# The cottage industry mindset
- URL: https://www.petrikajander.com/the-cottage-industry-mindset/
- Author: Petri Kajander
- Date: 2020-10-20
- Language: en
- Audio: https://anchor.fm/s/1018a6478/podcast/play/98857264/https%3A%2F%2Fd3ctxlq1ktw2nl.cloudfront.net%2Fstaging%2F2025-1-22%2F395326690-22050-1-f6ee82aac77b2099.mp3
- Video: https://www.youtube.com/watch?v=7yoTisIqjKE

You start small. There’re the very limited amount of resources and you have a lack of almost everything. Things don’t scale and they don’t even need to do at the beginning.

Gradually, if you find the product-market fit resources become more accessible. The limitations become evident in other parts of the business. Your processes may not scale.

Things become inefficient and your response time slows down. Communication does not work as well internally and externally. Feedback from customers may already have layers.

Most of the above issues are management and leadership challenges. They can be solved with the right tools and expertise.

I’m talking about something else, more vicious and tacit: a mindset from the early days when you did not need to consider too much about other people and processes since there were few and everybody could gather around a pizza or two.

There’s nothing wrong with lifestyle business if you want to build one. But if you’re aiming for scale and the large impact that’s another matter where the trouble is around the corner soon.

If your mindset is not updated beyond your own capabilities and resources it’s hard to make things work. The calculus is different when you cannot just use your cash flow thumb of the rules and simple measures.

Contributing margins, variable costs, resource allocations and limitations become important. You may run out of working capital even if you’re growing.  Losing money on every new revenue unit coming in can kill your company.

That’s what happened to dot-bomb companies when they were expanding rapidly and growing hyper-fast. The costs structure was just growing faster and every new sale meant more losses and running out of cash faster.

Exponential growth is hard to grasp. It’s even harder to manage and plan. If you’re not paying attention and learn to live with that mindset you may not be well-equipped to handle the next challenges.

The worst scenario is that you may not even ever reach that point where the problems emerge. Why? Because your mindset is still in the minor league. You never manage to make the jump to the majors.

A survival mode is not the same as thriving. If your goal is just to come by and have enough cash to cover costs that’s not a growth company mindset.

Don’t waste anyone’s time, yours included by thinking that you’re doing something when you’re not clearly having the growth mindset.

It’s not hard but you need to be aware of it. How do you handle things where you have 100x more what you have now?

[Video](https://www.youtube.com/watch?v=NCbKfY4lDak)

## Transcript (https://www.youtube.com/watch?v=7yoTisIqjKE, YouTube's automatic captions)

[0:02] Mindset you start small there are the very limited amount of resources and you have a lack of almost everything things don't scale and they don't even need to do at the beginning gradually if you find the product Market fit resources become more accessible the limitations become evident in other parts of the business your processes may not scale Things become inefficient and your response time slows down communication does not work as well internally and externally feedback from customers may already have layers most of the above issues are management and Leadership challenges they can be solved with the right tools and expertise I'm talking about something else more vicious and tacit a mindset from the early days when you did not need to consider too much about other people and processes as there were few and every body could gather around a pizza or two there's nothing wrong with lifestyle business if you want to build.

[1:06] One but if you're aiming for scale and the large impact that's another matter where the trouble is around the corner soon if your mindset is not updated beyond your own capabilities and resources it's hard to make things work the calculus is different when you cannot just use your cash flow thumb of the rules and simple measures contributing margins VAR variable costs resource allocations and limitations become important you may run out of working capital even if you're growing losing money on every new Revenue unit coming in can kill your company that's what happens to bomb companies when they were expanding rapidly and growing hyper fast the cost structure was just growing faster and every new sale meant more losses and running out of cash faster exponential growth is hard to grasp it's even harder to manage and plan if you're not paying attention and learn to live with that mindset you may not be well equipped to handle the next.

[2:10] Challenges the worst scenario is that you may not even ever reach that point where the problems emerge why because your mindset is still in the minor league you never managed to make the jump to the majors a survival mode is not the same as thriving if you're goal is just to come by and have enough cash to cover costs that's not a Growth Company mindset don't waste anyone's time yours included by thinking that you're doing something when you're not clearly having the growth mindset it's not hard but you need to be aware of it how do you handle things where you have 100x more what you have.

## Transcript (https://www.youtube.com/watch?v=NCbKfY4lDak)

[0:00] Hey, how's your growth company mindset doing? Have you upgraded it recently? This is something I noticed in some of the entrepreneurs, founders that when you have been going through the hard stuff of building your company from the ground zero, usually by yourself or with a few buddies, you have a really limited amount of resources and most work of the is done by you and maybe a bunch of other people that are close to you is very tangible. The input/ output is easy to see. There's not too much to worry about complexities in the business. When you start to grow, you have more people, there are more processes. The chain of value creation becomes a bit more complex.

[0:57] It's easy to forget to upgrade your mindset as well because there's this thing called opportunity cost. What could you be doing with the time and the resources you have, alternatively? When you're doing something, what are you missing? What other things you are not actually doing because you're focusing on something else? Or if you're spending time on certain things, which are not actually building the most value, creating the most value to the customers and increasing the value of your company then maybe there's something else you should be doing. And, I don't mean any offence when I'm saying that lifestyle business is something, well the name says it all, it's a lifestyle business. It's not a growth company per se.

[1:45] And if you want to build a growth company, then you need to be in the constant, continuous uncomfortable zone of going really fast. Most of the things are lacking a bit behind, not by design, but because you're growing so fast and this means that you need to adjust your mindset as well as a founder, as a leader to do things in the right order and focus on those things where are building the future. Looking ahead, you have to start to look not just weeks ahead with maybe quarters ahead. Also, look next coming years, think about more in the long term. The other aspect is really important. It's actually the scalability.

[2:35] The things you do, you just cannot put resources on things, which are not scaling. Because if you have a hundred times more orders coming in, a hundred times more support requests, a hundred times more whatever it is. Those things may not scale with what you have at this point. I have noticed that this type of a founder: "I do it all by myself. I don't really count my hours" type of a mindset doesn't scale. You just cannot do that. And there's another aspect to that as well, which is the cost aspect. You cannot just look the cash flow, how's the cash flow going? Do we have money in the bank today?

[3:26] You have to start to think about contributing margins, variable costs, fixed costs so that you're not losing money when you're growing. These sound like simple things, even boring things, something which anyone coming out of a business school should have a pretty good, decent understanding. But it's easy to forget those things. It's easy to be stuck on that mindset when you're building your company. And this was my reminder and notice that please stop for a while. Think about where you are with your company at this point. What would you need to do differently if you would have ten times, a hundred times more orders, sales?

[4:16] How are the processes coping? How are you going to do that? How do you want to achieve that? Maybe you should dream a bit as well. How I'm going to have those things next year or in two years time? And in order to build a thing, what does it take? How can I achieve that? And if it helps start from the endpoint where you already have achieved that. Okay, now I have a hundred times more sales orders, whatever aspect you're looking at. And then work it backwards. If it's, for example, in two years time, maybe you double in the second year. So, now you'll have half the growth parameters what you need at the end of the first year.

[5:11] And, and then you are coming back to this point and think, okay, what's the growth I need and what other steps? Play around with the numbers, play around a bit with the ideas, scenarios, how you're going to do that. It is evident that the world doesn't exactly work how you plan, but it's better to plan and be prepared. And my main point is that when you stop and think about those things, you can start to see things which are not really scaling. Those pitfalls, those thresholds, those parts of your processes, those parts of your system, which will hit the limit and slow you down. If you do that beforehand, it's easier to avoid and really hit your targets when you need them.

[6:09] Till next time!