In the final of this series of articles of how to navigate business black holes in order to grow your business. Now we’re looking at how to avoid being dragged backwards just when you thought you thought you were actually jumping over the black holes!
Let’s use this example:
One three-year-old business had grown quickly in the previous 12 months from 1m to 4m, but was now having problems. The business had jumped over the 750k black hole and continued to jump right past 1.5m and 3m to 4m. They were demonstrating a lot of growth.
To achieve this the business had focused entirely on brand and product which had propelled the business through these milestones quickly, however they didn’t build the infrastructure at the 750k level that would support this growth and now they were feeling the impact of this.
Keep moving forward by upgrading the business
You can jump up, but you can also be dragged back if you miss a phase. Unless they are moving forward at the same pace as your business, still using the same small business accountant, legal advice and systems and processes as you did when the business started will hold your business back.
Businesses require a full upgrade before each black hole. By waiting until the black hole, the business will swim in circles trying to manage the business and upgrade it at the same time. For example, before the 17m black hole the upgrade should come at 12m. Don’t wait until it’s too late.
From an investment/cost perspective people should allow about 5% per cycle. So for example at 6m you should really be thinking of putting 5% aside to get from 6m to 12m by investing in the product. But this 5% spend isn’t necessarily per year.
One further consideration is your natural risk profile. If you’re not a risk taker then you’ll say, ‘No way!’ Of course, the decision has to suit you and the parameter within your control is time.
Say you want to get to 12m and know it will cost 5%. You could spend that 5% over five years at 1% a year and not the whole 5% this year. If you want to push time out you can. After all, it’s your business, your time and your life.
Maintain your margins
A business with a margin of 20% at 12m now running at a 10% margin at 17m (black hole) is a classic black hole symptom – where the managers recognise they made more when they were smaller.
Businesses should consider their margin at the top of the cycle and look toward to the next cycle because that’s the margin they’ll make again. For example, if you’re making 20% margin at 12m then you’ll make 20% margin at 24m (the next cycle). You’ll only dip down to make 10% margin through the 17m black hole.
The good news is that you can bounce right over that 17m black hole.
If we run the numbers, a 20% margin at 24m is 4.8m profit, but you’re only making 1.7m profit today. So is it worth 3.1m in profit for you to get out of the current black hole?
The question then is, how much do you want to invest in this?
For only £250 per month and an amount of time you’re happy to spend in self-guided learning, you can access Shirlaws world-class IP, methodologies and proven frameworks and harness the tools you need to grow your business. Book a space on our next Discovery Session or get in touch with one of the Shirlaws team to find out more.