- Your business is barely surviving and you should be looking to shut it down. If at the end of three years, you are not succeeding, your business is probably not viable…software development notwithstanding.
- You are comfortable in your business and you have chosen not to grow. This is where many self-employed and micro businesses remain.
- You are continuing to grow and you can clearly see the potential in your business.
Tuesday, 29 April 2014
Year Three: Stability
Key Challenge: Developing management and business skills
By your third year of business, one of three things will have happened:
The ‘Management’ message applies primarily to that third group…growing your third year in business. In order to grow you must begin to develop additional managerial skills. Most people who are successful in their first two years owe their success to two factors: technical skills and marketing skills. You have successfully delivered on products or services and you have developed a customer base. Sometimes, you find businesses who can fake if for two years, but this never lasts. In order to grow a business, the company must increase capacity, capability or both.
Capacity relates to the ‘quantity’ of output. This could be units of production, hours of service or even metrics such as sales per square foot. Capacity relates to volume output. As your business grows, you may need to increase volume output.
Capability relates to the different things you sell. Capability represents the different products or services you can produce or provide your customers. Capability relates to product mix. If your business is not at capacity, you may increase your capabilities to increase sales.
In order to increase your capacity or capability, businesses use the other two aspects of business development…Finance and Human Resources.
You need finance to ensure you have the ability to purchase the assets required to support growth. This could be purchases of capital assets, such as machinery & equipment to allow for increased production or financing inventory and accounts receivable as your business grows.
Most business owners also hire additional people to grow the company. This means developing managerial skills such as recruiting, training, supervision and motivation. You must manage people. For many entrepreneurs, these are new skills. Being a great chef in one kitchen does not ensure success when managing chefs in a small restaurant chain. Just because someone is good at selling, does not necessarily mean that they can succeed as a sales manager. Finance, the downfall for many growing businesses, is more than getting your annual financial statements from your accountant and wondering where all of your money went.
Since your business is stable, you have the opportunity to develop your management, supervisory and financial skills. You must transcend your technical and sales skills and develop the kinds of skills that allow you to move your business forward. Check out your local college or business development centre for ways to develop. As your business grows, your knowledge requirements tip from technical, to business…from running your business to running a business.
For those who are content with operating as a micro-business or even as a ‘one person shop’, stability is a good time for developing additional skills. It is a great time to think about business development and entrepreneurial life style. Year three is a great time to reflect on the journey of the past three years so you can enter the dangerous year four with a clear idea of direction and purpose.
Next week…the dangers of year four!