In this thought-provoking episode, Scott Ritzheimer, Founder of Scale Architects, shares why bigger is not always better when considering the move from level 3 to level 4. If you're in stage 3 succeeding as a manager but feeling pressure to scale up, or already sensing the disillusionment of level 4, you won't want to miss it.

You will discover:

- Why thriving in level 3 as a player-coach can fully achieve your vision without added complexity

- How to decide if your organization truly needs the coach-on-the-sideline role of level 4

- What it takes to move successfully from managing people to leading managers

This episode is ideal for for Founders, Owners, and CEOs in stages 3,4 of The Founder's Evolution. Not sure which stage you're in? Find out for free in less than 10 minutes at https://www.scalearchitects.com/founders/quiz

Scott helped start nearly 20,000 new businesses and nonprofits and with his business partner started led their multimillion-dollar business through an exceptional and extended growth phase (over 10 years of double-digit growth) all before he turned 35. He founded Scale Architects to help founders and CEOs identify and implement the one essential strategy they need right now to get them on the fast track to Predictable Success.

Want to learn more about Scott Ritzheimer's work at Scale Architects? Check out his website at https://www.scalearchitects.com/

Connect with Scott through his LinkedIn at https://www.linkedin.com/in/scottritzheimer/

Scott, hello, hello, and welcome, welcome once

again to the Start Scale and Succeed podcast, the only

podcast that grows with you through all seven levels of your

journey as a founder. I'm your host, Scott Ritzheimer, and

today we are taking on three of what I believe are the most

dangerous words for founders, and they together make up one

belief, and that is bigger is better. That's right, three most

bigger is better, bigger is bigger. That

is true, but is it better? That's the question for today's

episode, because what happens for founders in level three of

the founders' evolution. If that doesn't make sense to you, go

back a couple episodes to part one of this should you really

series, where we talk through what the different levels are.

This episode is for those of you who are in level three and

trying to figure out if level four is right for you, or if

there's another way, and so we're going to assume that you

know what level three is. It's the reluctant manager stage.

It's really tough. It's where you're wondering what's wrong

with these people, and when you start to tackle that problem,

when you pick up a couple of the right skills and abilities to

manage your team effectively. You move from being a reluctant

manager to being an effective manager or a skillful manager,

and that doesn't mean that you know a manager is the highest

aspiration that you have to be in life. That's not true for

pretty much any founder. It doesn't mean that's all that you

do, but it does mean you've learned this skill to succeed in

this stage, and this is one of those areas where it's not so

much the challenge of level three that reluctance as a

manager, although that can be part of it, but the temptation

to think that you figured it out that causes problems for folks

between levels three and four, because level three is generally

not folks' favorite. Some of you, it might be ideal, and

we'll talk about that here in a moment, but for a lot of

founders, they're, they're, they want to move beyond the

management stage, and for obvious reasons, they, they

don't want to spend the majority of their energy managing people.

But here's where we have to stop, and this has been one of

the biggest revelations for several of my clients recently,

and that is, once you reach level three, you never actually

graduate from management. It's not like you move from being a

manager to being a leader, and you don't have to manage

anymore. No, all leadership is built on and predicated by sound

management. It's a really fancy way of saying, no matter how big

you get, you will always have to manage. Now, you won't have to

manage everyone in the company, but you will have to manage your

leadership team. You will have to manage your executive team

all the way through the end of the process, you'll have to

manage your wealth team in level six. You'll have to, there's

there's management and the skill of management more so than the

identity that sticks with you from here on. You don't get to

graduate from it. So, if you're trying to get from level three

to level four, so you don't have to manage anymore, you're in for

a rude awakening, because not only do you have to keep

managing, but now you also have to lead managers, which is a

challenge in and of itself. So, you're not going to graduate

from management, but that's that's not the issue here. The

issue is when we start to crack that code and we find out, hey,

we can add people in, and it works pretty well, then the

recipe for a little while, even for a few years, is add a person

organization grows, add a person organization grows. I remember

for me when we were in this stage, we would add a sales rep

that would bring us in a million dollars, we'd add one type of

consultant, we'd add another type of consultant, and we'd add

an admin, and those were all in balance, and we'd make a bunch

of money, and that was our growth strategy. Just add

another sales rep each year, and we'd add a million dollars to

our top line, and our bottom line would follow accordingly.

