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You’ll know you’re stuck at an inflection point if…
- Revenue growth has slowed substantially (often after a period of more rapid growth)
- Or you’ve been stuck at a level of annual revenue for a few years now
- And/or you and your team are working very, very hard (unsustainably hard) to maintain your previous years’ growth rates.
Breaking through to the next level of business performance is usually about how you are structured.
You might be a business that’s hit £400,000 or £500,000 of annual revenue and got stuck.
Or maybe you’re at £1M-ish and stuck.
Or maybe you’ve got yourself all the way to £2M and got stuck there.
Sure, reaching these levels and flattening out is a first-world problem I’ll grant you, but it’s a problem nonetheless.
So how do you fix it?
There are five things I’d focus on assuming you don’t just want to get stuck at the next inflection point.
Step 1 – Strip it back
If you’ve ever done any home improvement work, you’ll know that to make things better, you first have to make them a bit worse. Typically that involves removing, destroying, ripping out or stripping back whatever it is you want to work on (kitchen, bathroom, bedroom etc). It’s the first and essential stage in any improvement work.
The same is true for business improvements. The first step is to look at what you’ve got and strip it back to the core.
Stripping back might involve dealing with clients, team members or tech that no longer fit. Let’s call it what it is – simplification. Most businesses get over-engineered in the early phases of their creation and simplifying things, by stripping it back to the essentials, is always step 1.
An example might be that you’ve hired a new adviser who isn’t really working out. Sometimes you’ve got to bite the bullet and let them go. It feels like it’s setting you back a step so you might resist the idea initially. However, once you think it through you’ll realise that you’re taking one step back to move three steps forward.
Step 2 – Get the core team right (again)
Now it’s time to ensure you’re core team is spot on. You might feel like you’ve already done this, but you will need to do it again periodically. Your business is ever-growing and changing. If your team are growing with it, that’s great. But if they’re not (or some individuals are not) sometimes you need to make changes.
That might mean:
- Hiring new team members
- Moving around existing team members
- Upgrading to new and better team members by letting some go
Step 3 – Develop the people you’ve got
Having sorted the team out (again) it’s time to get much more proactive in developing the team you’ve got.
What I mean by that is creating personalised development plans for each and every person (including the owners) and investing some time and money into it. What I don’t mean is simply having people take more and more exams. That is not personal development – exams and qualifications are merely table stakes to get invited to the game.
You can’t develop people if everyone on the team is running at 100%, so part of the groundwork for this step to succeed is ensuring you’ve got enough people to leave a little bit of slack for training and development time.
It costs money in the short term but it allows you to build a higher-performing organisation in the medium and long term by increasing the profit potential of the organisation. See my previous blog Hygiene vs Health (and why you need to know the difference) for a more robust explanation of this concept.
Step 4 – Build depth on the reserves bench
Now it’s time to start building depth and cover for each position on your team.
Obviously, this happens over the years as you grow your revenues. It’s not something you can do with the wave of a magic wand. But for it to happen, you’ve first got to know this is what you want to happen and to plan for it as you grow.
Step 5 – Let the cream rise to the top (naturally)
What I mean here is that as part of your growing business, you need to identify who your future leaders and successors are.
Most great financial planning firms would rather not sell out to a consolidator or vertically integrated business because it doesn’t usually end well for the owner or their clients.
Yet we know also that many succession plans ultimately don’t succeed. Often that’s because the business owner “hired” a successor, and that’s the mistake.
Better to build depth of talent across all areas of the organisation as part of your growth and let future leaders and successors reveal themselves in their own behaviour and performance. You want to see people growing, learning and developing.
In my experience the motivation for that growth is intrinsic. You can’t incentivise people to want to be better.
Is this the only formula?
Clearly, my approach is not the only way to grow.
I’ve seen businesses go a long way (e.g. to £2M+ of annual revenue) without necessarily having addressed some of the issues I think are important. You can get away with that for a while. However, I’ve not seen anyone go beyond that without starting to address these issues specifically.
I should declare that my business philosophy wants things to be simple, enjoyable and lasting.
There are other approaches to business growth that seem to suit different temperaments. Some people are hungry and determined and seem to be able to get there through sheer force of will. Good for them.
However, I think business growth can occur much more elegantly and enjoyably, retaining an absolute focus on quality of outcomes for clients, rather than just growth of the numbers. I’m not sure I’d want to work in a culture that a ‘sheer-force-of-will’ type business necessarily involves.
The Hare and the Tortoise
Some people might be tempted to characterise my favoured approach as the slow and steady method, whereas the more aggressive approach might get characterised as the fast-track method. I beg to differ.
In the medium to long term, I like the performance of the businesses that follow my approach and I think they’ll do at least as well (if not better) than the alternative. Although I accept that in the short term (let’s say in the first 2 to 3 years) it may look like the more aggressive approach works better.
I think the shape of the growth curves for each approach just looks different:
Conclusion
If you believe you’re at an inflection point in your business, maybe it’s time to work through the steps I’ve outlined above.
You can try it on your own, or you can reach out to me for some help. The choice is yours.
Let me know how you go.
Related: Advisors: How To Reignite the Spark