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The Four Cycles Between the Black Holes

Darren Shirlaw

The Four Cycles Between the Black Holes


 

Darren Shirlaw is the co-founder and former CEO of The Shirlaws Group.

In my previous article The predictable problem of business black holes, I outlined the predictable black holes that any business can fall into – if they don’t plan ahead accurately enough. This article describes the four cycles between black holes and where to focus if you want to Jump.

The same four cycles – points where investment is needed – occur between black holes. Each cycle requires an important, but subtle infrastructure change. To show how these cycles operate, let’s focus on growing a business from 1.5m to 12m.

Sales

The first cycle after each black hole (in this case the black hole at 750k) is always a sales issue.

At 1.5m: all the big deals are probably still coming through the founder, even though a junior sales person may be employed to help. With this limit on capacity the business can’t grow any bigger.

At a conference when I say, ‘It’s now time to put on a salesperson who’s as good as you,’ you can hear the audience gasp loudly. ‘Someone as good as me?’

But even if you can find them, how do you incentivise? What happens if they start earning more than you? Just think…you’ve spent years building the business and now someone is getting more out of it than you!

Channels

The second cycle after the black hole is always a channel issue. For example, how do we get our product to market and how do we service clients?

At 3m: the client base is still probably attached to the owner, which comes back to bite them at this point. Remember when you were still handing your card out saying, ‘If ever you have problem just call me.’ Now the channel problem kicks in because you can’t get any bigger without releasing the client base.

Product

The third cycle is always a product line issue, whether design, architecture or extension.

At 6m: product lines usually start to bite, which is where margin comes into play. One business owner said, ‘When I was smaller I could undercut the bigger guys to win business. But now they’re taking business off me because I’m the guy with the general manager and 23 trucks on the road.’

Size and infrastructure will eventually squeeze your margins because you’re now a middle market – not a small market – player. And middle market players have fewer clients to chase. You’re not a corporate so you won’t win deals because of size and you’re not small enough to win deals on price. Now you’re starting to ask, ‘How do I develop product lines that’ll give me the margins?’

Brand

The fourth cycle is always brand because at this point it’s lagging behind the size of the business.

At 12m: the brand is probably still that of a 750k business. I asked one business, ‘Do you recall when you last did brand, back at 600k or 700k? You went off to a printer, spent a few pounds on business card design and called it your “brand strategy”. Now you’re turning over 12m, but don’t look the part. You’ve built up the product lines, but you need to re-invest in your brand to look like a middle market business.’

These four cycles – points requiring investment – always occur in the same order (sales, channel, product and brand) after a black hole. In the example given here i.e. growing from 1.5m to 12m, the next black hole occurs at a predictable 17m – and the four cycles will all begin again.

In my next article I’ll suggest ways to avoid the common tendency to creep the business forwards rather than jump.

Click here to see Darren Shirlaw introducing the concept of “Jumps” at a previous Shirlaws Client Conference.

 

Contact us at hello@shirlawsgroup.com if you would like to find out more about how Shirlaws can help you develop action plans for sustainable growth.

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Darren Shirlaw