Reaching the first million dollars in annual revenue is a major milestone in the life of a business. The emphasis during this initial growth period is focused on marketing: defining the market and refining its products or services. Unfortunately only a few business start-ups ever achieve this plateau and those that do, are in for a round of major restructuring.
While reaching the million dollar revenue the business is mostly in a survival mode. This next step in the growth process presents a new set of problems. This is a time to organize and stabilize. At this stage the business is at a crossroads, it must either grow or die.
Growth requires revenue, additional staff, new equipment, more space and, above all, operational systems have to be developed. An efficient accounting system to include budgets, collections, payables, etc. has to be put in place.
This is the most critical stage in the growth of a business. Many firms do not survive this transition and either disappear or revert to survival as an “under one million dollar in revenue” business.
The founder of the business may be unable to cope with transition. Authority has to be relinquished to others; responsibilities that have been handled by the owner now will be in other hands. The hiring of a managerial staff may be a new experience for the founder.
In summary, the three important growth factors are:
- Revenue: the ability to manage money as well as the ability to obtain additional funds ( if needed).
- Managerial staff: the ability to recruit a qualified management staff and to allow them to take over the responsibility according to their expertise.
- Operational systems: simple systems will no longer work. Growth must continue and complex operational systems must be implemented.
The founder of the business does not have to disappear. The founder’s unique strengths must be recognized and channeled in the direction that will be of the most benefit to future growth. Letting go is a difficult process. The founder can still be the “voice” or “spokesperson” for the firm but the operational growth will be in the hands of others.
Planning is bringing the future into the present so that you can do something about it now. Alan Lakein
Nick J. Petra CFP