Many people write about how to grow a business as though it was a single process, irrespective of the size and nature of the business. Here, we choose to break the process into a series of stages of business growth that reflect the size of the business at that time. Therefore, this size will govern the sort of resources and information that a business needs at the particular stage.
The stages chosen are:
- Micro business (1-4 staff)
- Small business (5-19 staff)
- Medium to Large Businesses (20 or more staff)
- Investor Stage
- Exit Stage
- Wrap Up
Owners/managers have different pressures on them at each of these growth stages in addition to the normal growth pressures. Either click on the one that resonates the most or alternatively, read the whole article.
The term Start-up refers to the creation of a new business.
They face the ‘perfect storm’ of having to learn how to make their business viable and manage its day-to-day operation and do all this before their money runs out!
Some start-ups aspire to be giants one day and are often funded by Venture Capital, or other substantial sources of financial support. Some will start with just the founder/owner. Others will need to be micro or small businesses on Day One to operate (e.g. a new restaurant).
A large percentage of Start Ups (some say up to 50%) do not last the first year. Because of this tremendous, and unfortunate, attrition there is a useful body of knowledge that has grown up to support people who are starting their business. As this information is of high quality, we have chosen not to duplicate it. Therefore, we will not be indicating how to plan and run a Start Up business. We refer you to the resources listed at below.
For other resources on Start Up management Google:
- “Lean Start Ups” which originated with Eric Reis.
- References by small business management guru Michael Gerber.
- A host of blogs found in search.
Many businesses are run by a single founder/owner. We have elected to use the term “Solopreneur” to classify this person.
Some will be comfortable to stay that way. Examples include many professional services (e.g. financial advisors), Personal Services (e.g. massage), home based (e.g. ecommerce store) and the arts.
Others may aspire to grow into a Micro business; and further. For these, we suggest you also read our resources on Micro business so you can see what you need to get ready for and shape your solo business accordingly for the next expansion stage.
The Solopreneur does everything in their business. They are very busy people as a consequence, and will have very little time to focus on anything other than the “doing” part of their business which brings them an Income.
Therefore, the Solopreneur will be looking for a simple marketing system. This must be sufficient to successfully bring them enough sales for them to manage themselves.
It is often difficult for the solo owner/operator to ensure that they spend enough time both;
- marketing, to keep the incoming work at a level that generates them sufficient income to survive, and
- actually getting that work done.
So Solopreneurs must become very skilled at balancing priorities to get the greatest impact. This will move them through the stages of business growth.
For this reason, we suggest that you read some of the following resources to learn how best to prioritise your efforts and how to grow your business;
- Theory of Constraints and the 80/20 Rule
- Time Management
- Useful Cash Flow Management techniques, for example: Profitable Business Autopilot
Except for the lack of staff, Solopreneurs face much the same issues as Micro business so we encourage you to tap into our Micro business resources below.
How to Grow a Micro Businesses (1 - 4 staff)
There are various definitions of what constitutes a Micro Business throughout different countries. This is often related to tax office definitions. We use the term to refer to businesses with 1-4 staff. Additionally, the assumption is that the owner/operator directly manages the staff employed by the business.
Firstly, the owner has their finger on the pulse and handles everything. Secondly, the reason for them being, typically less than 5 staff, is that experience has shown that a single supervisor can manage 8-12 staff, in normal circumstances. At this stage of business growth, the owner is even more stressed. Because, not only do they need to manage the staff, but they need to manage every aspect of the business. This includes Sales, Marketing, Administration and HR.
Typically, Micro Business owners find themselves starting to hire, lead and motivate staff for what maybe the first time in their life. Consequently, they have a very steep learning curve around matters relating to people. To help with this, the resources for how to grow a business focus on assisting them with managing people.
Along with having more staff comes increased responsibility to have the funds to pay the wages of those staff, when they fall due. It is one thing for an owner to forgo an Income themselves; it is entirely different to try and convince employees that they should forgo their Income. Consequently, this stage of business growth also introduces the need for the owner to have a much better grasp of Cash Flow. Also, their current financial position and how to increase Revenue sufficiently to pay for the increased payroll.
Having decided that more staff are necessary, the owner has to juggle what positions are to be filled. Also, what skill sets are needed in the people they select to fill those positions. There are numerous decisions and financial calculations to be done around the staffing issue.
