For this week's topic, I put my business coach hat on. First, some definitions.
Stage 1 - HOBBY: More of an interest, avocation, project, than a business. Usually loses money.
Stage 2 - CUSTOMERS: Not just selling to friends. A reputation is being established. Owner still does everything.
Stage 3 - IT'S A BUSINESS: Sales engine running. Usually have employees, but owner still very hands-on. Starting to make a profit. Mistakes beginning to occur as owner tries to delegate key tasks. Owner beginning to feel overwhelmed.
Stage 4 - MANAGERS NEEDED: Owner needs specialized reports to track status. Key manager to run day to day operations hired. Profits at risk due to rising overhead. Owner is starting to come up with new ideas to expand, but not sure which one will work best.
Stage 5 - CONTROLS REPLACE THE OWNER: Owner now relies mostly on reports, much less direct customer contact. Owner becoming a leader that inspires, sets direction, empowers, creates the team. Business taking on a personality of its own. Risk of the system becoming too rigid and reducing the ability to respond to the market as quickly as in the past.
Stage 6 - WELCOME TO THE BIG TIME: Growth now comes from the executives, managers, and staff. The "who we are" is becoming more important than the "what we do" as a public image. Owner is starting to focus on fostering the innovative process of the "team" creating new markets, products, services.
Stage 7 - WELCOME TO THE BIGGER TIME: Management is getting more connected with competitors, trends, demographics, politics, the economy, suppliers, etc. The success of the management's ability to gather new information and synthesize it with the wisdom and good judgment that's been developed that will launch the company into prominence where it can actually have an impact on shaping the future rather than just the present. Effort put into sales returns 3-10 fold. Employees don't burn out, profits occurring more naturally, staff are a cooperative team, vision is clear, and little is in the way of continued growth.
Most small businesses struggle to get past Stage 3 or 4. This is where the business is most at risk of imploding at any time. One major misstep. One lost key customer. One major negative event. Hiring the wrong person to start taking over day to day management. This is the stage where systems must be put in place in order to insure consistent quality of service to the customers or they will leave. It is critical at this stage that a solid accounting system is in place, (it's not just for taxes) producing reliable information. "Garbage In Garbage Out" WILL lead to wrong decisions.
With the economy finally beginning to pick up, it is imperative that you not miss out by getting stuck in stages 3 or 4. This year, set a goal to sit down with your outside advisors to come up with a written plan to move through Stages 4 and 5 as quickly as possible ... and get to your share of the BIG TIME and SUCCESS.
• Kelly Bullis is a Certified Public Accountant with over 30 years of experience. Contact him at 882-4459.