Many owner operated businesses grow quickly in their early days but more often than not they reach a plateau. Sales and profit growth slows, if there is any at all.
Many business owners are happy with this particularly if the business is generating enough profit to be comfortable.
The problem is that while your business is standing still, others around you are growing theirs.
So ultimately, you start to lose out to the competition. You lose market share or your unique identity or employees, etc.
And then you have to work twice as hard to keep up.
There are a number of reasons for the growth of a business to stall. The more obvious reasons, such as not being able to find enough new customers or price-sensitivity in the market place are often symptoms of other constraints in the business. These are not faults in the business, rather constraints that are more or less inevitable given the systems and structures needed to operate a business of a given size. In owner operated small to medium sized businesses, the constraint can sometimes be the owner themselves, as described here:
- A small business revolves around the owner. All decisions have to be made by them or run past them causing a bottleneck in the running of the company. The business becomes more and more dependent upon the owner because the employees stop taking decisions. Ever heard a business owner say: “I wish I could find staff that would use their initiative”? It’s often a symptom of the owner making all the decisions. As a result, their employees don’t feel that they are supported in making their own decisions or in taking a risk or two that would benefit the company. As the business growns it is more and more important that issues are dealt with by individuals, teams and department heads.
- This situation is often compounded by the fact that employees may have a strong loyalty to the owner of an owner operated business. This is fantastic, but as a business grows it needs to have more than one leader. If employees remain loyal to the owner instead of switching that allegiance to the company as a whole and the long-term future of the company, then business growth will inevitably become stunted as conflicts arise.
- At some point in the development of a business, the owner must spend most of their time on the strategic aspects of growing the business, leaving the day-to-day running of the business to a capable manager. Failure to spend sufficient time setting the strategic direction of the business and helping the team produce a realistic action plan to get there is a major cause of businesses failing to grow.
- While the owners role should evolve to a more strategic one, it is limiting for new ideas to only come from the owner. New ideas should be encouraged from all employees. In fact, why not from all stakeholders including customers, suppliers, alliance partners?
- The culture of a start up business is quite naturally a reflection of the values and beliefs of the owner. This is generally what drives the successful development of the business during the start up phase. It is therefore quite difficult to give this up. But as the business grows the culture has to develop beyond that of the owner – still strongly influenced by them, but allowing the influences of employees, customers and their shared experiences to be reflected.
- Small businesses often have their biggest wins when they go the extra mile to get a job done: doing something outside the normal procedures, thinking out of the box, taking a chance in order to deliver great service to a customer. If a business is to grow, however, these situations should become less frequent. You can’t continue to run a business by the seat of your pants. Celebration of a job well done needs to focus on getting systems in place to avoid seat-of-the-pants activity. It might not be as exciting, but it will allow the business to grow faster.
- As a business grows the stakes get bigger and it gets harder to make decisions that may jeopardise what the business owner has already achieved. Employing more people in order to increase sales but when the current sales won’t quite cover the employment costs is a major impediment to growth. The fear of losing hard earned sales and profits will equally stop a business from making bold strategic decisions.
As businesses grow it is natural to go through multiple plateaus – growing until they reach a size that is supported by their current structures and systems. Each time this point is reached the structures and systems must evolve to support a bigger organisation, otherwise the business will falter and ultimately fade away.
This is a natural process. A small business employing three people can’t be run in the same way as a multi-billion pound global conglomerate. Even if you envisage your business becoming one, you have to start with business systems that support the business today and the near future, not those that support a multi-billion pound turnover…
So take a look at your business systems and the way you operate. Are they holding you back? How do you need to change them to support a new phase of growth?