As a Regional Vice President for Cogent Analytics, I, have the unique opportunity of meeting with three to four small business owners one-on-one almost every day of the year. I have been in the industry for over 18 years. So, if you were to do the math, I have had the chance to personally meet with over 18,000 small business owners throughout the United States. Enough to populate a small village – Entrepreneursville.
Over that time, I have witnessed first-hand common challenges that almost every entrepreneur encounters. This article will be the first in a series that will discuss key issues most every small business owner faces soon after opening their doors.
Entrepreneurs are a unique breed. No two are exactly alike, yet they each have a common trait – a burning desire to own their own business and call their own shots. Many of them start with a dream and a technical skill, but little knowledge of how to go about growing a business. One of the phenomena I encounter frequently is small business owners stalled out around $1.5 – 3 million in revenue. Many stagnate there or regress, while others grow beyond. Why is that?
When you distill business down to super-simple, there are essentially three hats a budding entrepreneur must wear: 1.) Getting the Work. 2.) Doing the Work. 3.) Tracking the Work. Somewhere around $1.5 – 3 million in revenue (and usually between 10 – 15 employees), an owner encounters the fact that there are not enough hours in a day, or days in a week for him to wear all three hats effectively. At that point, he must get others to wear the hats for him, or remain stuck at that size. A small business owner must move beyond the “mom and pop” model that got him to this initial plateau and adopt a true business model with management, infrastructure, systems and controls if he hopes to grow beyond it.
Let us take a closer look at the first of these three hats – “Getting the Work.”
To propel any small business beyond this initial plateau, an owner must identify someone within the organization to manage the sales effort full-time. Someone whose primary responsibility is to continually drive sales with existing clients, or pursue business with new prospects.
There are many ways to go about it. For example, Cogent Analytics worked with a small landscape contractor in Texas a few years ago. They had been stuck at $3 million in revenue for several years. They had tried many different strategies to grow the company – fancy brochures, radio advertising, trade shows, etc. Try as they might, nothing seemed to get them past that point. While working with the client, our consultant quickly recognized one of the owners did all the bidding and got bogged down dealing with minutia in the office. There was only so much work he could bid during any given day, and he had very little time left over to call on clients. Our solution to grow the business was not another brochure or billboard, rather we promoted an experienced employee to the position of Estimator. We trained him to bid work full time. That freed up the owner’s time to wear his business development hat again. It allowed him to pursue new business with existing clients, plus find new clients. He was then able to diversify into other lucrative markets including landscape maintenance, as well as time & materials work. In one year’s time, the company grew from $3 million to $5 million in revenue. Along with the incremental sales of $2 million the client could achieve a bottom line improvement of $250,000.
At Cogent, we find that it is common for small business owners to be hesitant to let others wear their hats – to give up control. However, in this example, by putting in place a more clearly defined sales system, carefully outlining the new estimator’s role, training them how to bid correctly and installing proper management tools, Cogent could help our client monitor the bidding process without having to be the guy to put the pen to paper. That freed up his time to get back in the field full-time and do what he was good at – selling landscaping services.
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: