Chapter 2. WHY EMPLOYEE SIZE MATTERS: A Different Way of Measuring the Four Stages

Because entrepreneurs like to think about revenues when they think about growth, I have characterized the four stages of entrepreneurial growth accordingly: zero to $1 million, $1 million to $10 million, $10 million to $50 million, and $50 million to $100 million and beyond. My operating theory—that each stage has its own particular problems, challenges, and opportunities—will hold up pretty well for most people who read this book. There will be exceptions, though.

You may find that the major problem you are facing right now does not correspond to the stage you are in. That may be because I determined the stage delineations by revenue, which sometimes isn't the most important factor in corporate change. In some businesses, employee size is a better indication of growth and the problems, challenges, and opportunities that come with growth.

In The Tipping Point (Little, Brown, 2000), Malcolm Gladwell talks about how communication is affected by the size of the community. He presents scientific studies that suggest that communication is at its most efficient when the group is small—no more than six or seven people. And he speculates that the quality of communication breaks down as the group gets larger.

When I read that passage in The Tipping Point, I thought about how small businesses grow and change in terms of their population. And it occurred to me that there is a fundamental shift that occurs with ...

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