With a new year just around the corner, you as a business owner may be thinking about your sales numbers - what they were like this year compared to last year, what next year should look like, etc.
Like the economy, everyone assumes that a healthy business is a growing business. Progress and increase are quick validation that we are working hard and things are going well. If you are not growing you are shrinking, contracting, losing market share, in a recession...all negative sounding things we have been conditioned to have an aversion to.
Let's assume for the sake of this blog post that growth is good, necessary even, for your micro-business. We want to measure our efforts and see fine results: higher sales, and more importantly - higher profit...
The thing with incremental growth is that it is attainable. You can work the levers of your business to achieve an increase of 10% pretty easily. Negotiate a couple of percentage points off on your main supplies, reduce perks for workers, work a little harder, work a little faster, work a little longer, work a little smarter, increase your rates to keep up with inflation (or more), charge for extras, etc, etc. Blamo! You got your 10-15% increase over last year. This is a good exercise to conduct on a yearly basis because it can highlight some inefficiencies in your business.
There are at least 2 problems with incremental growth when it comes to your small business:
1. Achieving modest incremental growth targets can be a satisfying way to look at your business as doing well. This can keep you from really looking deeply at your business and doing the harder work of making it thrive and serve your objectives.
2. Incremental increases can become draining when they compound year after year. Increasing your business or profit by 10% is easy to do. Once. Twice. Maybe even multiple times - riding a good economy, great projects, or other circumstances. But after 10 or 20 years, those compounding increases will tire you out. You can only work so hard and so fast. You can only squeeze your suppliers and workers so much. Your market will only bear a certain cost level before you reach a tipping point and lose most of your customers. Eventually something will give under the stress of compounding incremental increases. After a while those 10-15% incremental increases are going to require a lot of effort to attain, especially as we get older or the local economy struggles.
If you are committed to the idea that your business needs to grow in order to be healthy and for you to feel good about your work (I'm not sure that it does need to grow, in fact you might be happier if it shrank), you may want to consider exponential growth for your micro-business. I'm not recommending this as a better option, but at least it is a good thought exercise to go through - a strategic 'best practice'.
What would it take for your business to achieve a 100% increase - to double in sales? Would it require 100% more effort - double the work for you? Maybe. 12 hour days, 6 days per week. Attainable but not sustainable. So what would be required to double your sales, without doubling your workload?
What would it take to increase your sales 10x? Now there is no way you can achieve that solely through your own effort. Would reaching a 1000% increase require 1000% more work for you? Likely not - in fact, it might not be that much more effort to grow your business a lot rather than a little. You may need to ask yourself some questions...What would it take to grow my business exponentially? What are the 3 top barriers to exponential growth? Is one of those barriers my own thinking about the business or myself? What systems would I need to put in place to facilitate such growth? What kind of customers would I need? How would my life be different if my business generated much greater returns? Is it possible that my quality of life could be better if my business was a lot busier? Would it be worse? What single role would I be best suited to in my business - Project Manager? Sales Manager? Site Foreman? What could I delegate, and to who, so that I can focus my core strengths that are integral to the success of my business?
Growing pains are real - growing too fast can lead to complete failure. Experiencing 1000% growth can take your business out of the micro-contractor sphere into the small business category. You may not want that. There is nothing wrong with small and simple. Its just that we sometimes don't think creatively about growth and how it can take a toll on us. Over the years I've talked to many many contractors whose businesses grew quickly. They eventually decided to trim back their operations because they found that they weren't making that much more money and the business was too stressful or unmanageable. Growing for the sake of growth is not a worthy objective. Greed for money or marketshare are not worthwhile goals. Growth has to be sustainable and help you achieve your goals in life. Whether modest or ambitious, spend sometime thinking about the goals you have for the growth of your business in 2017.
One final note...sales numbers can be alluring but the far more important number is your profit margin. And this has to do as much with how much money is going out as is coming in. For example, I just looked at my numbers for 2016 so far and I noticed that my sales are strong, we are growing sales very well and projecting a 15% increase over our previous peak in 2014. But when I look at the profit - it is down by 30%! compared to the same year. So there is a lot of customers being served and work being done, but I'm not benefiting from any of that extra sales growth at all. In fact I'm losing as a result of taking on all that work. Now there are some other factors below the surface that I won't get into here, but the point is that there is no incentive to continue growing under these circumstances. I need to course correct ASAP.
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