In business there are stages that a business goes through as it grows. Understanding what stage your business is at right now helps to understand what’s coming and to prepare for it.

Much like Google Maps has changed how we get from point A to point B with transportation having a clear idea of the road ahead just makes your life easier as a business owner – with less stress.

Stage 1 – Starting

This stage is about finding out all the government obligations of owning a business. It includes registering the business name, buying the domain for it, registering for tax and finding a good accountant.

It’s a challenging stage to try to do it all yourself, so it’s best to do some kind of small business course, ideally provided by your own government, to understand all your requirements and obligations.

Stage 1 is over in a matter of months. By then you’d have all of the above in place taken care of and be earning money.

A cheap website is often all the business needs (or may be able to afford) just to get things started and learn about the industry the business operates in.

Identifying the sale prices through experience is important here and potentially using a bookkeeper to help take care of the basic finances.

Stage 2 – Sales

The second stage of business is to generate sufficient sales. First of all to generate the income necessary to pay yourself a salary.

A salary earner is different to a wage earner because when you’re a business owner you don’t have the luxury of stopping work after an 8-hour day. You’ll find you need to work longer hours because there’s just so much to do.

In this stage of growing your business it’s essential to develop habits or disciplines that lead to success in business.

For a start, one such habit is to save money for tax.

Think of every sale needing 10% at least to go into a separate bank account to keep reserved to pay tax as often as needed in your own country.

Having 10% or so coming out of every dollar going into your bank account is an essential habit.

You may also need to save 10% for equipment, marketing, stock, products, tools etc.

Work out what your business will need to buy regularly to keep it going and growing and then set aside some money out of your income for that.

Education is a very wise thing to invest in as a business owner. There is just so much to learn about growing and managing a business so investing in education is a great investment. Education isn’t expensive, but ignorance sure is!

An education can come in the form of a course, like one you can find on Udemy.

The course topics that are good to learn as the basics include…

In the second stage of business it’s all about sales and sales are made up of 3 separate topics…

  1. Lead generation
  2. Selling conversion rates
  3. Second and third sales, or increasing transactions

Lead generation comes about through marketing. Some good, basic marketing strategies include building and vehicle signage, a quality website, Google My Business, social media accounts/posting and Pay Per Click such as with Facebook or Google Ads.

Learning about strategies or platforms that suit your business is important and that’s why a basic or even intermediate course is beneficial. A good business coach or mentor can assist with increasing leads and sales or a digital marketing company.

The aim of this stage is to grow by increasing sales, to be able to hire 1, 2 and 3 employees. Income and revenue growth is the focus here.

It’s recommended to look at what competitors do for lead generation, which is called “market research” – to learn from those more established businesses.

Stage 3 – Managing

Managing the business is the next stage, which is typically when the business has 4 or 6 employees and above. It’s where you’ve past the Sales Stage as plenty are coming in to allow the business to grow by word of mouth combined with marketing.

This stage includes an admin/bookkeeper employee to take care of systems that aren’t related to sales and delivery.

This stage is the crucial one to become focused on increasing profits. Not by increasing sales, but to look at the profit margins.

Profit margins determine how much cash is in the bank. If a business has a revenue of $1,000,000 and has $1,000,000 in costs and overheads with 0% profit then it will struggle with paying bills on time and having enough cash to keep the business operating. There will probably be times when cash runs out or runs very low and debtors aren’t paid on time.

The managing stage is about increasing what savvy business owners and entrepreneurs consider to be the most important figure for a business – the Net Profit Margin.

The Net Profit Margin is the percentage of revenue that is the Net Profit.

If a business has a $1,000,000 revenue and the Net Profit is $50,000 then the Net Profit Margin would be 5% – derived from diving the Net Profit figure into the Revenue figure.

The managing stage is where a focus on increasing this figure is both worthwhile and extremely rewarding. Few businesses do so, but the ones that do enjoy seeing loads of surplus cash in the bank, often 10% to 20% of revenue or higher as a figure.

Increasing the cash in the bank by increasing the Net Profit Margin solves late payments of bills plus it allows the business to grow faster with more money available to invest in marketing, buy equipment and tools etc.

In the managing stage it’s very important to measure, loads of activities in the business. Measuring creates a focus, just like a score in a game for the players.

By knowing the score of your business, in various departments, you see opportunities for improvements because you see inefficiencies.

What to Measure to Manage a Business

All businesses have 3 core functions…

  1. To win sales
  2. To deliver the outcome of the sale
  3. To receive cash for the delivery

In a retail business it buys the stock/product to then sell and receives the cash for it. Retail businesses don’t have a challenge with receiving payment whereas a service or manufacturing business can, where clients pay later or slowly after delivery.

Tracking the 3 separate functions of a business leads to very beneficial insights and outcomes.

Tracking the number of leads and how many turn into sales is a conversion rate. Measuring this can reveal that the majority of people who contact the business don’t end up buying. By knowing this, something can be done about it, such as introducing a conversion rate strategy, such as sales training.

Tracking leads may reveal lead generation strategies that aren’t working at all, despite the cost, so then money can be saved by stopping the promotion.

Measuring the delivery, especially in a service or manufacturing business can result in seeing which jobs/sales are profitable, measured by Gross Margins.

Looking at a business’ overall Gross Margin on the Profit and Loss for the financial year and then comparing it to the individual job to identify if the job was profitable or not.

By understanding a problem, it can be solved.

By measuring all jobs it may be found that some types of jobs simply aren’t profitable so a decision needs to be made to raise the price on that type of job or stop doing it. Either one is a positive outcome.

By measuring jobs the different skills and aptitudes of different employees can be seen. This may lead to training of certain employees or firing of others.

Measuring and using figures for decisions to lead to significant increases in certainty for you as a business owner.

Imagine if every decision you made was with high certainty. What difference would that make to your business?

Leave a Reply