By Michael Walsh

Step 1: Thinking Through the Bigger Game

The first thing to do when you're thinking through the growth of your business is to picture how the business will run at $3 million.  How will it be attracting customers?  How will the customers buy at that point?  How many people will you have working for you?  What size of facility will you be in?  What will the geographic span be to achieve your new, larger size?

All of these questions and more need to be addressed.  By thinking these things through, you will start to see much more clearly what the infrastructure will need to be to support your organization at its new, bigger size.

Step 2: Draw it Out

It is one thing to answer these questions to yourself, or on paper.  Now, draw out your current organization chart, followed by the organization chart that your new company will need to look like, for you to achieve and sustain the sales levels you desire (in this case the $3 million).  Don’t worry about exact names in each of the roles that will be needed.  Start with the roles themselves.  The visual of how many people will be working in what roles will give you a good idea of space requirements, and other supports that you will need.  Don’t worry about getting it perfect.  You can, and will, adjust this as you grow.

Step 3: Do the Math

After you have a potential organization chart, now it is time for the calculator.  Sit down and figure out what your future Profit and Loss Statement will look like.  You may need your accountant’s help with this, but it is worth it.  You already have a rough idea of how many people you will need, from your organization chart.  Now, through the financial statement, you can figure out the space requirements, the sales support needed, as well as all the other levels of infrastructure you will need to achieve the $3 million in sales.  This is critical to catching all that you will need to address, so don’t skip this step.

Step 4: Develop the Transition Plan

You know where you are currently, and you now have a plan for what the future might look like, at triple your current size.  Next is to sort out the transition plan.  You still can’t afford to add all the pieces at once, but you can decide how you will phase them in, as you grow.  Check to make sure you are funding the steps in a manner that makes sense to you.  This is another area where your advisors can really help.  By making the infrastructure changes event specific (i.e. when I hit $1.5 million, that’s when I add the next salesperson, for instance), you can afford your growth along the way.

The difference is that you will have thought it through, including the pieces that most people miss.

By following this approach to large scale growth, you will find it easier to overcome the fear and tap that internal fire in the belly to grow your business consistent with your dreams.

Source: profit and loss statement

By Michael Walsh

When people talk about large scale growth for small business, most business owners have a two-sided reaction.  The first is a spark in their eyes that lights a fire in their belly over the notion of having the larger business of their dreams.  The second reaction is quiet revulsion in their gut, quelling the fire, over what it would take to grow the business to that next level.

The source of these mixed feelings isn’t a mystery…  didn’t it take a lot more than you expected to grow your business to this point? 

It’s one thing to have the skills to deliver exceptional value to clients and customers as you grow. Then there are all the things you had to learn about sales and marketing, about finances and of course, about hiring and working with people… how will those also grow as your business grows?

Traditional Growth

You now have your business running at a level that pays you well, and that seems to be working (though you still put too much time into the business for your liking).  To go through more to get it bigger, that just seems brutal . . . and tantalizing all at the same time.

Think about it for a minute.  Usually, a small business will naturally grow fairly quickly up until the point of getting to full capacity in one area or another.  Let’s say you get to $1 million in annual sales.  You have a system that seems to be working, so you decide on a 15% increase, pushing sales to $1.15 million.  Then the next year, you grow a little again, going to $1.25 million.  Then up to $1.4 million.

However, there is a problem here.  Whatever that “natural capacity level” is that was at full capacity… is now getting stretched.  You’re stretching your existing structures past their capacity levels.  That’s when people start to get spread too thin.  They start getting tired, and making mistakes.  Then you try to solve that by adding more people, only to find that the efficiencies you enjoyed at $1 million have gone away, and your costs are getting out of hand, while your customer service levels are slipping.

What’s Missing is Infrastructure

You know you need more infrastructure to make this work – some major capital expenditures, whether it be new software, a new piece of equipment or new space for your people.  But with the increases at the size they have been, you can’t afford to make big changes. If you are at $1 million in annual sales, an  extra $150,000 might only leave you with $30,000 after expenses.  That’s hardly enough to spend the $40,000 to $50,000 on that new piece of financial and accounting software.  It makes no sense.

Anytime you decide to grow by little bits, unless you have excess capacity in all areas – including your own time, by the way – then something will get stretched and possibly break, making the whole growth thing that much more difficult.

The Good News

The good news is that it is actually easier to double or triple a business than it is to grow it by 10% to 15% per year.  Yes, that’s right.  I said easier.  The reason is that while you may delude yourself that you can get by with small growth without changing your systems, there is no way that you will think you can run a $3 million company the same way your now run your $1 million business.  You know that it just can’t be done.

Instead, what people do when approaching large scale growth is to think through the bigger game.  You may not be able to afford that new software program at $1.15 million, but you know for certain that you will need it before you hit $2 million, and definitely by the time you get to $3 million.  And, there are lots of other changes that will need to be made too.

Later this week, I'll be posting Large Scale Growth for Small Businesses (Part Two)

Source: capacity level