Every day I’m given the opportunity to peak behind the curtain of some highly successful companies. The question that continues to present a significant opportunity is this. “Is your company built to grow?” This issue is the difference between a hobby business and the building of a self-sustaining profit machine. As markets change and technology continues to move us forward, we must be willing to ask ourselves the difficult questions.
If you would like to be in a position to answer this question in the positive, you will need to be able to answer yes to at least these three questions.
- Does your business have a scalable process or product?
The question is do we have a scalable process, or product is dependent on what you are trying to sell, a service or a good. For the sake of this example let’s assume that you are an excellent Massage Therapist. And while superb at your job your business is only as big as you have hours in the day or the amount you charge. Basic economics teaches that there is a cap to what the market will tolerate in price and we all have a fixed number of hours in the day. So, based on this you do not have a scalable model unless you can find a way to replicate your skills. This is most commonly done by charging a fixed price for services and paying an employee or contractor to do the work for less than the total rate. This allows you to pay your people there a fee and maintain a profit margin for the business. This is one of many models that can be used to scale. If you do not have a scaling model, then you have a paid hobby, not a business built to grow.
- Does your business have passive revenue models?
The question we ask here is the difference between being an employee of your company and being a business owner with all the freedoms that is provided. Using the example under question one, we can explore this. One example of creating a passive revenue source is to find ways to expand revenue generation that is not contingent on having clients in the spa. One example of this is similar to what is done in many salons. If I am a great massage therapist and you have a tremendous spa location you could lease to me the use of one of the massage rooms for 10 hours/day six days at 100$/day. If the therapist is charging $80 an hour to do a massage they can certainly afford the lease rate. Doing just five massage’s per day, this therapist could make $300/Day after paying $100/day to the spa owner. This is passive money to the business owner. Whether the therapist does a massage or not, they still need to pay the $600/week. This is money that you would not earn by hiring employees. This passive revenue is how you build a company to grow.
- Does your business have a growth strategy?
This question is often answered with a resounding no. Especially when working with small to mid-sized companies. The reason is that when businesses are small, they are focused on the next deal. Focused on making a sale or two sales, but they do not step back and design a strategy. The reason is also that we convince ourselves that the “hustle and grind” is what will make them millions. This is not true. ‘Hustle and Grind” makes thousands while Growth Strategy and Execution makes millions! A key growth strategy needs to contain the following annual components:
- Vision and Mission
- People Strategy
- Marketing Strategy
- Sales Strategy
- Expansion Strategy
- Personal & Leadership Development Strategy
Without the six components developed on an annual basis, the business never knows when they hit (or miss) a goal. This is at the core of business growth.
My message as an executive consultant with over a dozen years of experience in business growth is to ensure that you are building these core components on a yearly basis. If you have the skills to make them, then do it. If you do not have these skills, then hire a consultant to help you do it! This will be the best money you ever spend.
Finally, never forget that companies built to grow must be scalable, possess passive revenue streams, and be operating on a growth strategy containing the core six. As a leader, it is your role to help in defining this for your company. If you are an employee, these are the questions you should be asking of your employer as you plan for your future.