Sales Growth Comes to a Halt
I recently read that there are nearly 23 million small and medium-sized businesses (“SMBs”) in the US. Those businesses represent the core of the US economy, producing more than 50% of the nonfarm private gross domestic product. They also employ half of all private sector workers. But after four years, roughly half of the business start-ups die. Of those that survive, most struggle to achieve their full potential.
My observation over 30 years in financial services is that many of these underperforming companies, as if on cue, get stuck at $3 to $5 million in sales. But why? I have some theories on that, as well as some thoughts on how to push through this barrier. Please read on…
What is the Root Cause?
I believe that there are many reasons why SMBs stagnate around the $3M mark including:
- Comfort – Some SMB owners get to a level of success they are comfortable with, then stop marketing, direct sales efforts, etc. These tasks are sometimes outside of their comfort zone, so they stop doing them as soon as they are sure that dicontinuance won’t ruin the business.
- Economics – Having grown to $3 to $5 million in sales, the SMB owner may now be able to pay himself compensation that is acceptable, so there is no longer a need to work so hard.
- No Middle Management – An SMB owner that insists on doing all important tasks herself without assistance will eventually “hit the wall” as bandwidth limitations kick in. From that point forward, the SMB owner will personally restrict sales growth – i.e. become her own worst enemy.
Finders, Minders and Grinders…
At B2B CFO®, we like to draw pictures in order to explain how this phenomenon afflicts so many SMBs. We categorize workers in an organization as either Finders (owner, top management, etc.), Minders (middle management) and Grinders (production). In the world of SMB’s, often the top executive(s) of the organization stop finding new customers, products, markets, etc. and allow themselves to be distracted by tasks that are more appropriately handled by middle management or even by production. Put simply, robust growth is not going to happen unless the business owner refocuses on sales. The 401(k) problem, the legal issue, the software crash, the broken down photocopier, and the HR situation can all be taken care of by others in the organization. You, the business owner, have a more important agenda.
Our mission at B2B CFO® is to free up business owners so they can return to being a visionary and growing the organization. Your business is likely capable of so much more than $3 to $5 million in sales. But how does that get accomplished? We have a proven 6-step process known as the GamePlan™ which can help SMB owners jump start sales growth, as well as solve other pressing issues.