Only 4 percent of firms reach £1 million in turnover. Of those only 10% make it to £10 million – that's 0.4% of all businesses!
That means there are around 96% of businesses that simply can't make it to £1 million in turnover.
So the question is, what's holding them back? As an experienced coach training over 450+ businesses to grow, let me go over three main areas where I see businesses often become stuck:
1) Poor Leadership
A business can only be as strong as its leadership team. In order to assess the effectiveness of a leadership team, you must consider two of their most important qualities: the ability to predict, and the ability to delegate.
A leader must be able to set a clear vision for the company, to give the business direction. But importantly, that vision needs to be aware of, and take into account the movements of, the market. Understanding that, and being truly able to predict where the revenue is going to be coming from is one of the defining factors in successful leadership.
The second factor is delegation: a leader must be able to identify their own weaknesses, and trust others to perform in those areas better than they can. It is one of the most difficult things to do, letting go and letting others take the reins, especially for entrepreneurs. But it is what sets apart the start-ups that will always stay small from the £1 million+ businesses.
As businesses get larger, the nature of delegation changes: from assigning functions to employees in smaller businesses, to training mid-level leaders to take over predicting and delegation themselves as the business gets bigger.
All of it, however, requires that you are hiring the right people: if they're not the best person for the job, how will you ever trust them to do what you need them to do?
Once you find the right person, delegation can become a simple four-step process: discover their ultimate strengths and weaknesses and define their role, measure their work with a tracking system, give them feedback and advice on how to improve, and finally, motivate them through desirable and valuable rewards and recognition.
2) Inefficient Organisation
Something I frequently hear clients say is that every time they attempt to expand, the complexity increases. It is a fact that businesses hit a complexity ceiling at some point – as a business owner, you don't need some mathematical formula to tell you that as you grow, complexity increases exponentially. If you don't have appropriate systems and structures in place, you won't be able to handle that increased complexity, and won't be able to let that growth happen.
Businesses are often called "organisations" for a reason: you must be organised and you must be systemised. Let me run through three organisational charts that may help:
The hierarchy: this chart lays out the clear lines of accountability and responsibility. This means assigning every project and process in your business to someone – even if they're not the ones to actually do it, but to make sure the position is eventually filled. The term "acting" often helps to assign temporary roles, but you can never leave a position on your chart "unfilled-for-now". For everything, someone must be accountable. Without this, you will find your business becoming bogged down in communication issues and costly mistakes as tasks are missed and projects are left undone.
The work flows: If you attempted to include all the different work flows in your hierarchy chart, it will become a useless mess of lines that is impossible to read. Instead, separate out the accountability structure from the critical work processes such as client acquisition, project management, recruitment, and financial management. This will help make your processes clear and get you unstuck. However, don't think this is a one-time thing: processes need to shift and change as you go along and will require regular maintenance.
The business units: As your business grows, there will be subsections of the organisation that will begin to function almost like separate businesses on their own. These units don't necessarily have to be actual subsidiary businesses though: you could be splitting units by geography, by niche or by products. The key here is to determine relationships between these units: there are leaders of each unit and there are leaders above them who oversee multiple units – who do the employees report to? Unit leaders should be managing most of the people, while the functional, higher level leaders, should be teaching, training and strategizing to ensure the bigger picture is seen to.
3) Failing to Adjust External Focuses
Your focus should not remain constant as you grow. With external pressure and internal complexities changing as you go from £1 million to £10 million to £50 million and beyond, your main concerns should be changing with them. Whether it's the revenue focus of the start-up, to the cash focus of the £1 million business, or the value proposition focus for a £10 million business or the profit focus of a £50 million+ business. The fact is, as you grow, the way you analyse and respond to the market must change: you cannot keep going as you always have been if you want to continue to grow.
But it is important to balance your external focus with your internal ones as well. Unfortunately, it is all too common with my clients – I suppose it's human nature – that they've got the external and internal focus backwards.
This is especially evident when you are approaching the edge of a turnover bracket: you're excited to reach the goal value so your whole focus is on that external growth. However, if you spent time focusing on creating sustainable systems and structures, then you would see greater long-term benefits. And then once you've blown past that goal, growing into the new bracket, your attention turns towards all the internal complexities. This is when you should be focused on stoking that external growth instead. If you did it the other way around, then your systems would be in place to ensure the complexities don't limit your growth, and you become free to grow into the new turnover bracket sustainably and smoothly. This is where it can be extremely useful to have an outside advisor helping you deal with internal issues so you can be focused on the external growth.
In no way is this list exhaustive: there are a thousand different reasons why a business fails to grow, many of which are unique to the business and its situation. However, these three reasons are the ones that come up time and again – and are ones that businesses can seriously focus on and witness massive results from improving.
For companies looking to learn more about how they can grow their business, London Coaching Group has excellent success rates achieved through their systematic solutions.