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The snakes and ladders of business growth

Darren Shirlaw

The snakes and ladders of business growth


 

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

The previous three articles outlined, The predictable problem with black holes,  The four cycles between black holes and Jump, don’t creep, the common tendency of businesses to creep. This article discusses how to avoid being dragged backwards – just when you thought you thought you were actually jumping!

One three-year-old business had grown quickly in the previous 12 months from 1m to 4m, but was now having problems.

We could see the business had jumped over the 750k black hole and continued to jump right past 1.5m and 3m to 4m. We said, ‘You’re demonstrating that you certainly have growth here.’

After a discussion we realised the business had focused entirely on brand and product. ‘You’ve built brand and product, which have dragged your business through quickly,’ we said. ‘But you didn’t build the infrastructure at the 750k level that would support your growth. So you’re now being dragged back.’

Keep moving forward by upgrading the business

You can jump up, but you can also be dragged back if you miss a phase.

We asked the client, ‘Are you still using the same corner shop accountant as when you started the business? Then you need to upgrade your accountant. You should also upgrade your legal advice and accounting systems too. In fact, you’ll need a full upgrade across the business.’

Businesses require a full upgrade before each black hole. If you wait until the black hole, you’ll swim in circles trying to manage the business and upgrade it at the same time. For example, before the 17m black hole the upgrade should come at 12m. Don’t wait until it’s too late.

Managing risk

From an investment/cost perspective people should allow about 5% per cycle. So for example at 6m you should really be thinking of putting 5% aside to get from 6m to 12m by investing in the product. But this 5% spend isn’t necessarily per year.

One further consideration is your natural risk profile. If you’re not a risk taker then you’ll say, ‘No way!’ Of course, the decision has to suit you and the parameter within your control is time.

Say you want to get to 12m and know it will cost 5%. You could spend that 5% over five years at 1% a year and not the whole 5% this year. If you want to push time out you can. After all, it’s your business, your time and your life.

Maintain your margins

I told delegates recently about a business with a margin of 20% at 12m now doing a 10% margin at 17m (black hole). The managers said they made more when they were smaller – a classic black hole symptom.

Businesses should consider their margin at the top of the cycle and look toward to the next cycle because that’s the margin they’ll make again. For example, if you’re making 20% margin at 12m then you’ll make 20% margin at 24m (the next cycle). You’ll only dip down to make 10% margin through the 17m black hole.

And the good news is that you can bounce right over that 17m, as some of our clients already have (see the previous article http://bit.ly/1htZYxd.)

If we run the numbers, a 20% margin at 24m is 4.8m profit, but you’re only making 1.7m profit today. So is it worth 3.1m in profit for you to get out of the current black hole?

Now, how much do you want to invest in this?

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

Shirlaws Jump events. Don’t miss out!

17 Sept 2015: Join us on 17 Sept in the UK for our free workshop looking at how our Compass indicators, key enablers that reduce resistance to change by aligning people more naturally with the business growth strategy, can really help your business jump. For more information on the workshop email hugo.depree@shirlawsgroup.com. Visit http://www.shirlawscompass.com/ for more on our indicators.

7-9 Oct 2015: Join us on the Gold Coast, Australia on 7- 9 Oct for a fantastic 2 day conference. Creating your jump. Executing your plans. Build the assets for your next leap. Your product, brand and infrastructure. Register here www.shirlawsgroup.com/events/jump

18-19 Nov 2015: Don’t miss our 2 day conference in the UK on 18- 19 Nov. What’s your end game? Get the most value out of your life’s work, create a clear exit vision. Register here www.shirlawsgroup.com/events/endgame (Early bird rates still available)

 
Darren Shirlaw