The Rule of 3 and 10
One of the best pieces of advice I ever received came from Hiroshi Mikitani, the CEO of Rakuten, the Japanese retailer. He said that everything changes at roughly every third and tenth steps.
When you go from one person to three people it’s different. When it’s just you, you know what you are doing and then you have three people and you have to rethink how you are doing everything. But when there are 10 people it’s all going to change again. And when there are 30 people it will change again. Same when you reach 100 people.
At every one of those steps everything kind of breaks. Everything. Your communication systems and your payroll and your accounting and customer support. Everything that you put into place needs to change when you put in those three and 10 steps.
When you get into trouble is when you skip one of those steps without really thinking about it. So we’re at a little over 300 people now. There are still processes and procedures that we put in place when we were 30 people. The way that we onboard people hasn’t really changed--we still bring people on board and just throw them into the deep end of the pool. And that works great when you are 30 people, but it really doesn’t at 300.
By the time you get to 1,000 people you are likely going to stay there for years. When you get to 10,000 you might stay there forever. But as a startup when you are growing from three, to 10 in a short amount of time it is very easy to skip a few steps and then end up with all sorts of broken stuff.
There’s nothing magic about three and 10, but it’s been true for us. The structures we are putting in now should get us to be 1000 people.
Based on an interview with Phil Libin
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