What’s the Best Way to Build a Strong Business?

culled from:lifehack.org

Not every owner wants to build or grow a business. Many owners (by some statistics, as many as 75% of them by number out of the total) operate what might be called a “life-style” business. This kind of business acts as a vehicle for an owner and perhaps a spouse or even his or her children to work in the organization and provide sufficient income to pay a living wage. Many small retail shops, consulting practices, professional practitioners (accountants, bookkeepers, attorneys etc., home based services, tradespeople, brokers of all kinds (e.g. real estate or insurance) and even internet based businesses fall into this category and they may provide both enough satisfaction and a decent monetary return for many years and without any need to grow much at all.

Not only do most of these kinds of small-in-scale businesses never get anywhere near breaking the $1 million in revenue barrier but have little real and committed interest in doing so. If you as a reader of this article have one of these businesses and are quite happy with the way things are then read no further. However, if you want something different from your current business or want to grow a stronger business, in what follows we will explore the four stages or phases of business growth and how you transition through each of these one by one.
Stage 1-The Start-up and Immature or “Innocence” Stage

Small businesses are often cited to be the “engine room” of most economies, because they collectively employ most of the people (in the US SMB’s employ over 90% of all employees) and account for the majority of revenues (in the US over 70%). But even when an owner or CEO of one of these businesses is interested in growing beyond being only a lifestyle affair, they may remain relatively “Innocent” about what it takes to build real scale. This often means that they are innocent about many things including why their customers buy from them (or not), how to deliver consistently, how to get people to work together in consistently team-oriented ways and even how to manage money (in and out of the business). In general we can say that these “innocent” businesses have the following characteristics. They:

    Pay irregular wages (to self and others)
    Utilize flexible premises and other assets
    Deal with cash needs as issues arise
    Tend to work in rather than on the business

The only way for these kinds of business to start to scale is to recognize that they need help and to become aware about what needs to change. This is often best done by an external review or audit.
Stage 2-The Developing and Awakening or “Awareness” Stage

Once a business of any kind has taken a hard look at itself, ideally through an external review or audit, it will have a much great awareness about where it may need to focus particular attention. This may be in many different areas but in most cases there will be a few particular ones that will stand out as being the most critical and in need of immediate attention – this could be on greater and more consistent revenue generation, more strategic planning, better customer segmentation, much more rigorous cost control and higher quality people selection for key internal roles, etc. In general we can say that these “newly aware” businesses have the following characteristics. They:

    Much more carefully start to manage cash flow
    Begin to “feed” more than just the founder(s) or provide wages for several people
    Take a longer term view (and start to evolve a vison for growth)
    Put a strategic and tactical growth plan together (and resource it with time and money)

Stage 3-The Flexible and Focused or “Competent” Stage

Once a business is more aware of its biggest shortcomings and started to focus on these areas in greatest need of new focus or attention, it starts to become competent as an organization in general. Competent here does not mean mastery or best-practice but does mean that the organization can start to stabilize most of its processes and create more repeatable quality at many levels. In general we can say that these “broadly competent” businesses have the following characteristics. They:

    Put structure, systems and organization together at all levels
    Manage and deal with “risk” more strategically
    Start to utilize key advisers/external help/assistance more regularly, where appropriate
    Use training, coaching and development more strategically

Stage 4-The Mature and High Performing or “Excellence” Stage

Although few organizations attain true excellence at all levels, excellence will be partially reached or will come about in parts of the organization as its specifically focuses on its customers, processes, people and finance in strategic ways on a consistent basis. These organizations are often leaders in their industry or are known for high innovation or “best-practice” in wider circles. In general we can say that these “widely excellent” businesses have the following characteristics. They:

    Start to think much more about work-life balance
    Manage prospects and processes strategically at all levels
    Engage in regular growth, learning and development activities (especially managerially)
    Become fully accountable at all levels (especially managerially)

There is nothing “hard and fast” about these four phases of business growth. Some organization can grow quickly through each of these phases and some very slowly (and may get stuck at phase one, two or three). And if the business is large enough, one part of the business or a department/division may be further along than another. But the key point here is that progression is the result of one key driver – the amount of focus that is applied to take it from one phase to the next. One way to think of this word “focus” is to see it as an acronym. This stands for Finance, Organization, Control, Utilization, and Systems – five key areas about which every business needs to be more focused about. These five areas are shown across the top of the chart below. This chart then shows what tends to happen in summary in each of these areas through all four of the phases described above.