To handle the Phase-2 business required every employee, including founders and executives, to be hands-on. Jason Lemkin discusses the #1 challenge of Phase-3 (attaining initial scale) is managing.

Expansion Phase Challenges in a SaaS Company

The main challenge I think from sort of getting from 8 - 10 run rate to the next level -- 20, 30, 40, and I’m not going to talk beyond that phase, I’ll let others talk about the pre-idea phase, the main challenge people have is that they don’t build a strong enough management team.

So, once you get to 8 - 10 million, as founders or CEOs, you should not be managing anything directly. You have got to no longer be a micro manager in any way shape or form, you need VP’s at every function, and they need to be real VP’s and not fake VP’s and they need to be running things and they need to know how to do everything. All your VP’s need to know how to hire every single person that will get you from 8 or 10  million to 50 million, and the biggest thing that you can do as you come up to that initial scale that 8 - 10 million is not to put the management team in place and then you are just losing time. You’re destroying that investment and your brand.

So once you have a few million in revenue, always spend 20% of your time recruiting, and as you get bigger do it for your VP’s.