And so I thought, like you would imagine that most people would,

that bigger was better because I had a whole track record from a

couple of employees to 15, closer to 20 employees, that

said when you add another person things get better, because I'd

figured out that level, I'd figured out how to manage these

folks effectively, and then we added people and I couldn't

manage all of them anymore, and so now to add more people I had

to add a layer of management to help me lead it. That's

expensive. It results in a huge loss of control because you're

not the one doing it anymore. What. Folks don't recognize for

a long time, is it's a huge loss in data, and not data in the

like spreadsheet sense, but data in the intuition sense, because

when you're managing everybody, you're kind of in it with them

all the time, your brain is constantly consuming the

information and filing it away for later decisions that you'll

make, and this is where founders that are succeeding in level

three kind of develop this golden gut of like, hey, I know

what it takes and what we need to do, because they're getting

all this great information in. Well, once you add a manager

between you and all those people, you might be able to

effectively delegate down their responsibility, but most folks

miss the opportunity to elevate up the information that they

need that they're not getting anymore by not being part of it.

So you lose control, you lose information, which ultimately

ends up making you make worse decisions in the long run, which

is a scary thing. You lose the ability to influence culture

just by who you are. In level three, you get to be the vision

and values of the organization. In level four, you have to start

to structure that so that your managers can be the vision and

values for you, and that's a very different approach and a

very different skill set, and so it's not linear, you don't just

keep adding people and, and things get better, you add

people and they get better, but then the S curve starts to round

off, and the more people you add, the less benefit you get

from each new person that you add, to the point where it was

for me, we were adding people and adding people to try and

solve the problem to grow, and we added so many people that we

ended up losing profit, not just a reduction in profit margin,

which was staggering. We lost actual profit. We sold a million

dollars more one year than the year before, and we had less

profit at the end of the day, again, not a lower profit

margin, not a percentage basis. We had less dollars the next

year, even though we had more revenue, and that's the problem

with bigger is better, is that we think it's linear and it's

not. It's a series of S curves. What are those S curves for

founders? They are these different levels, and how we

need to behave and lead in each of those levels. And so, when we

think bigger is better, then eventually we reach a point

where we can't manage everybody anymore, and we have to start

adding people. Well, once you start adding people, that forces

you into level four, if you never really wanted to or needed

to be in level four, then even if you succeed there, you're

going to succeed at the wrong game, you're going to succeed at

something that you were never desiring to do or wanting to do,

and that's even worse than failing there, because you feel

trapped and stuck, and so we want to really think critically

about this idea of, is bigger actually better, or have you

already found your sweet spot? So, let's look at that a little

bit more closely. Let's look at what some of the reasons are

that you would stay in level three. Now, before that, just

quickly, we talked about this in the first episode, but level

three is usually gonna be somewhere between five and 15,

maybe up to 2020-five, people at the most, but it's enough for

you to mostly manage yourself. You might have a couple people

who kind of help, but like you're really the one leading

the whole thing.

It's where, where Where your activities start to refine a

little bit in the sense that you can't do it all anymore, so you

have to start handing things off. So most level three

founders will start to find themselves spending more of

their time managing and less of their time doing some

combination of sales ops or admin, and for most founders

that means focusing on sales and starting to build out a sales

team sometimes, and managing the rest of the folks, including

generally some kind of operational leader, like a head

of ops or an office manager, or someone to kind of keep the

trains on time, and, and so, that's that's where we're at

here. So, you've got more than a handful of people, enough that

you can manage by yourself. One way of describing is you can all

fit around a table, right, like one big dining room table,

everyone can still fit. And I remember, for us, we used to

have all our staff meetings at a Panera Bread, and we could all

fit in this one little tiny room. And then there was one one

day we were like 25 people, and we tried to fit in there, and it

was literally a game of sardines. It was so

embarrassing, it didn't work at all, because we had, we didn't

realize how much we had grown, and that was that helped us

realize it. So, anyway. You can largely manage them yourself

now. Again, this isn't the right place for a lot of founders. I

have found I actually started this process thinking that

nobody should stay in level three, that the only right thing

to do was to go back or go forward and not stay here. I've

since had several of my clients prove me wrong on that, and

here's why. There's an opportunity for some markets and

some services where you can fulfill the needs of your

market, where you can achieve your vision with a team that you

can run largely by yourself, right? Maybe the help of someone

else, and you, you like that boutique feel, you know.

