Would you like your small business to Take-off?
In 2018, 9% of small businesses made more than one million (SBA.gov).
If you are one of these 1 out of 10 small businesses and have revenues less than ten million, then you have reached a unique position that I term the Growth stage.
If you have been in business five or more years, then you ought to feel a sense of accomplishment as half the small companies do not make it that far.
In the early phase of the Growth stage, you most likely have fewer than twenty employees. It gets down to math on how many people that you can afford. With the average annual salary in the US of about $50,000, then twenty people would be a cost of $1 million not considering burden. You are not likely to be paying the average salary, but you already understand the significant cost of employees.
You quickly find though that you need more people to do more things to accelerate your growth.
The larger the size of your organization the more challenges you face. Everything needs to rise to the next level of sophistication as the complexity increases, and in particular your leadership if you really want to grow.
It is very possible that you are comfortable letting your small business naturally evolve particularly if this is a lifestyle business for you.
With growth comes change and you may prefer to have things stay pretty much the same.
I have seen many small companies in the lower end of the Growth stage with this perspective. Sometimes they even say they want to grow significantly but that is not really a driver for them.
There are others that you can easily spot that have a real passion to build their small business into something much more significant.
This blog is geared for small business owners/CEOs that fall into this latter mindset.
Growth Stage Elements
If you want to accelerate your growth, you need to follow good planning processes to first assess where you are at today.
My 4 Stage Growth Model outlines various elements that should give you a good picture of your current position.
You will probably find that you are ahead on some, behind on others, and several others will describe your condition.
Take a look at the elements below and go through this simple assessment of marking them red if you are behind, yellow if it is a good description, and green if you are more progressive.
If you are mostly red, then go back to my blog of February 3rd on Breaking out of the Development Stage for Small Businesses.
If you are a mix of colors or primarily yellow, then this blog should give you some insight into moving into the next phase termed the Take-Off stage.
If you are all green, then a future blog on the Take-Off stage advice will be coming.
- Revenues – Owner(s) are getting excited about the organization’s success. Traction with new customers or expanding activities with current customers is generating a growing revenue base. Typical revenues run above one million and below ten million.
- Sustainability – Organization is approaching a going concern where owner is less critical to survival and growth. Revenues are providing cash to invest in business and improve operability and compete more effectively for new business. Loss of key customers can prove devastating.
- Business Focus/Planning – There is a fair amount of activity on generating new ideas for products/services/customers and more sophisticated approaches to attracting customers through marketing. Still planning is heavily oriented towards current year. Planning still may be rather ad hoc lacking strategic focus synchronized with tactical game plans. Planning framework including mission, vision, objectives, value propositions, target markets, strategic themes, competitor analysis, goal cascading, accountability, and so forth are often lacking. Effort does not seem to match current rewards for many with the focus still on the here and now.
- Organization – Other key players have evolved and perform critical roles. Often, these players interact more, and teamwork is emerging. Organization structure is still somewhat loose with not overly formal role definition. The size of the organization varies based on the nature of the product or service provided. Often staff exceeds ten and but generally does not exceed fifty and almost always less than one hundred. Contractors are used to avoid adding staff in many cases. People can perform multiples functions.
- Processes – Processes have emerged and there is a level of documentation and sometimes training. Processes are often changing and adapting as more effective functioning progresses and customer feedback requires modifications to be made.
- Target Market – Local market continues to dominate customer base in most cases. Customer loyalty has emerged and identified as key customers with a retention focus. Expenditures for sales and marketing have expanded significantly. Often there are some dedicated people to sales beyond owner and budgets for improved websites, marketing collateral, and marketing campaigns.
- Value Proposition – Value proposition is adapting to customer needs and customer feedback.
- Leadership – Owner and key players are beginning to think about how to motivate and retain employees. Decision making processes are receiving some scrutiny. Delegation has emerged where owner feels comfortable with key players carrying out more defined roles. Level of participation in decision making varies but generally still well controlled by owner.
What is your Vision?
I find that many small businesses have difficulty in describing a picture of what they want to look like in their next stage of progression.
That is the beauty of the 4 Stage Growth Model in that it provides an overview picture.
There are many things you have to do to get from your Growth stage to the Take-off stage. Knowing what you want to look like invigorates finding the pathways to achieve this next level of progression.
Below is the description of the Take-off stage using the same criteria above in the Growth stage.
- Revenues: Customers pulling business into extended and new offerings
- Sustainability: Going concern sellable if owner disengaged
- Business Focus/Planning: Extensive multi-year planning
- Organization: Matured with more structured roles and responsibilities exhibiting extensive teamwork
- Processes: Tuned as a competitive advantage
- Target Market: Tied to broader strategy, potentially new geographies/offerings.
- Value Proposition: Rigorously adapts to beat competition or take advantage of new opportunities.
- Leadership: Seen as key, owner seeks leadership development for self and management team.
Advise in reaching the Take-off Stage
So how do you move into the Take-off Stage? Let me give you some of my mentoring advice on each of the key elements.
