Running a successful SME is tough. There are so many jobs that need doing that it’s a wonder that we actually get anything done at all! One apt definition of a business owner is:
“Somebody who would rather work 16 hours a day for themselves than 8 hours a day for somebody else.”
However, just working hard does not mean you will be successful! Sadly, I have met many hard working people who never achieve their full potential, or whose businesses even go bust, including my own father. So what do you need to do to ensure that your hard work brings you the success you desire?
The first step is to understand where you and your business are on the business growth ladder. The second step is to understand what you need to do to move to the next level.
Level 1 Up to £500k turnover, up to 10 employees
Level 2 £500k to £1.5m turnover, 10 – 30 employees
Level 3 £1.5m to £5m turnover, 30 – 60 employees
Level 4 Over £5m turnover, 60+ employees
Level 1 Businesses
As a level 1 business owner, you will struggle with the fact that you are still spending a lot of time actually working in the business. When one person is off sick or on holiday that is 10% of the workforce gone, so you are constantly dragged back into the day-to-day work. At this level, you cannot afford to take on top level managers. Therefore, all the Director level work in terms of Sales, Marketing, Finance, HR, Operations etc. will fall to you to deal with.
Here you have a choice – you can either grow your business to level 2, or recognise and accept where you are. If you decide you don’t want to grow and step up to level 2, there are still some great opportunities for you. Firstly, make sure that you treat yourself as well as you do your employees. Take your full holiday entitlement and ensure you also take time out for training and self development. Work to make the business as profitable as you can, and take as much money out of the business as possible. You will need to reinvest this money in other things (property or shares) that will in turn make you more money, because when you come to sell your business, it will not be worth a great deal, as it relies on you to function.
Level 2 Businesses
If and when you move on to level 2, you are in the danger zone. Businesses at this level are neither big enough nor small enough to get away with poor management. Experience shows that one person can manage up to 8 other people reasonably well, but after that there is a diminishing return. So as an owner with 20 employees, you will probably need at least 3 other good managers to run the business. You will spend much of your time managing the managers.
You may be stuck at level 2 because you have resisted taking on good managers because they add too much cost to the business. Or maybe you have tried and failed to find people of the calibre you need. However, if you are fortunate enough to have found great managers, it is this and this alone that will enable you to move the business to level 3. If not, you are destined to remain at level 2.
Level 3 Businesses
At level 3, life should be getting good for you as a business owner. The business will start to become seriously profitable. The managers are now taking on more responsibility and starting to bring with them their own ideas and build their own teams. They will now be able to work ON the business, not just IN it. So you now have a choice to make. You can sit back, enjoy the success and allow the managers to get on with running the business. Or you can continue to lead and direct them to achieve even bigger and better things. Business can now be a game to you, with profit being the score, and the challenge being how big you can make it, not because you need to, but because you want to.
Level 4 Businesses
As a level 4 business owner, you should now be thinking of your exit strategy. Building a business to £5 million is a completely different game to maintaining it at £5 million, and requires a different set of skills. The company will now have a considerable intrinsic value which, if realised, could provide you with financial security for the rest of your life. Because building businesses is far more fun than maintaining them, why not sell this one and start the journey again?
So what’s stopping you?
The barrier to real success for many business owners is the fact that they themselves remain at level 1 and 2, irrespective of the size of their business. I have worked with clients who realised that, even with businesses turning over £15 million and with 100+ staff, they were still only level 1 owners. Your business is never going to be a real success unless you are ready to step up and lead it forward. This may mean learning different skills and getting out of your comfort zone, but it is worth it. After all, I am sure you didn’t get into business just to be mediocre!
So if your business isn’t where you want it to be, now is the time to take Action! Why not come and see us for a complimentary business strategy session? We will help you understand where your business is now, where it could be, and what you can do to achieve the success you desire. Call us now to book your session (subject to availability) on 02380 560833.