Everybody, everybody knows you, everybody knows everyone, and

you, you can, you can really thrive in that environment. Your

model doesn't require a whole bunch of middle management

layers or departments or sophisticated interconnected

systems to run well again. Your market is right sized. You're,

you're not trying to be like a global phenomenon. You're,

you're just trying to serve your clients well. You can make

enough revenue to be comfortable and happy in your not work life,

your home life, you, which you can usually make great money in

an optimized level three. You are willing to manage that many

people, one especially once you get to the high side of that

level, like managing 1213, 1415, people's a lot of work, and and

sometimes that's just way too much, so some folks have to get

through level three to level four, where they can bring in

some other managers to help, but if you're okay with learning and

building those skills, then it's not a bad gig. You, you're okay

with the diversity of double duty. What I mean by that is

this is kind of like being a captain on the field, right? If

you were to take, like, a football team or a hockey hockey

team, the captain is part of the game, they have their job to do,

but they're also helping lead and excite and and direct

everyone else, and and so you have this kind of dual nature of

player coach that are both happening at the exact same time

and and you can, you can create enough success through others,

this this this can be a challenge for folks in this

stage, they're really good at what they do, and they're really

bad at getting other people to do that thing well. So, if

that's the case, you probably shouldn't have gotten here in

the first place. But that's going to get even worse if you

keep going to level four, because now not only do you have

to do through others, you have to lead through others, and

while that might sound like a relief, it's actually a bigger

problem, because the accumulation of the inadequacy

starts to grow, and that's not pleasant.

So you can stay there, if you again, if you like that boutique

size, if you can achieve the vision that you have for your

organization, you can do great work for great people, and you

can do it in a relatively small market, and you don't mind that

dual nature player coach. You can ride here for a really long

time. You can make a lot of money here. You can find some

freedom with your time. You can go away for a couple weeks, and

the organization still moves. You can find a lot of

specialization in what you do. This is particularly true if you

enjoy the more human side of whatever your operation is. If

you like the sales networking approach, most of my folks who

pick level three do so because they really like the sales

process, and they're able to effectively hand off kind of

everything else and just manage an ops leader, and then that

allows them to manage a sales and networking process that they

really enjoy. So those are all signs that level three might be

good for you. Now, what are some signs that you should move to

level four? The first one, broken record here, if you've

been listening to all of these, but really the first and kind of

only reason that you would do it is because your vision demands a

bigger, a team that's bigger than what you can manage on your

own. You have to have more than this number of people, and

that's not a decision to take lightly. Level four, I really

think is the hardest of all levels for most founders, and

that doesn't mean it's bad. It might actually be the perfect

level for you, but it's pretty normal for, especially the

beginning of level four, to be quite difficult. It can, it can

literally be existential, uh. For you as a founder, so this

this idea of, hey, bigger is better. It's not if you're going

to get just a little bit bigger and it's going to tip you into

level four, it's going to get a lot worse before it gets better,

and that little bit of better might not be worth it,

especially if you can achieve the same thing by just

optimizing a little bit better and going better is better in

level three, however, if your vision demands it, if you've

got, if you need to grow beyond what you can manage, then level

four is going to be a necessary part of that, if you are okay

not playing an instrumental role in, in the actual selling, or

doing so. What happens in level four is that we leave the field

of play. Level three, captain on the field, level four, coach on

the sideline, and you are sidelined like that. That phrase

actually means something here, you in level three. If something

goes wrong, you can jump in and save the day pretty effectively,

because you're close enough to it. It's, it's matched to you,

because you've, you're the one who's been doing it, and it's

relatively easy, although sometimes quite exhausting, to

kind of jump in and save the day, but it's possible in level

four. It, it's not really possible to jump in and save the

day, not reliably and consistently over time. You,

you, you get pretty tired running up and down the

sideline, and then realize that it didn't do anything. You like,

it doesn't matter how fast you run anymore, it matters how fast

the people you coach can run, and so level four requires you

to be okay with not being on the field, maybe even for the

biggest place. It requires you to, rather than leading those

who do, I'm sorry, rather than doing it all yourself, you have

to lead those who lead those who do? Right, you're not just

leading those who do, you are leading those who lead those who

do. And again, it's a different skill set. You might be ready if

you're willing to embrace that coach on the sideline role,

right?

