SOP 175 — Capitalize the business at 250 to 500 people

1. The stage

At the stage before, 100 to 250, the theme was specialization: everything had been categorized, and then roles and teams were specialized. Past 250, the theme is to capitalize.

Item	At this stage
Headcount	250 to 500, as the range is restated; it is first given as 250 to 499
Your role	Chairman
Leadership structure	Five layers underneath you. Ideally you want as few layers as possible; sometimes, at this point, you just kind of have that
Who drives revenue	It is almost as if division leaders kind of run an entire product line or division of the business, driving sales and revenue. These revenue leaders and streams kind of report into a CEO who reports into you, or sometimes straight to you; it just depends on how the company is structured
How many companies get here	300,000, put at like 0.1%: very, very small, one out of a lot

Almost a company of companies. At this level you are almost a company of companies. You have divisions of revenue, and sometimes they stand apart as whole entities, either bought or not yet bought, rolled into a larger group.

2. Each function at this stage

Function	What it covers	What breaks	What graduates it
Product	What the business delivers: its goods, services and results	Changing a successful product, a cash cow, now actually makes it worse, yet you need new things to keep growing	Buy or build: buy through M&A, build through research and development, looking for the next rising-star product to add to your suite
Marketing	How you tell people about your stuff	Attributing leads by channel gets really difficult, because you market all over the place, through many different channels; platform and regulatory compliance become an issue	Shift to brand-first advertising, omnichannel, with return on ad spend read blended across all products; on top of that, install a compliance process
Sales	How you get people to give you money	Too many different leads and products for any one type of salesperson	Salespeople specialize, selling different products to different leads through different processes; sometimes you have to start routing leads by product or territory
Customer service	How you get customers to refer, retain, review and resell	Support for varied new offerings breaks under the volume: too much volume of new customers, and of different types of customer	Triage support to specialized reps, much as in sales, to improve efficiency and shorten training
Technology (called IT)	How you gather, store, analyze and display information	The old tech stack is insufficient and needs updating, since volume has essentially broken it; departments demand new, specialized solutions	Move to an updated tech stack and updated enterprise-level software
Recruiting	How you find and hire people to work for your company	The best talent is not responding to your recruiters, or to anyone besides you	The founder attracts talent directly, becoming the chief recruiting officer
Human resources	How you decrease the likelihood that employees and regulators sue you	Staff churn rises, and you do not know whom you need to grow	Strategic workforce planning, described as essentially a nice word for organizational design
Finance	How you manage your money	Your finances are not legit enough to get other people to give you money: to raise it, borrow it or have the business bought, so as to make a big investment in M&A or R&D	Prep for sale, a frame offered as a preference: get the company sale-ready, while not saying that you are going to sell it

3. Product and marketing

Product. The choice between buying the next product and building it is worked through on SOP 180 — Decide whether to buy or build the next product.
Marketing. The compliance process for advertising has its own procedure, SOP 176 — Install a compliance process for marketing. Leading with the brand across channels, and reading the results blended across products, belongs to SOP 177 — Go brand-first, read blended return and cost a permanent customer.

4. Sales: specialize the reps, route the leads

Sending the best leads to the best closers was done at the stage before (SOP 168, section 5, the page for that stage). At this size it is taken as already in place, and the work moves on from there.

Some leads can go only to certain closers, because only those closers know how to close them. The example is a business with a direct-to-consumer line beside a wholesale line. Selling wholesale is a completely different process: the prospects are completely different, and they respond to entirely different messaging.

A direct-to-consumer example. You might have a sales team for nano influencers, just for the tiny ones; then you might have mega influencers; then wholesale. These are very different avatars you might need to expand into, and each has its own leads, pipelines and processes: different everything. At this point you might be getting them, because sometimes a nano influencer does bring in a wholesaler, and then the question is what happens. That is the reason categorizing came first, and then specializing roles: so that at this stage you can capitalize on what you put in place and squeeze even more out of the funnel.

Different reps, different pay, different training. It follows that you will have different types of salespeople, with different compensation and different training for each kind of rep.

Specialize to shorten training. Picture someone starting when there are six different processes, six different types of leads and 12 different types of products. Learning every process, product and customer would take forever. So narrow it: recruit specifically for wholesale, onboard those people with the wholesale training specifically, give them their own compensation structure, and point them at one thing on one channel. Each division starts to sprout and grow legs of its own.

