This means, of course, that you do
everything. Although you are now CEO, you are also secretary,
marketing director, receptionist and gopher. But hey, that’s the way
you like it, right?! And when you’re just starting out, let’s face
it, you don’t have much of a choice anyway.
But sooner or later, if you keep doing
everything yourself you’ll necessarily curtail the growth of your
business. It will grow to a certain point but no further because
you’re only one person and there are, after all, only 24 hours in a
day. Now, if you’re satisfied with making a little money on the
side, that’s fine. But if your business is your only source of
income, you must move beyond start-up if you are to become
financially successful and avoid stunting the growth of your
business.
This article looks at the growth stages of
a typical one-person home-based business and how to gradually grow
your business without being run over in the process.
INITIAL GROWTH
=> One-(Wo)Man Band
As already stated, when you first start
out, you do everything yourself. You’re both chief cook and
bottle-washer. And you can continue like this for quite some time
because, initially, you are unlikely to be fully stretched. This is
exactly what you should be doing.
This is NOT the time to go out and spend
money with advertising agencies and hiring employees. For so long as
you CAN do everything yourself and everything that needs to be done
is getting done, this is the most efficient use of your current
resources.
=> Don’t Over commit Yourself
During this stage, however, it is important
to be careful not to over commit yourself. You are a fledgling. You
must learn to fly like a sparrow before you can soar like an eagle.
So, when you first start out, under promise and over deliver.
Also, don’t embark on an aggressive
marketing campaign until you have the business resources to satisfy
the demand you will create. Let your advertising grow in line with
the growth of your business, the addition of employees and increased
financial capacity.
=> Pay Yourself
Be extremely careful of your pricing during
this stage also. Make sure you include a wage for yourself in your
overhead costs and add a realistic profit margin (say 15-20%).
Remember, price equals costs plus profit margin. Costs include
direct, indirect and overhead costs. For a more detailed treatment
on pricing, read “Pricing Yourself to Get, and Stay In, Business”
(http://www.ahbbo.com/pricing.html ).
=> Profits Belong to Your Business
Plough your profit back into your business.
This is most important. This is where your funds for expansion
during the next growth phase of your business come from. NEVER use
your business’s profits to pay personal expenses. This is what you
pay yourself a wage for. Your business’s profit does not belong to
you. It belongs to your business. There IS a difference!
=> Avoid Premature Expenditure
During your shoestring days, look for
lower-cost substitutes before incurring substantial expenditure. For
example, don’t go out and buy a new fax machine, a new answering
machine, a new photocopier. Get one of those three in one jobs that
sits on your desktop and only costs a few hundred dollars.
Use a good accounting software program
rather than hiring an accountant and hire from your family first if
you need temporary help. Another good idea is to negotiate with
family members to take over some household chores you would normally
do yourself to free your time to work on your business. This works
especially well with pocket-money age children and teenagers.
During times of temporary overload, hire
temporary staff from a staffing agency if no family members or
members of your social circle can do the job.
=> The Glass Ceiling
After a while, somewhere between the one
year and three year mark, you will notice that your business is
beginning to stagnate. At this point, you have stretched yourself
and your resources as far as they can go. You have hit the glass
ceiling.
At this point, if you want your business to
grow further, you will have to grow it. It will not happen as part
of an evolutionary process beyond this point.
BEYOND THE GLASS CEILING
=> Hire Permanent Employees
The time to hire permanent employees is
when you reach the point where you can’t complete all tasks alone
(or with the help of family members) and/or your time is worth more
than it would cost to hire someone to complete your less complicated
tasks.
Before adding employees, carry out an
inventory of the necessary tasks required to operate your business.
Once you’ve identified all necessary tasks, assign primary
responsibility for each task to one person. Although one person will
be assigned more than one task, make sure no two people are assigned
the same tasks.
Also, make sure at least one other person
knows how to do each task to cover yourself during times of staff
shortages, whether due to temporary absence due to illness, or when
an employee resigns and it takes you a while to find a replacement.
Finally, and most importantly, when
assigning tasks, assign yourself the tasks you do best.
=> Capital
To grow beyond the start-up and initial
growth phases, you will need capital to inject into your business.
Now this, unfortunately, is easier said than done. Banks can be
leery of entrepreneurial ventures and venture capital is not easy to
obtain. But, although obtaining borrowed capital is difficult, it is
by no means impossible. Here are the main sources of funds:
* Banks
Cultivate a good relationship with your
banker. The more he or she understands your business and knows you,
the more likely it is that your application will be approved. And
this means more than just fronting up when you need money. Keep your
banker informed of all significant developments in your business and
routinely provide copies of your annual business plans.
Be prepared to demonstrate that your
business is capable of generating cash flow and think about what
collateral you have available to put up if necessary.
* Venture Capital
In addition to a solid business plan and
track record, venture capital providers want to see that you
understand your customers and how your business is a good fit with
their needs. So arm yourself with competitive intelligence and
satisfied customers as references. Also, be prepared to show you
have access to experienced management staff. These individuals need
not be on your payroll but you should expect to show that you have a
depth of experience and talent available to you at least in an
advisory capacity.
* Revenue Stream
Instead of selling equity to raise capital,
consider selling part of the revenue of the business. In other
words, investors advance loan capital and get repaid by way of a
percentage of the sales of the business. This preserves your equity
in the business and is attractive to investors because they receive
an immediate cash return.
This method has the considerable advantage
of avoiding securities laws (it is a loan rather than a sale of
securities) but it is only viable for businesses with high margins
and strong sales.
* Angel Capital Electronic Network
ACE-Net brings companies looking for
capital together with angel investors. You can find links to ACE-Net
at http://www.sba.gov/ADVO .
* Direct Public Offering
If your business has a strong relationship
with its constituents (employees, customers, vendors and community),
consider selling stock via a direct public offering. Note that with
this option you will run into serious securities laws issues which
will require an attorney. This is an *expensive* alternative. Other
miscellaneous sources of funding include 401(k) plans and provision
of loan guarantees by family members or friends.
=> Work On the Business, Not In the
Business
The third and final point to note about
breaking through the glass ceiling is that you must make the mental
transition from working IN the business, to working ON the business.
Until your business hit the glass ceiling, you were effectively
working in the business, much as an employee would. In this sense,
the business was your job, a place to go to work. But beyond the
glass ceiling, your business becomes an entity unto itself. It is no
longer your “job” to work at the tasks that make up the business’s
operation. Instead, your role is to work “on” the business as a
separate entity, leaving the tasks to your paid employees.
Hopefully you can see that shifting your
perspective in this way is the key to the long-term growth of your
business and the difference between true autonomy and indentured
servitude.