- Revenues – If you are really taking off, you ought to see a doubling or more of your revenues in a two-to-three-year time frame. That means you will have to make substantial progress on your marketing plan and sales effort. Ensure your target market is clear as are your target customers. Then focus on brand advertising with communication channels that fit your customers’ appetite. It will take more than a website. Depending on your product or service, you should consider strategic selling with profiles of your customers and tactical game plans to grow revenues. For a broader customer base, sales funneling, and a fully functioning CRM system will be key.
- Sustainability – Cash flow has become sufficient to operate in your current mode without sufficient concern. However, you will likely need to take some more risk on investing to really grow the business. This is a good time to strengthen your bank credit lines/relationships and depending on your situation consider investors for major investments. It may be worthwhile to investigate acquiring companies that enhance your offering or customer breadth. While acquisitions/mergers can be challenging, they can provide leverage through economies of scale.
- Business Focus/Planning – This is where you will really have to ramp up your efforts. Redefine your vision, mission, and long-term objectives with a broader mindset. If you do not have clear company values, do so now as they will have a real impact on the company culture as you grow. I also strongly encourage you to develop mid-term plans of critical success factors that move you on the path of reaching your vision and longer-term objectives. Look for help. If you are here in Houston, I would really recommend you join a Silver Fox Advisor CEO Roundtable. This is a great vehicle for seeing how other companies are trying to grow their businesses. Many of the members of these CEO Roundtables are in the Growth Stage. As your company breaks through five million in revenue and heads towards ten million, you may also want to consider an Advisory Board. The Silver Fox Advisors can help you on that, particularly if you do a deep dive on your business challenges through their Fox Den business review. Like the CEO Roundtables, the Fox Den is pro bono.
- Organization – Your company probably lacks definition on who does what, who is accountable, and how people work together to achieve your company’s objectives. You should really take a read of TRACTION: Get a Grip on Your Business by Gino Wickman. He does a good job in describing an Entrepreneurial Operating System (EOS) that brings the essentials of running your small company to a higher level of sophistication. It uses the concepts I taught in my Corporate Strategy course for big businesses and translates them into a practical approach for small businesses. It is highly beneficial for companies in the Growth Stage in particular. My clients and CEO Roundtable members find it extremely beneficial.
- Processes – If you are in the Growth Stage, then you have conquered to some degree putting processes in place that enable the business to operate efficient and effectively. Do not underestimate the competitive power of having even more highly effective processes that describe the flow of how work gets done to produce your product or service better than your competition. Processes need to be tied to your customer value proposition. It is often an advantage to start with a clean whiteboard and rethink how a process can fulfill your value proposition better than your competitor. If you are trying to be the low-cost producer, then think out of the box on how to achieve that. You can also look at your current processes and determine ways to simplify or eliminate steps.
- Target Market – You can’t be everything to everyone. In the early stages of your business, if a customer has a need, then you generally try to fulfill it as revenue is king. Somewhat ironically, as you grow, the specificity of your customer becomes more targeted. With small companies, this is also true of the geographic market. In moving to Take-off, you need to rethink your target market and geography. In many cases, expanding your target market translates into widening your geographic reach. There are many repercussions in making this kind of move, particularly the need for investment dollars and organizational building/restructuring.
- Value Proposition – In the Growth Stage, you have articulated your value proposition most likely on your website and marketing collateral. The value proposition is framed to attract your target customer. To move to the Take-off Stage, you need to think more strategically in terms of differentiating your company from the competition. You will need to do much more competitive analysis on their strengths and weaknesses in providing their described value proposition. Then, think strategically. Treacy and Wiersema in their book The Discipline of Market Leaders outlined three broad strategic approaches to capturing customers. While written in 1997, the thrust of these strategic approaches is still very applicable to most small businesses. The Operational Excellence strategy is built on delivering the best total cost that is driven by operational competence. The Product Leadership strategy is excelling in product differentiation to deliver the best product. Finally, the Customer Intimacy strategy provides the best total solution to the customer driven by customer responsiveness and focus. My advice to clients is lead with one of these three strategies but be strong enough in the other two to ensure you win your targeted customer.
- Leadership – You have recognized the importance of leadership as your company has grown in the number of employees and organizational structure. The companies I know in the Take-off stage, their CEOs have a voracious appetite to improve their leadership capability and that of their management team. I have written a whole series of blogs on the Silver Fox Advisors website to help you improve your leadership capability. One in particular entitled Your Leadership Personal Profile has been very insightful for clients. The methodology can also be used by the CEO to coach other members of their leadership team. It provides significant insight for both the CEO and the coached.
Let me conclude by adding to the suggestion for you to reach out for help.
Think of a personal advisor to mentor and coach you in transitioning your business.
The Silver Fox Advisors have essentially two types of Advisors.
Those who have had significant careers in larger organizations and understand the complexities and need for best practices for a company to be successful. They have the insight to bring this perspective to small businesses.
The second type are those who have run small businesses and come with a deep understanding of their inner workings. They come with significant knowledge and insight to share.
Take a look at the Silver Fox Advisor website under Engage an Advisor and see if one of our Advisors fits your needs to help you grow into the Take-off Stage.
Also, take a look at the CEO Education Series videos on the SilverFox.org website that gives advice on many of these elements.
Contributed by Lane Sloan, former Shell CFO and Silver Fox Advisor.