out. That can help, but it’s not enough on its own. The people you bring in still need something to work with.
Start with the four areas that cause the most damage when they’re left informal.
1. Authority over decisions
Write down who can approve what without asking you. Spending limits, client commitments, product changes. There should be a named owner for each. When that document exists, new hires stop guessing and experienced team members stop waiting.
2. Financial transparency
A lot of early founders keep the numbers close because it feels safe and protective. But when key team members don’t know the financial reality of the business, they make decisions without the information that can help them do it better. They might overspend on things that feel reasonable or underprice work because they had no way of knowing that margins were tight. Share the basics like revenue, burn rate and key targets so your team has the context to make better calls without you in the room.
3. Standards for hiring and firing
Gut feel works when you’re making every hire yourself, but breaks down by the time managers are doing the hiring for you. You don’t have to be elaborate about your criteria for hiring. Just make sure you have it written down in a way that all team members know what it is. This type of document should lay down things like what constitutes good performance or what behavior is grounds for dismissal. When those answers live in a concrete place instead of the founder’s head, the whole team operates with the same standards.
4. Conflict resolution
If there is friction at the office, is the team handling it properly? When there isn’t a process in place it may look a lot like a mom-and-pop business where every disagreement eventually lands on the founder’s desk. Build a simple escalation path. It may look like this:
- Try to resolve an issue directly
- Involve a manager
- Escalate further
This removes the founder from disputes that don’t require them and is also a positive signal that the business runs on process, not personalities.
How to scale the business without killing what works
This is where many founders hesitate. They’ve seen startups lose the energy that helped them succeed as they start to become “too corporate.” People who played a big role in building the company start to leave or the culture changes with new processes and org charts. This doesn’t have to happen, though.
1. Keep the culture, but formalize the roles
Many of the founders I’ve worked with tended to avoid writing job descriptions or getting too explicit with organizational structure because it felt like the first step in becoming a soulless corporation. But roles and culture are separate things. Culture largely comes from how people treat each other and what gets rewarded. That won’t change because you wrote someone’s responsibilities down.
2. Write down what’s working
Spend a few hours capturing the decisions you make on instinct. Founders make hundreds of good calls that nobody ever documents, so do that. They range from things like how to handle a hard client to how to say no to a project or how to know when a team member is ready for more responsibility. These bits of institutional knowledge shouldn’t disappear the moment you step away.
3. Bring in outside voices
You don’t need to create a formal board of advisors. Try bringing on two or three people with relevant experience who can meet with you quarterly and influence the quality of your decisions. They might break deadlocks that would otherwise drag on for weeks. Outside advisors often have no stake in the internal politics, making them useful in ways your own team sometimes can’t be.
4. Hire for the job you don’t do as well
The skills that launch a company are not the same skills that scale one. If you’re dreading the operational work, doing it badly or avoiding it altogether, bring in a COO or operations lead whose entire job is execution. That frees you to stay focused on the work that sets you apart.
What good scaling looks like
Every startup that grows past its early stage faces the same choice that many mom-and-pop businesses encounter. Run it the way you always have and face headwinds, or build the systems that carry your business to a better future. You don’t have to lose the culture and the energy that made your company worth building, but you do have to stop letting it depend entirely on you.
If you’ve ever worked for a mom-and-pop business, as well as a startup, you may have noticed some striking similarities. Founders often like to make choices straight from the gut and they have a hand in almost every decision.
Every March, we celebrate National Mom and Pop Business Owners Day, the scrappy founders who bet on themselves and start something real. But Harvard Business School researcher Noam Wasserman found that within three years, half of these founders are no longer running the company they started. For many, the business outgrows the way they ran it. The informal systems and gut calls that worked early on start to work against the team as the company grows. The founder at the center of every decision often stops being an asset and starts being a bottleneck.
Signs you’ve hit the ceiling
Does this sound familiar? I once worked with a founder who had to be copied on every email and asked about every decision. When a key hire was struggling, a client was about to walk or cash was tight, nobody wanted to talk to the boss. Issues got passed around until they became too big to ignore.