Territories. Territories often, sometimes, come into it, especially if you are a brick-and-mortar type of business, or at least sell into different areas of the US. Having territory leads and the like starts to become important. The reason offered is sometimes just cultural: people from the south tend to respond more to people from the south, and people from the north likewise. So you start matching the types of people with the types of people who sell best to them.

Processes, by how the deal closes. What different processes might look like:

A really low-ticket product might close on one call.
Another might take two calls, with some sort of sales aid in between.
A third might need someone on a call, then conversations with multiple stakeholders in the company: it might take five-plus calls, with different stakeholders at different times, to make sure your product integrates with their solution.

Each of these is basically a whole separate operation.

The theme in sales. Capitalizing, in sales, starts from too many different leads and products for any one type of salesperson. So salespeople specialize in different products, different leads and different processes, and leads are routed by territory. It is specialization taken even deeper across every function, and in sales above all at this moment.

5. Customer service

When the volume and variety of customers break the support team, the fix is on SOP 178 — Triage support to specialized reps.

6. Technology: update the stack, and guard the team's time

Each division has its own technology. Technology began to specialize at the stage before. By now you should have full technology teams for each product division, just as customer service has its own. Each major technology function has its own updated, segmented tech stack, fully fleshed out, and cannot function without its own autonomous team. That does not rule out one person overseeing all of those teams of teams.

Enterprise-level software. What is new at this point: you probably need to consider new enterprise-level software. You are probably still using the same CRM you used at 50 people, and you probably have to look at an entirely new solution, something like an ERP. You might start off with a CRM, then have to move to a real, full-blown customized solution at ERP level (Zoho is one of those named) or something else with more robust customization, so you can meet the individual needs of every department and every product.

Shared logins are the sign. Down to the detail, the CRM you have does not even have the login abilities to account for your products and each one's owners, so people share login credentials. That happens because you have the wrong system. The right one has the functions a company of this size needs.

An owner for each function's technology. Each function's technology needs its own owner: one for marketing, one for sales, one for customer service. Below them, the system needs prioritization, so they do not get bogged down with work that does not matter: inquiries and SLAs, established. The inquiry process and the agreements are set out on SOP 170 — Decentralize technology into the departments; what follows is what this stage adds to them.

IT as something like an internal vendor. A lot of times, at this level, the IT function specifically is like an internal service, almost like a vendor that exists inside the business to serve its other functions; it supports value creation. Oftentimes, given a blank check for help, a lot of individual contributors do not grasp the cost of what they ask for relative to the impact of it. The technology people become free help, inundated with useless requests. So you have to be able to say: these are the only things this team works on, and this is the agreed triage order of importance. What makes IT departments ineffective, in general, is spending all their time on work that does not matter.

Levels of talent. Have different levels of IT talent organizing the infrastructure, so that it keeps working correctly.

In-house developers. At this point you are probably going to have to bring in developers of your own. With the upgrade to ERP-level software, it makes sense to have in-house developers at some point. It is probably going to start in maybe marketing, maybe sales, and work its way down based on your company's needs.

7. Recruiting, human resources and finance

Recruiting. Why the founder now has to draw top people in personally is covered by SOP 181 — Recruit top talent as the founder.
Human resources. Working out whom you will need, and who answers for what, is the subject of SOP 179 — Plan the workforce and map responsibility.
Finance. Cleaning the business up so it could be sold, whether or not it ever is, is SOP 182 — Get the business sale-ready to reach new capital.

8. The bottom line: make a big bet

The constraint is a plateau. No growth is occurring, or, more precisely, growth is not as fast as you want, or not in your main product line. To graduate, you are going to need to make a big bet. This is typically a point where you are many years into the business, and you might have to shake things up again to reach the next level: how do we 10x from here. That question is kind of what this stage prepares you to answer.

Capitalizing is this stage's theme, and all of it is about making the big bets that expand the company: big bets in people, planning how much you will need in the future; in product; and in brand, on the marketing side, asking what the big investments there are. The reason is the next stage: how you get past 500 people.

9. What this page does not decide for you

The share of companies at this stage. 300,000 is given beside "like 0.1%", and no base is given for the percentage. Against the count of all US businesses on SOP 164, section 1, 300,000 would be 1 percent. Not established on this page.
The title of each function's technology owner. Not established on this page.

10. What this page does not cover

Onboarding and training sales reps are on SOP 255 and SOP 256. The oversight of all the technology teams is not covered on this page. The stages past 500 people are not covered on this page.