Here, we discuss small business growth. There is no single definition for what constitutes a small business. This stage of the business life cycle is the point where the owner begins to employ middle management. Who then manage people under them. Experience has shown that a single supervisor can manage 8-12 staff in normal circumstances. Consequently, more than this will require middle management. This is due to the fact that, in a small business, the owner is doing much more of the marketing and administration – as well as managing operating staff. For that reason, there is a limit to their ability to manage staff directly. Hence, the 5-19 staff measure that we use.
During this stage of a business’s growth, the owner moves from managing people directly to managing managers who manage people.
The very fact that the frontline staff are at arms length from the owner means that the delegation and communications systems in the business need to be substantially overhauled. Then both the middle managers and the frontline staff will clearly understand what they should be doing.
In fact, it means that the upstream information flow, from frontline to owner, also needs to be improved. Once at arms length, it is much more difficult for the owner to understand what is happening in their business in a timely fashion. Far too often they discover things that are not working when the wheels fall off that particular part of their business. Therefore, monitoring of a small business begins to take on a special importance.
The need to create and manage funds to pay wages grows in direct proportion to the number of staff. As the business gets larger, this becomes a more sensitive area for attention. This is due to the speed at which things can go bad increasing with the number of staff.
Small Business Growth: Hire Specialist Managers
As well as middle managers to supervise staff in this sized business, the owner may find themselves needing to hire specialist managers. For example, sales and marketing, administration and possibly HR. It is sound business practice to employ people who are smarter and more experienced in their skill area than the owner. Otherwise, the businesses success is entirely governed by the owner; which defeats the purpose of having specialist managers. The owner then finds themselves in the situation where they are managing personnel with a higher level of skill and knowledge. So, instead of being the “smartest” person in the business, the owner moves to managing “smarter”, specialist, people. This requires both higher levels of trust and better direction and monitoring to ensure the outcomes are favourable.
Small Business Growth: Work Flows
By the time the business is this size, there will be well-developed “work flows” that govern how work moves through the business. Very often, these work flows have grownup over time and inherited various inefficiencies and “make do’s”. Any business of this scale will benefit from ways to improve the work flow. Typically, improvements in work flow go directly to the Profit bottom line, as they are cost saving activities.
Planning and Execution
As the business grows, it becomes more necessary to have an organised and systematic approach to the planning and execution of strategy. While small, the owner can tell everybody what to do. Once the business is larger, there has to be a more systematic approach. So that everybody clearly understands what the goals of the business are, what is important now and in the future and how progress is going. We have several resources for planning both longer term and shorter term.
A subset of planning is the financial planning of the business. Typically, this is done through a budgeting process. But, many find the traditional budget, of trying to guess where you will be in 12 months’ time, to be a guessing exercise.
We take a different approach, as part of our Sustainable Business Success Mission. Work out, from your current position, how the business can grow sustainably. We also demonstrate working backwards from a desired goal. In say, one quarter or one year, then illustrate the changes that will need to happen. Some of the areas are staff count and various skills. For example, if the desired Profit was to increase by 10%, it is illustrated how much the Revenue will need to increase; allowing for increases in the number of staff and other overheads that will be necessary. This “Reverse Engineering” of a desired future position allows the owner to see whether they can grow at that rate. Additionally, what plans have to be made to increase various functional areas in the business.
An owner in the small to medium range, who is beginning to employ middle managers, will benefit from our resources we have grouped into the Small Business Resource Catalogue