Why is my business the size it is? And how do I grow it for the right reasons?

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Have you ever said to yourself:

All of the above are common catchcries from the majority of builders — particularly from Master Builder members who want to grow their businesses and who, for one reason or another, reach a certain size and stagnate at that level, unsure of how or whether they should progress.

So the question is, how do you break the shackles and push on with profitable and manageable growth?

First, there are some basics to understand:

There are typically five stages of small-to-medium business growth, and it’s worth understanding these and identifying the stage you’re at.

It’s also important to understand that the stage you are at is not set by turnover but, more importantly, by your number of employees and the management structure you operate within. The typical steps are:

Existence Stage — Hand to Mouth

The owner does everything, with the number one concern being cashflow and the ability to meet the bills each month. The business focus is based solidly on getting customers and delivery of product. There is little to no strategic planning, and the operation is one bad job from going out of business.

It’s likely the majority of small builders are in this category, and you are more or less wed to the business — if you’re not there, you’re not earning.

Survival Stage — Bumbling Along

This is where the owner still does everything but is starting to develop systems and carrying out basic business disciplines such as cashflow projections — but there is still no strategic or longer-term planning.

Companies can be profitable but usually by accident, as there tends to be little defined or repeatable process.

Success Stage – Owner Rules Supreme

This is where you can make it or break it. There are two paths that can be taken — one planning for growth, the other disengaging and staying with the status quo. The success-disengaging path is where the company may have some functional front line managers but the owner still rules supreme.

There are basic financial, marketing and production systems in place. However, growth is seen as painful or frightening and, accordingly, the company performance plateaus at a point the owner feels comfortably in control.

All this said, the business can continue in this phase for a long time and be relatively successful.

The success growth path, conversely, is where the owner sees growth as the focus and commits resources to achieve this. There is extensive planning and forecasting for growth, and management staff are employed with an eye to the future rather than to meet the immediate current position of the company.

Take Off Stage — Letting go of the reins

The company’s growth is significant, with primary concerns being delegation, cashflow and planning to cope with the exponential growth. This is a pivotal point in the company’s life, as the owner will be out of their comfort zone with many decisions having to be made by front line staff.

These decisions will, of course, never be quite the same as if the owner was making them.

However, this is a cost of growth and must be factored in. If the owner can’t accept or get beyond this phase they may retreat back to their comfort zone and, consequently, stifle the growth of the operation.

These tend to be businesses that have some brand value and can be sold as going concerns, as they are not solely reliant on the individual who owns the company for its day-to-day operation.

It also allows the owner a degree of freedom to work on the business as opposed to being all consumed within it.

Maturity Stage — The Corporate Model

At this stage profit is based upon process and not necessarily identities or personalities. The business operation will be detailed and structured with a clear strategic plan and direction.

Management of the business will be by delegation with full accountability. Should the company not be successful in delegating, grow too fast or not be able to keep sufficient volumes up to support the infrastructure, then the possibility remains to revert to an earlier growth stage.

How to get started

So after reading this and identifying the stage your business is at, how do you grow your business so that it’s not a lifestyle business or defacto employment position?

Analyse the growth that occurred at the beginning of your company’s life and look at your company’s results for the past five financial years to see if a pattern emerges.

You’ll probably see that you reached a plateau at a certain size that will be reflected in the stages outlined above. If you wish to grow beyond this, then you need to heed the following:

It’s important to have an idea of where you’d like to be in five years, otherwise you don’t know where you are heading. You can’t drive the truck without a steering wheel and, certainly, you can’t build a successful house without a plan — and it’s exactly the same when building your business.

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