In the previous article, ‘Business black holes’, we outlined the predictable black holes that any business can fall into if they don’t plan ahead accurately enough. Here we go further and look at the four cycles between black holes which are key to business growth and where to focus if you want your company to jump past the black hole.
Between each black hole the same four cycles occur; these are points where investment is needed. Each cycle requires an important, but subtle, infrastructure change. To demonstrate how these cycles operate, we’ll use the example of growing a business from 1.5m to 12m.
The first cycle after each black hole (in this case the black hole at 750k) is always a sales issue.
All the big deals are probably still coming through the founder, even though a junior sales person may be employed to help. With this limit on capacity the business can’t grow any bigger.
Now is the time to take on a salesperson who’s as good as you. This is, for many founders, hard to believe; who could be as passionate, energised and committed to growth as them?
Well, let’s say you can find that person, how do you incentivise them? What happens if they start earning more than you? You’ve spent years building the business and now someone is getting more out of it than you!
The second cycle after the black hole is always a channel issue. For example, how do we get our product to market and how do we service clients?
The client base is still probably attached to the owner, which comes back to bite them at this point. These clients are the ones you handed your contact details to saying ‘If ever you have problem just call me.’ Now your client service model is hindering your business growth.
The third cycle is always a product line issue, whether it’s design, architecture or extension.
This is where margin becomes an issue. Typically, when businesses are smaller they can undercut the much larger competition to win business. Once they’ve grown and taken on more overheads they lose this advantage.
Size and infrastructure will eventually squeeze your margins because your business is now a middle market, not a small market, player. And middle market players have fewer clients to chase.
At this stage you’re not a corporate so you won’t win deals because of size and you’re not small enough to win deals on price. Now is the time to ask, ‘How do I develop product lines that’ll give me the margins?’
The fourth cycle is always brand because at this point it’s lagging behind the size of the business.
The brand is probably still that of a 750k business which does not correlate with a business turning over 12m. Reinvesting in brand at this stage will create a company persona that reflects the middle market business that it actually is.
These four cycles always occur after a black hole in the same order; sales, channel, product and brand. In the example given here i.e. growing from 1.5m to 12m, the next black hole occurs at a predictable 17m and the four cycles will all begin again.
Power through the four cycles
Shirlaws provide a holistic approach to business. As well as being able to recognise where businesses will be challenged, we provide the IP, methodologies and frameworks to overcome those challenges.
Don’t let yourself be overwhelmed. Take some time out to join us at a Discovery Session, register for one of our Masterclass or training events or get in touch with a Shirlaws expert to discuss how our online learning resources and experienced community of like-minded professionals can guide your business through to accelerated growth.