Go to the Micro Business Resource catalogue for relevant resources on how to grow a Micro business.
How to Grow a Small (5 - 19 staff) Business
There is also no single definition for what constitutes a “small” business. We have elected to identify this stage of the business life cycle to be the point where the owner employs middle management who then manage people under them. Experience has shown that a single supervisor can manage 8-12 staff in normal circumstances. So, when one is employed, the owner;
- indirectly manages the middle manager’s 8-12 staff,
- manages the middle manager and any other staff and
- many of the operations, administration and sales aspects of the business
This workload tends to limit their ability to manage the “small” business to one with 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 so that both the middle managers and the frontline staff clearly understand what they should be doing.
It also means that not only does the downstream information flow from owner to frontline need to be improved but 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 takes 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 because the speed at which things can go bad increases with the number of staff.
As well as middle managers to supervise staff in this sized business, the owner may find themselves needing to hire specialist managers in e.g. 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 who are doing these tasks with a higher level of skill and knowledge than the owner themselves have. 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.
By the time the business is this size, there are probably fairly 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 would 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.
As you grow your business, it becomes more necessary to have an organised and systematic approach to the planning and execution of strategy in the business. While small, the owner can tell everybody what to do. Once the business is larger, there has to be a more systematic approach. This is 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.
Here, we take a different approach as part of the Sustainable Business Success Mission. You work out, from your current position, how to grow a business sustainably. Additionally, we demonstrate working backwards from a desired goal, in say one quarter or one year, and illustrate the changes that will need to happen in staff count and various skills areas.
Increase your desired Profit by 10%.
We illustrate 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:
Firstly, to see whether they can grow at that rate.
Secondly, 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 the resources we have grouped into the Small Business Resource Catalogue
Medium (20 - 199 Staff) and Large Businesses (> 199 Staff)
We define Medium to Large businesses as those that have reached a stage to employ specialist senior managers to oversee specialist functions in the business. Typically these are a Sales, Finance and Administration Executives, and often a Chief Operating Officer to oversee the production routines of the business.
These people have serious roles in the overall success of the business. They will have specific information needs and will construct their own tactical plans to implement the company strategy.
We believe that many of the skills that the owner has already developed, from the Solopreneur to the Small business stage, will continue to play an important role in the success of the business going forward. However, because the business will begin to separate into specialist areas, they will also develop their own specialist information needs and software tools.
Because of this complexity, 12Faces has not developed a Resource Catalogue for this group. Any and all of our resources may be of assistance. Managers are also a lot more experienced and likely to have clearer insight into what are the next steps in their business’s growth. Therefore, the strongest suggestion we can make is to avoid the creation of “silos” that lock up knowledge and information on efficiencies behind the doors of the specialisation.
The Owner as Investor
At some point, the owner of a successful and substantial business may want to back off on the day to day management of the business. Alternatively, they may want to become much more selective about what aspects they spend their time in – particularly those they enjoy – and those they can delegate to a CEO.
Bringing in a CEO to run the business, while the owner/founder continues to work in only some aspects of the business, is quite common in successful businesses. It happens even at the large end of town. Google went from Founders to hired CEO and then back to Founders/CEO. This was in order to get the specific skill set necessary for Google as it grew in size.
It is quite common, and quite reasonable, to expect that an owner/founder eventually reaches the point where their ability and business experience is not sufficient to run a business of the size that theirs has become. It makes perfectly good sense to hire someone with more experience in the necessary skills.
What the Founder does is up to them. Some will move out of active management into a Chairperson type role.
Authors like Gino Wickman (in “Rocket Fuel” and “Traction”) write about “Visionary/Integrator“. This divides the senior manager role into “Integrator“, who makes things happen, and the Founder into “Visionary“; doing the things that got them the most excited when they started the business. This can be a happy marriage for both parties.
At some point, the owner/founder will want to exit their business; or their heirs and successors will.
Growing, and then structuring a business for successful exit is a skill in its own right. It will, typically, take 2 to 3 years to position the business in order to get the best exit price.
This is a specialised area, we encourage you to research exit strategies with a Google search. In addition, look at the books and podcasts by John Warrillow.
Go to the resources on business exit here.
Wrap Up: How to Grow a Business
This is a general introduction to the classification of the stages of business growth. The most relevant and specific resources are grouped into Resource Catalogues suited to a particular evolutionary stage.