I was at a networking event last night when I met a local business owner Barry. Eventually the conversation moved to the point he asked me the “what do you do” question. On finding out I was an advisor to family businesses, he commented; “I will give you a ring in a couple of years”.
A few simple questions later. I discovered he had not been successful in growing his business to the point where he could employ family members, although this was one of his goals.
He seemed a little startled and put off when I suggested that it would be likely that he would not be ready to use my services within the two years.
I went on to say it seems like you are “stuck” at one of the common constraints to scaling a business. And if not addressed he would cycle in spurts of growth followed by shrinkage and back to spurts of growth and so on, until after many years he got really tired.
After hearing how Barry’s business had been doing exactly this for several years now. He had been wining sales, working hard to complete the contracts, only then to slip in to a lull in sales. In frustration he and his staff would then be chasing sales orders again, hopefully before having to layoff loyal employees. He went on to say, it was an emotional roller-coaster for him as the owner. Additionally, the surging brought restlessness for his staff as they lurched from week to week, month to month.
Counterintuitively, the first constraint to scaling a business is not a lack of sales, but instead, operations ability to complete the work on time. I say the first constraint, because growth often flatlines roughly every time the business doubles in size.
There are some common symptoms or “tell tales” businesses can lookout for including;
The solution is to professionalise the business and to move away from being owner centric. There is only one of you, you can not do everything. Your business needs to be capable of operating without you. Once it can, you have choices and options. To work on your business, to work less hours, to become philanthropic or to start a new venture.
To do this businesses need to have a system of governance, a level of systemisation and automation as the enablers of growth. This will enable your business to double in size rapidly. It provides the platform for the business to start running itself, starts the trek down the continuum of the operating without the need for the owner’s attention. Autonomous, scalable and saleable.
It will deliver the owner higher profits, while delivering staff opportunities and certainty in their employment. For businesses like Barry’s, it allows the opportunity to become a family business engaging and sustainably employing the next generation.
If your unsure about how your business can deliver this advantage, seek the assistance of an independent family business specialist like Woodhouse .
You can also check out our video’s on family businesses.