Doing the Work
Just by sheer numbers, most businesses in the U.S. generate between $1 – $5 million in annual revenue. Many companies stall out at this level, while some manage to grow beyond. Why is that?
Too Many Hats
Many entrepreneurs start their business because they enjoy the technical aspects of their job – the hands-on work. Plumbers like plumbing, machinists like machining, etc. Those technicians with entrepreneurial tendencies often grow tired of working for someone else and decide to strike out on their own. We usually find that somewhere around $1.5 to $3.0 million in annual revenue these technicians bump into the fact that there aren’t enough hours in the day, or days in the week for them to get the work, to do the work and to keep track of it all. The owner is… wearing too many hats!
With the first article in this series, we discussed the “Getting the Work” hat. The owner must delegate this hat for in order to grow sales. Now, let’s look at the second hat – “Doing the Work.” This second article addresses the operational aspect of business.
Delegating this hat can be especially challenging given the fact that many small business owners are highly skilled technicians. They love doing the work. In many instances, they feel that no one in the company can do the job as well as they do (and in some cases, they are right). Unfortunately, continued growth is often stifled at this point because the owner becomes a bottleneck. Frequently this can also affect a company’s financial performance because inefficiencies begin to surface.
To complicate things further, the operations side is the most physically demanding part of most businesses. Many owners try to get more done by putting in extra hours. They come in early and stay late with the hopes of keeping up. It is not uncommon for owners at this stage to be working 70 – 80 hours per week. That may work for a short period of time, but it’s not sustainable long-term. Frequently we see productivity actually go down when fatigue begins to set in.
Grow Beyond the Plateau
To grow beyond this plateau and realize a viable work/life balance, an entrepreneur typically must delegate the operations hat to someone in the company other than himself – someone that will be solely responsible for managing operations. At Cogent we recognize that it’s more than just handing the hat to the next closest person. We know the key to success is structure and control. Typically we find it is necessary to install operational systems, procedural systems, and reporting systems.
• An example of systems include developing formal job descriptions so that company-wide everyone is aware of responsibilities.
• Another example is the need for employee training to emphasize processes and quality requirements.
These systems are just a few of the many that are critical for success! Letting go is tough for many technician/owners. But the payoff can be significant.
Real life success
For example, a small cabinet shop Cogent Analytics worked with several years ago had maxed out $4.5 million in revenue and was actually losing money because of bottlenecks and inefficiencies.
• The owner, a cabinet maker, tried to be hands-on in all aspects of the business and attempted to wear all the hats. While that management style worked when he was just starting out, it was becoming increasingly less effective as he added employees and grew revenue. Ultimately, growth halted, productivity dropped, quality slipped and employee morale suffered.
• Early in our consulting project, Cogent recognized the fact that the owner needed to delegate his operations hat. We helped identify an employee with the aptitude and interest in becoming the operations manager. Beyond that, we helped train the employee on how to be an effective manager and set him up with the tools he needed to perform his new responsibilities. We worked with the owner to develop job descriptions and install employee incentives, measurement tools, management dashboards, etc.
At the end of the project, the owner stated, “My quality of life has improved. Probably the biggest thing is it’s helped my time – really taken the pressure off me.” The best part is the company returned to profitability and the owner actually found himself working less. Plus, the company began to grow again.
Each company is different and this is just one example. However, to effectively grow a company beyond the initial plateau, we typically find owners must start to build a true organizational structure and delegate the responsibility of who wears the hats. In the next article in this series, I will discuss another hat a small business owner must hand off to grow their company to the next level.
At Cogent Analytics, we never stop looking for ways to improve your business and neither should you. So, check out some of our other posts for helpful business information: