04 Jun Founder Of 4 BRW Fast 100 Companies Reveals How To Take Your Business From Where it is to the Next Big Jump
If you’re not ready to take your business to the next big jump, you’ll remain stagnant. Preparation and anticipation is the key. Here’s what to look out for.
What do you think holds you back from moving your business to the next big jump?
Many business owners feel shocked to discover that they are the reason why their business hasn’t grown. The decisions that they made during the start-up stages set them up for stagnation right off the bat.
That’s a bad position to be in. Seeing that your business could have pushed on if not for an earlier decision can break your heart.
That’s something that I almost found out the hard way.
Simply Saying “No”
I helped to found a catering company called Blue Rock with my business partner Pete Mumford.
Originally, we worked out of our home kitchen. But a slew of orders for the Christmas period meant that we needed to move to a new location. We simply didn’t have the capacity to grow the business from home.
We did all of the preparation and handled the tactical side of the upgrade. This meant ensuring a secure cash flow and a line of credit were in place, just in case. We also made agreements and signed contracts with various suppliers. All of this in preparation for the very heavy period that was to come.
We also managed to find a kitchen that would suit our purposes at that point in time. But we also knew that we must always have a forward-focus. That’s how you prepare for the big jump later on.
The landlord wanted to secure Blue Rock to a long-term lease that would tie us into the kitchen for several months. That’s when we said “no”. Instead, we asked our agent for a lease that we could break with a month’s notice if need be.
At first, this seems like a risk mitigation strategy. If you can break the lease quickly, you can escape the monthly rent payments if the business starts struggling.
But we had something much grander in mind. We thought ahead to the big jump of the future. The reason for the extra condition was that we wanted to be able to break the lease when the business grew.
It made sense too, as we knew the premises couldn’t scale up to our ambition. It was just a good solution for the “here and now”. If we got tied into it, it placed a limit on our growth.
Our agent got to work and secured the lease that we wanted. Sure enough, the premises served its purpose for that busy Christmas period. And from there, the business continued to grow. Soon after, Blue Rock had to break the lease so that we could secure new larger premises.
Imagine if we’d agreed to tie ourselves into the original lease. We’d have ended up paying two leases just to allow our business to expand.
By saying no to the first lease offer, we prepared Blue Rock for the big jump that was to come. We also learned one of the most important lessons in business – you can say “no” to the first offer if it doesn’t fit with your future vision.
Current Reality to Future Vision
It all comes down to weighing your current reality against your future vision.
Does that reality help you to achieve the next big jump?
That’s the question that we asked when we were trying to lease premises. The kitchen we found certainly served the current purpose. But it wasn’t large enough to suit the future vision that we had in mind. Tying us into an unbreakable lease would have delayed the achievement of our future vision. At worst, it would have raised costs so much that we wouldn’t have achieved that vision.
The lessons I learned during this allows me to break the big jump process down into three critical components:
- Marketing
- Serviceability
- Cashflow
Firstly, you create a strategy to market the business. How do you attract the business in the first place? What plans do you put in place to bring the clients to you?
Without that plan, you can’t take that next big jump. You’ll probably stagnate and possibly even decline.
Secondly, you consider how you’re going to service the increased demand that your marketing strategy creates. That’s what really applies in my story. We knew that the demand would increase due to our marketing efforts. The premises we had wouldn’t allow us to service that increased demand later on. Thus, we put measures in place that would allow us to expand quickly when needed.
Finally, there’s the cashflow issue. Many business owners plough the profits they generate from their current business into the future vision. As a result, they lose money as they grow. That’s not how you take the next big jump.
The key is finding a way to bring these three elements of the growth cycle together without damaging profits. An ideal strategy allows you to grow the business without losing money.
But how do you do that? I’ve come up with several tips that deal with both the hard and soft side of your business. After all, aligning both is what ensures the next big jump goes off without a hitch.
Achieving Your Vision – The Hard Side
The hard side of your business relates to the financial figures and the key metrics. It’s also about your location, your capacity planning, and the strategies that you put in place to grow.
