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I think I was on my fourth Red Bull and vodka when I realized just how much fun my company had become.

I was on a business trip to San Francisco, and one of the employees in my firm had invited me out to see a funk band. As the music got louder, I started to bask in the feeling of starting a business where employees felt more like friends and where work intermingled effortlessly with play.

It had been six years since I'd started my research company, and things were going well. Or so I'd thought.

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It wasn't long after that night that things started to change at my business. The quality of our work dropped, we started missing deadlines, and given how close I had become to my employees, I had lost the authority to lead.

In an attempt to get us back on track, I brought in a senior manager from a big company, gave her a fancy title, and asked most of our employees to report to her.

Things went from bad to worse as our entrepreneurial body rejected the new organ. I had over-corrected and lurched from a frat house to a library.

According to Les McKeown, author of Predictable Success: Getting Your Organization on the Growth Track–and Keeping It There, my experience wasn't unique.

Mr. McKeown has plotted the typical stages of company growth and found that, in order to become valuable, sellable businesses, companies had to first travel through three phases of development:

  1. Early Struggle: In this stage, it feels as if you’re hacking through the jungle, fighting to keep your newborn organization alive. The two main challenges are (1) making sure there is enough cash to keep going and (2) clearly establishing that there is a market for your product or service.
  2. Fun: You have broken through the Early Struggle – you have cash and an established market, and your people have started to have fun. The key focus moves from cash to sales, and the organization’s myths and legends are built. The “big dogs” emerge – those loyal high producers (usually in sales) who have the ear of the owner and build the business exponentially in this time of rapid, first-stage growth.
  3. Whitewater: The very success that you reaped in the Fun stage brings with it the seeds of Whitewater: your organization becomes complex, and the key emphasis shifts once more from sales to profitability. Achieving sustained, profitable growth requires you to put in place consistent processes, policies and systems. Unfortunately, putting those systems in place proves harder than you expected. Making the right decisions seems easy, but implementing decisions and making them stick is incredibly difficult. The organization seems to be going through an identity crisis, which causes the owners to doubt their leadership and management skills.
  4. Predictable Success: This is the stage you want to strive for in order to have a valuable, sellable company. Here you can set and consistently achieve your goals and objectives. Unlike in the Fun phases (where you were growing but not quite sure why), here you know why you are successful, and you use that information to sustain growth in the long term.

In my experience, transitioning from Whitewater to Predictable Success was a long slog that required a complete overhaul. We needed to let go of the big-company executive and some of her lieutenants, reshape our offering into something more scalable, stop offering product customization, hire more experienced people in functional areas, develop long-term plans, create systems and become a better-managed company without choking off our entrepreneurial instinct. At times, it felt as though we were taking one step forward and two back. Eventually, we got through Whitewater and into something that looked more like Mr. McKeown's Predictable Success stage.

Recalling just how painful the transition was for us, I asked Mr. McKeown if it was possible to skip the Whitewater phase and move faster into Predictable Success. The author didn't offer much hope: "Just like every kid needs to go through adolescence before they reach adulthood, every company needs to go through Whitewater before they can become a Predictable Success."

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Special to The Globe and Mail

John Warrillow is a writer, speaker and angel investor in a number of start-up companies. He writes a blog about building a valuable – sellable – company.

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