Sometimes when you've been doing something for a while, even if

you love it, you're just tired, like you know, you, you coach or

mow lawns or cut hair or do architectural designs when you

do the thing that it is that you do for 510, 1520, years, that in

and of itself can take it out of you, and it just might be, hey,

I don't have the energy to literally do the thing that we

do anymore. This is why literal players move out of being

players in sports. Some of them become coaches. It's actually

quite rare, and there's a reason for that, and that is a great

players very seldom make great coaches, and the same is true of

founders. Those who really succeed in that level two

player, really, even those who succeed in level three, are

often those who struggle the most in level four, because

their skills are suited to being on the field, and so if you're

ready to, or desirous of being a coach on the sideline, not

having to run up and down, and being willing to put the ball in

someone else's hands. Level four might be for you. Last one here

is, if you're okay being a coach on the sideline and not having

to run, or like being a coach in a hockey game, and standing on

the bench, instead of getting blasted in game three of the

Stanley Cup finals by a 250 pound guy who wants to take your

head off when you're already injured to start, like the life

of a player or a captain, it's got its perks. It's like you

might take a straight puck every once in a while, on a hockey

bench, but you're not going to get checked. You might have to

stand in some pretty nasty weather in a football game, but

you don't have a 300 pound lineman trying to take your head

off, and so there's some, there's some obvious draws to

that position until you realize you don't get to touch the ball

or the puck, or whatever it is that you're playing with in the

game, and that is a tension to be managed, right. We've used

this language throughout, but every level comes with tensions

to be managed, and the tension in level four is that you are

still right there at the game, but you don't get to touch the

ball, you don't get to be the one who jumps in and saves the

day, not with any degree of regularity, and as you grow

through level four, in terms of size, not necessarily skill, but

size, you'll find that you become even less capable of

jumping in and saving the day, and that's a scary place to be,

you are now responsible. Responsible for something that

you can't do on your own, and, and that can happen in level two

or level three, but it's kind of incidental and on the side. In

level four, it's almost everything, because even the

things that you were really good at, you haven't done in five

years, you haven't followed the processes that the company has

in five years, they've all changed and developed and grown

without you, and that can be really daunting. So, really,

what we're doing, we're looking at, hey, can you achieve what

you want in that boutique single team feel, where your team and

your company are the same thing, you know everyone, everyone

knows everyone, and you all fit around a dining room table,

there's something really special about that. If you've done that,

you've enjoyed it, but your vision just demands more. Then,

sure, you might have to move forward to level four, and only

then, when you've succeeded in level three, and it's not enough

to achieve your vision, that's when it might be time to

consider level four. So, do you just the moment you hit

challenges in level three, throw up your hands and say, I need

someone else to manage all these people? No, it's not going to

work. You have to learn to manage yourself. You have to

thrive in level three before you get to level four, and just

because you learn to thrive in level three doesn't mean that

you're going to be able to keep doing that same thing in a

linear way over and over.

You're going to have to relearn how to thrive in level four as a

coach on the sideline. So, hopefully, for those of you that

have been wrestling with this, that's that's helpful. It's a,

it's a complex decision. It's, it's not the easiest decision in

the world to make. There's so much pressure to grow and to

scale and to be something else. What I'd really encourage you to

do is just stop and think, hey, what would it look like to be

content with a better version of what I'm experiencing today, not

a bigger one? And that question can really, really unlock some

clarity for you in level three, and you might find, yes, level

four is next, let's take the bull by the horns and ride it

until we win, or you might find, hey, that level four was never

actually necessary. I'm going to lock into level three, and I'm

going to crush it. And if you do, you can find deep

fulfillment in level three. You can have a lot of fun with it

and with your team, and it can be a really, really special time

and season, so I want to wrap up with just a little bit of a

teaser, so those of you who are listening through, and maybe

you've been through this before, you've already made this

decision, and you're, you're either in level four, you've

been to level four, you're curious about what happens here.

Level four is an interesting one, because we are going to

talk about in our Should You Really series, we're going to

talk about the most common mistake that founders make when

they try to solve for level four, and that is to go out and

hire or try to hire a professional CEO, and so that's

the question we're going to answer in the next one. Should

you go out and hire yourself a professional CEO? And it's gonna

be a really interesting conversation. I can't wait for

it. For now, for those of you in level three, make sure that you

thrive in level three, even if you're on your way to level

four. Every bit of gain in level three is going to just be an

advantage to you in level four. For those of you who never need

to get to level four, enjoy the heck out of level three. For

those of you who are going to level four, it's a tough stage,

but man, is it a good one. It's a hard one, but a good one. And

I'm excited to talk about that with you next time. So, with

that, you know your time and attention mean the world to us,

to me, really. And I hope you got just a little bit more

clarity out of this episode than you had before. And cannot wait

to see you in the next episode. Take care. Hey everyone, Scott

Retheimer here. Thank you so much for listening to the Start

Scale and Succeed podcast. I hope this episode gave you

exactly what you need for the level you're in right now. If

you want to discover what level you're in, take our 10 question

founders evolution quiz for [email protected] That's

foundersquiz.com it'll pinpoint exactly where you are and give

you tailored tips to move forward and reach that next

level in your journey as a founder. If you got something

out of today's episode, don't forget to subscribe, rate, or

review. It helps us reach more founders like you, and let's be

honest, it means a ton to me, my team, and all our incredible

guests. So keep starting scaling and succeeding, and I'll see you

in the next episode.