Here are my tips for preparing the hard side of your business for the next big jump.
Tip #1 – Understand Capacity Planning
This is the tip that relates most directly to my story.
Many small business owners make the mistake of only considering current capacity. They often don’t plan ahead for the future. This leaves them stuck in premises that can’t scale up as they grow. They may see an increase in orders or clients. But they don’t have the capacity to take them on.
Capacity planning involves figuring out where you want to take the business in the future. Do you have what you need right now to take on an increased capacity? If not, do you have a plan in place to increase your capacity when the time comes?
Don’t make the mistake of only considering the downside risk. The growth risk is also a major issue. Inadequate capacity planning may lead to your businesses growth causing issues.
The key is to consider both down and upside risk in your risk planning. Sure, you have to work out what you’ll do if the business doesn’t perform to your expectations. But you it may also help to have a plan in place to deal with the risk of the business growing faster than you expected. Mitigating the risk for both may be the best way to handle capacity planning.
Tip #2 – Create a Cash Buffer
Of course, having a plan for growth may mean little if the numbers don’t align correctly. Inconsistent cashflow could mean that you can’t fund the growth, even if you know that you need it.
Ideally, you want to lock your profit into your capacity planning. This should ensure that the business doesn’t lose money as it grows.
Perhaps the biggest mistake you could make is to throw everything that you have at the growth phase. Many small business owners reinvest all of their profits into making the next big jump. But in doing that, they may leave themselves in a precarious position once they make the jump. There could end up with no cash buffer to fall back on if things go the other way.
Ask yourself these key questions to understand your numbers:
- What’s my risk profile?
- Do I have a stable cash flow?
- Does my business rely on market cycles?
- Is there a seasonal element to my business?
The answers to these questions should determine the cash buffer that you need to have in place to help your business grow safely. For example, a seasonal business with an unstable cash flow usually takes on more risk as it grows. There are often months where you won’t generate the revenue you need. Your cash buffer should cover you for those months so you’re ready to maximise revenue during the busy season.
This cash buffer may give you the breathing space that you need to execute your capacity planning strategy.
Achieving Your Vision – The Soft Side
The soft side of the business relates to your people and your culture. Failing to align this with the hard side often causes issues. If your people aren’t ready for the next big jump, they may not put their all into achieving it.
Here’s my advice for preparing the soft side of the business.
Tip #1 – Create a Cultural Development Plan
Every business has a culture that they want their people to align themselves with. But that culture usually develops over time. As the business grows and you learn, you’ll often alter the culture accordingly.
A strong cultural development plan should help you to do this. With the plan, you can put strategies in place that should keep your people aligned with where the business will go in the future.
Talk to your people about your culture and what you want it to evolve into. Tell them how you plan to grow the business and the steps that you need everybody to take to get you there.
Bring your team along with you for the ride.
That extra transparency often goes a long way towards earning the trust of your team. And a trusting team is much more likely to align itself with your culture.
Tip #2 – Create Personal Development Plans
Your team isn’t just one homogenous mass. It’s full of individuals who have their own desires and aims. Aligning those aims with your growth plan may help you to keep your best people.
Consider working with each individual to create personal development plans. These outline the current reality and future vision of the person within the business. Treat them with the same amount of care as you do your business. Figure out where the person is now and what their vision is for the future. This may help you to create a sustainable plan around that vision that highlights how your business helps them to get there.
This shows the individual that they’re an important part of your larger future vision. As a result, they may understand the vision and will support you in achieving it.
The Final Word
The decisions that you make right now can have a serious effect on the future of your business. My story shows how a single decision allowed my business to take the next big jump.
How do you do the same?
Align the hard and soft sides of the business. Consider doing the following:
- Create a capacity plan that considers both the downside and growth risk.
- Have a cash buffer in place that’s relevant to that risk.
- Create a cultural development plan that shows your people where you intend to be in the future.
- Work on personal development plans for each of your people.
I can help you to plan for your business’ next jump. And it all starts with a no-obligation 1 Hour Business Review Session.