Growing A Business Beyond The Initial Startup Stage
By Cliff Ennico
www.creators.com
I had the privilege of participating in an all-star panel discussion on "Getting a Grip on Rapid Expansion" at last week's New York Times Small Business Summit in New York City. Joining me on the podium were Select Wines LLC founder John D'Aquila, Garage Tek founder Marc Shuman, and Paula McCoy-Pinderhughes, author and former small business editor of Black Enterprise magazine.
Here are some insights I and the other panelists offered to the more than 500 attendees.
"When You're Growing a Business, It's All About Growing Revenue." It sounds pretty trite, but a lot of entrepreneurs forget that "growing a business" is all about growing the "top line" of the income statement - gross sales or gross revenue. You can boost your operating efficiency and profitability (the "bottom line") by cutting costs, but if you're not taking steps to grow your revenue, you are not growing your business in any meaningful sense.
So how do you grow revenue? Simple. There are only two ways. Either you increase the prices you charge for the goods and services you are already offering, or you sell more goods and services. Let's look at each strategy.
Raise Your Prices. A lot of entrepreneurs believe they can't do this, because they're in a tightly competitive market. But if you can persuade your market that they're getting extra "value added" for their money - something more than your competitors are offering - you can charge more with a perfectly straight face and the market will gladly pay more. For example, you can hire a local interior designer to redo your bathroom for about $100 to $150 an hour in most places, but if you ask Martha Stewart to redesign your bathroom she's going to charge a whole lot more than that. Why? Because you are now not just buying a new bathroom; you are buying the bragging rights of telling the world that your bathroom is a Martha Stewart original design. Frankly, you should pay a lot more for that.
Sell More Stuff. Find new domestic and (especially) international markets for your products and services - there are huge markets in Africa, Asia and Latin America for things you would have trouble giving away in the United States. Also, find new uses for your products and services. Arm Hammer Baking Soda was originally used to bake cakes (and can still be used that way), but its most popular use today is as a refrigerator and appliance deodorant. Look to see what your customers are actually doing with your stuff once they buy it - and brace yourself for some interesting surprises.
"Understand the Three Commandments of Growing a Business". I call these the three "ates" because each word ends in the letters "ate". Here they are:
Automate. At some point it becomes impossible for your management team to run your business day to day. You will have to create systems to run the business, and train your management team to run the systems. Use technology wherever possible to operate the systems so as to free your management team's time up for creative and strategic thinking.
Delegate. Hire employees, train them well, and learn how to supervise their activities without doing their work for them. It's not easy, but you can't grow a successful mail-order business if you're packing boxes six hours a day. Anyone who's ever read Michael Gerber's classic book "The E-Myth Revisited" knows what I am talking about here.
Concentrate. Startup businesses tend to do too many things for too many different customers. Find out what it is you do best, or what your customers are paying the most for, extend those lines of business to create an identifiable brand, and be ruthless enough to cut out product and service lines that are dragging down your performance. A business can be so well-rounded that there's no point to it - if one or two product or service lines are accounting for more than 75% of your total business, spend all your time building on those and delete the rest.
Finally, beware of Murphy's Law: "anything that can go wrong will go wrong". Whenever you are offering multiple products and services, the ones your customers seem to want the most (and generate the most profit for your business) are usually the ones you are least excited about providing. Don't become emotionally attached to any product or service you offer. This is a business, not a baby, and if something isn't making you money you shouldn't be wasting your precious time doing, making or servicing it, even if it's enjoyable or self-fulfilling. Let it die (or do it as a hobby, if you have time), and build your business on what works.
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest books are 'Small Business Survival Guide' (Adams Media, $12.95) and 'The eBay Seller's Tax and Legal Answer Book' (AMACOM, $19.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2007 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.
