How to crack the tricky $1 million revenue mark
I’ve noticed from working with lots of small business owners that one of the greatest challenges they face in the development of their business is how to grow beyond $1 million in revenue.
It seems that as they get close to this point, they get stuck and struggle to push beyond it. From my observations there are a number of reasons for this.
Start-ups are typically built upon the blood, sweat and tears of the business owner themselves. They provide the direction, knowledge, skills, motivation, and relationships the business needs.
They also drive and are typically involved in every area of the business from management, sales, fulfilment and collection to aftercare and follow up.
They might hire staff in some of these areas, but the business is very much reliant on the owner. Meanwhile, the owner is consumed with survival, working in the business to keep it going and avoid the dreaded fate of many start-ups that go broke.
It’s this passion, drive and work ethic that pushes the business to its first real challenge point near the $1 million turnover mark.
This critical juncture is when a business needs to grow rapidly or face a period of treading water, followed by eventual decline.
This is generally the point when the capacity of the owner is almost exhausted. They can’t manage any additional business and their passion starts to wane.
Running the business gets harder and the fun goes out of it. The risks become bigger because the owner has to move beyond their immediate sphere of influence and control.
They’ve generally already exhausted all their personal relationships and acquired the early adopters and customers that were easiest to get.
Continuing to operate out of their home, garage or the smallest and cheapest premises they could get with minimal infrastructure, staff and costs won’t enable them to expand the business.
Their start-up sources of cash aren’t sufficient to fund more growth and the tiny measured steps that inched them forward initially, won’t push them to the next level.
They generally know what they need to do, but aren’t sure how to go about it. The challenge for most small business owners is how to move beyond this.
Here are my six strategies for cracking the $1 million mark:
- Have a clear vision. Be clear about what you want to achieve, how the business will look, the type of products and services you will be selling and who your customers will be. Picture the business beyond $1m. If you can’t see it, it won’t happen.
- Use business disciplines. Getting beyond $1 million will require business disciplines, systems and processes to complement the passion of the business owner. Get help and assistance from advisors, mentors and other business owners. Use their knowledge and experience, and learn the business and management skills you need to take the business to the next level.
- Invest in the growth engine. It’s all about getting, keeping and growing your business. Getting beyond the $1m mark requires growth, so invest in and develop the growth engine of the business. The growth engine is what drives and creates demand for your business.
- Move beyond management. To grow you will generally need to hire more people and then effectively delegate tasks, manage and lead these people. Leadership skills are critical, as is the ability to let someone else do the tasks that you would normally do, even though they may not do it as well as you do.
This creates a very different dynamic for the business owner to operate within and many find it difficult to redefine and refocus their efforts. Letting go in order to delegate is a big issue for most.
- Get cash-flowing. You need cash to fund growth. Additional staff, space and raw materials incur increased costs. Additional sales should provide cash, but your issue is one of timing. You’ll have to invest a dollar before you make one, so be clear about how much you need, where you’re getting it from and when.
While you need to have the additional resources in place ready to address the increasing demands on the business, you don’t want to incur additional costs too far in advance of recouping them through additional sales revenue. You also want to make sure you do in fact collect that revenue in a timely manner and your payment and debtor management processes can be scaled to match the increased sales activity.
- Measure, monitor and manage. Have the accounting, management reports and processes to monitor the activities of the business and make sure it’s cashflow positive and profitable.
Of course, many business owners decide not to push through. They’re happy to keep it small and reliant on their day-to-day involvement to manage as well as work in the business.
At its existing size, it might sufficiently meet their financial, technical, creative or lifestyle needs.
But for those that want to take it to the next level and crack the $1 million mark and beyond, it’s important to be aware and acknowledge these changes and take adequate steps in advance to prepare for them.
MPR Group is hosting a business owner’s event in Melbourne on July 24 that shows SMEs how to break through to the next level. You can attend this event with legendary business-builder and TEDx speaker, Paul Dunn, by registering here.
Marc Peskett is a director of MPR Group, a Melbourne based business that provides business advisory, capital raising, grants services, as well as tax, outsourced accounting, finance lending and wealth management to fast growing small to medium enterprises. MPR Group is a member of the Proactive Accountants Network. You can follow Marc on Twitter @mpeskett