For those who started a business some years ago, many are able to look back and appreciate how things have changed. Most businesses go through a life cycle with distinct phases. Take a look to see what phase you are in so that you are aware as to how you can best plan for the future.
Phase 1 – Start Up
In the early stages of starting a new business, it is relatively easy to grow it. You are a new player to the market with a new value proposition. In many cases this alone will attract customers.
Whenever you meet someone, you let them know that you have started your own business and ask if they know anyone who might need your products or services. You are excited and you hand over a bunch of business cards for them to pass on. Each time the phone rings you grab it hoping that it will be a potential customer and in between all of this, you are out networking events to proactively seek new customers. You find your business gets off the ground and starts to grow. This is great, but then you hit phase 2.
Phase 2 – You Get Busy!
You know you have hit phase 2 when you realise that you are stopping yourself from doing the things you used to do when starting out. Your heart sinks when the phone rings. Could it be a customer complaining? You are now too busy to go to networking events and you stop asking for referrals because you know you are struggling to cope with your existing work. Not surprisingly, your growth rates slow or even stop.
At this stage you start to feel frustrated and question whether you should have stayed where you were working for someone else. After all, it would be far less stressful right? You now start to realise that the financial freedom you were aiming for does not seem to be happening as planned. Sure, you might be earning reasonable money but you find yourself with less time to enjoy it. At this stage, you have three options:
- Go small again to free up more time
- Do nothing and so continue to be run off your feet feeling stressed and overworked, or
- Decide you want to continue to grow and need to employ more people to help you
Many business owners choose option 2, which is usually the worst option. To quote Albert Einstein, he once said “Insanity: doing the same thing over and over again and expecting different results”.
Phase 3 – Controlled Growth
If you choose option 3 then you want growth. Usually the minority of businesses choose this option. Failure rates for small businesses before the five-year mark are common. When you aim for growth, you need to be aware of the following key points:
- You are going to have to settle for success, not perfection. No one will ever be as passionate about your business as you will be and you may even think that very few people can do the work as well as you. You will need to live with this because you cannot physically do all the work yourself when you grow. This does not mean though that you settle for a sub-standard job.
- As your business grows, look to hire people who are better than you are. This is the best way to improve your business as a whole.
- Look for more effective ways to expand. Do you need more customers, new products or perhaps both? Do you stay in your local area or look to expand further afield?
- Enlist someone with marketing expertise that is focused on lead generation activities. You cannot consistently grow through personal relationships and you need new marketing activities to bring in more customers.
Phase 4 – The Next Phase
In most industries, the landscape in which you operate will change over time. These changes are driven by technology, legislation, offshore labour availability, environmental issues or new opportunities. How you respond to these changes will determine whether you enter phase 4 – the next phase or skip phase 4 and go straight to phase 5 – the decline.
You need to be continually aware of what is happening in your industry and be ready to be ahead of the game. You need to jump at new opportunities before your competitors do. To be able to respond, you need time to think. This is another reason why you need to hire good people and remove yourself from trying to do everything.
Phase 5 – The Decline
If you skip phase 4, your business will most likely decline. You will find that your revenue will stagnate or worse still, fall. It will be harder and harder to win new work and you will find that your prices are being squeezed out by your competitors who embrace new technology. You may also find that your team members are head hunted, or attracted to ‘leading edge’ competitors. Many businesses find themselves in this phase, not by design but by default.
Whether you are an established business or just starting out, to avoid the decline we recommend that you take action now to identify what your phase 4 might look like. Start today to do something different so that you can prolong the life of your business. We want your business to be a success and so if you are not sure of the best way to approach this then please contact us.