Five Questions You Must Answer If You’re Going to Grow Your Business
Small businesses often have a hard time breaking through the next barrier, whether it be the $1M, $5M or $10M mark, many small businesses remain flat for years and never achieve scale. Here are the five questions that need to be answered to move to the next level.
Is this a business or a lifestyle?
The two things that inspire most small business owners are control and upside. Entrepreneurs want control of their time and they want the opportunity to make as much money as possible. For most small business owners, starting their own business was about time and money.
But the lack of oversight, the lack of a boss, and the lack of corporate structure allow the entrepreneur to get comfortable in their lifestyle. When that happens, they stop growing. Their revenue may stay flat for years, or it may bounce up and down a bit. But to make the changes they would have to make to achieve consistent growth are too uncomfortable. Protecting their current lifestyle is the number one obstacle to growth for most small business owners.
Growth starts inside the owner's head and heart. Growing a business often means going well out of your comfort zone, giving up some control to clients or investors, and changing cherished personal rituals and lifestyle habits. Some entrepreneurs face this hurdle when they consider making their first hire, and some face it when they consider opening up a new plant or division. The numbers may be large or small, but the question is the same -- am I more interested in maintaining my lifestyle or growing my business?
Where do my clients come from?
Many entrepreneurs started their business on tight budget with their own invested dollars, maybe a home mortgage or a retirement nest egg. They are understandably thrifty when it comes to spending money. This applies to client acquisition and marketing as much as anything. They are careful with their marketing dollars. Many of them find clients through their own sales and networking ability -- a natural talent of most entrepreneurs. No one can sell the company like they can. They may have a small sales team or a meager marketing budget; just enough to maintain their lifestyle and put food on the table. Yet, the growth is never quite what they want it to be.
The fact is, most small business owners are underspending on marketing and they are underinvested in the online and digital marketing spaces. The quickest way to remedy this is to study your largest and most successful competitors. What does their market presence look like? Do you see them on television, radio, pay-per-click, hard copy mailers? How big is their sales team? How clear is their message? How do you compare to them?
This kind of study often leads to two conclusions: 1.) my current marketing efforts are not sufficient to drive explosive growth, and 2.) my investment in marketing is not adequate to grow our market share. Which leads to the next question.
How will I pay for growth?
Everyone is clear on the fact that starting a business costs money, but not everyone realizes that growth also costs money.
There are really only two sources of capital for company growth: cash flow from inside the company, or investment from outside the company. This is what is we call your capital structure. They are the last two sections of your Balance Sheet: long term liabilities and owner’s equity. The money to grow your company is either in the business from free cash flow and owner investment (equity) or else you’ve borrowed from family, friends or the bank (long term liabilities).
Once you identify how much you will need to invest in your marketing plan to grow your business, it’s time to either pour more of the profits back into the business, bring money from home, or borrow. Bringing on a partner is another option that can fuel growth. The right marketing investment should produce a return. This is not a slam dunk though. Getting the marketing investment right requires a lot of time, effort, and help. Reach out to people who are growing and find out what they're doing. Remember the research you did on your growing competitors.
Where does my talent pipeline come from?
When you get the right marketing strategy and growth happens you will have another issue -- where will my talent pipeline come from to support the increased sales? If you’ve set up your business model correctly, you will have your target % of revenue to spend on salaries. This is your guide as to how many people to hire as sales increase. Where to put the new hires is more of an operational question which goes back to your org chart. But assuming you know how many and where to put them, you have to ask yourself -- where will these new people come from?
Many companies are now beginning to see that their marketing efforts need to have two audiences: new customers and new employees. You need to always be selling your company as not only the right place to do business, but also the right place to work. Often you will find that you need a certain type of employee, with a certain culture and skill set. Most employers find their pipelines are institutions: a particular college/university, or even a particular corporation. Many corporations have high turnover. As they “churn and burn” their former employees are often looking for a change and the small business environment can be a match. Some people find their pipeline in their church, or a particular geography in their state. Family and closely held small businesses find their talent pipeline in their own personal networks. The word of mouth that comes from using the same source for talent is very helpful. Be strategic about the talent pipeline and get ahead of the curve by having a pipeline of potential hires lined up before you need them. Always be recruiting.
Do I love this thing?
The final, and most important question to ask before you set out to grow your business is simply this: do you love being an entrepreneur? Do you love the work you do? Do you love your clients? Do you love your employees? If the answer is "no" to any of these questions, it doesn’t mean that you have to go back to being an employee -- but it does mean that you need to understand why the disconnect and how to solve it.
To really grow your business is going to require a time commitment that will push out a lot of other things you hold dear. If you love what you’re doing -- and see it is a worthwhile goal completely in line with your values -- then even the challenges will be a joy and you will be at peace with the trade-offs that will inevitably come.
Learn more about growing your business with our business growth consulting services.
