When you begin you are your business’s most valuable asset.
When you are done, if we do things right, your business is the most valuable asset in your life.
That inversion is at the heart of the 3-cycle approach to small business growth.
Three Cycles In Brief
- In the first cycle, the focus is on growing sales. We also begin to grow internal capacity, primarily administrative functions.
- In the second cycle the focus is on profit, and delegation. The priority for delegation is the core product/service delivery (e.g. if you run a bakery, hire another baker so you can work on the bakery).
- In the third cycle we develop an enterprise with an independent management layer. The owner steps away from all daily administrative, sales, core delivery, and management functions.
The goal of all this is simple: to be paid for owning a business instead of working in the business.
Imagining the Enterprise
To start aiming your small business in this direction, these are the steps to take.
1. Create a vision of what could be. The sooner you formulate what your business would look like as an enterprise the sooner you can start designing that outcome. Now is not too soon. Can you see franchising? Expansion into markets in other cities? Exporting? Time matters because not only do these plans create the business you ultimately want, they also create a highly profitable and efficient business along the way. And keep in mind that to prepare a small business for sale can take up to five years if nothing else described here has been done.
2. Identify the largest constraints preventing you from achieving your vision. Consider both marketing and operational constraints. This is the beginning of a sort of future-oriented gap analysis.
Typical constraints include:
- finding the right team members, especially management talent.
- absence of capital
- low market awareness/penetration
- inadequate systems (documentation, CRM software, poor inventory control, no Standard Operating Procedures manual)
- failure of vision (see #1)
3. Understand the sequence of bottlenecks. Work backwards and ask the question “If we removed those top level constraints, what new bottlenecks would that create?” If you opened a new market would it create manufacturing problems? If you solved the manufacturing problems would it create shipping/inventory/logistics problems?
4. Design solutions to address every bottleneck. When you have thoroughly ‘mapped’ the questions and constraints, working backwards from vision to the present reality, build a plan to address each constraint. Often bottlenecks have to be removed in groups to achieve results. If you have to use an incremental approach (addressing constraints one at a time instead of at once), be aware of the costs, and the kinds of support and alliances you will need to sustain growth until each bottleneck can be eliminated.
In the second article in this pair, we’ll look at the nuts and bolts of getting to and managing the Enterprise Cycle of your business.
At the Great Performances Group we improve the success of small and medium business anywhere in the English-speaking world. Check us out to find out how. Read Clemens’ book “Great Performances – the Small Business Script for the 21st Century.” Leave a comment or question! A Facebook “Like” is sweet too.
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