Complete Guide: Grow Your Business the Right Way in 5 Simple Steps
- Step 1: Define Your Goals
- How much does it cost?
- What quality of life do you seek for yourself?
- What are your non-financial reasons for wanting to grow your business?
- Step 2: Revisit Your Break-Even Analysis
- Are you charging the right price?
- Are you paying too much?
- The Break-Even Formula
- Variable Costs
- Fixed Costs
- Step 3: Examine Your Sales Process
- Use customer feedback to improve.
- Improve your communication with customers.
- Create “buyer personas.”
- Where do your customers come from?
- Step 4: Examine Your Team
- Do you have a mission statement that good employees believe and are attracted to?
- Do you have a mission statement?
- Step 5: Create Scalability
- What costs should you consider to increase your capacity?
- What can you do now to increase your capacity for free?
- What is your current max capacity and have you reached it?
- Moving Forward
You’ve launched your business and now you want to have a clear path forward for growth.
Or, maybe you’ve successfully operated your business for some time, but you don’t feel the sense of satisfaction you thought you’d feel.
We all (entrepreneurs) sense that a plateau-ing business is a dying business. Instead of settling for the way things are, it might be a great time to identify better and then go for it.
If that “better” is what you want, then consider these 5 steps to grow your business the right way without cutting any corners.
While I believe that each step relates to the step before it, I’ve separated each section as a stand-alone for you to be able to home in on what you believe to be your primary objectives.
Step 1: Define Your Goals
You became your own boss for a reason. Can you remember what those reasons were?
Here are a few questions that could help.
What are your non-financial reasons for wanting to grow your business?
Studies show that financial gain isn’t the main reason people go into business for themselves.
These are all emotional, not financial reasons that people become entrepreneurs. They are unhappy with where they are professionally and want to change their circumstances. It is likely that you are no different.
What quality of life do you seek for yourself?
I strongly recommend that entrepreneurs read Tim Ferriss’ . The book is chalked full of wonderful suggestions for outsourcing, streamlining your schedule, etc. But the most valuable part of the book is that it challenges you to identify your desired quality of life.
Entrepreneurs today don’t plan for retirement like they used to. Instead, they decide to work while traveling. Or they build a family on their own terms. Their life is their own to find deeper meaning in the day-to-day.
Although money is great and can buy us all the things that will temporarily make us happy, no amount of money can buy time. Time is our most valuable asset and it is something, that while on this earth, we should spend most wisely. You shouldn’t feel like you’re mindlessly wasting your life away.
What you’ve experienced and who’ve experienced those things with matters more than anything you will ever do professionally. And the experiences you long to have do not have to be expensive.
How much does it cost?
You need money to stay in business. We will discuss that more in the section on Revisiting your Break-Even Analysis.
But you will need even more money to meet the desires you identified just a moment ago. You have living expenses. Your kids might want to go to college. And your daughter might want a nice wedding.
Are you currently meeting all your financial obligations? Do you anticipate having more financial obligations in the future?
Do your life priorities match your financial obligations? What things are you paying for that you don’t actually want or need?
Put a price tag on all these goals and obligations. Make the necessary adjustments so that you feel you are on the right path.
Step 2: Revisit Your Break-Even Analysis
It is likely that you already have a break-even analysis or understand what it is.
Your “break even” is the exact sales number that – when achieved – tells you that your business is paying for itself. No one wants a business that costs money. You want a business that can pay for itself and more.
Fixed costs don’t change based on how much of your products/services you’ve sold. Typically, they are the same month-to-month.
If you are not sure that you are aware what your fixed costs are, print out your last 6 months’ bank statements from the business. Grab your receipts. Label every cost with a category.
Quickbooks Online is a low-cost resource that will help you do this efficiently.
If you sell bagels, you had to pay for those bagels before you sold them. You had to pay for the ingredients. If you hand the customer their bagel in bag, you had to pay for those bags, too.
When you sell more bagels, then the cost of ingredients and bags goes up. If you sell fewer bagels, then the cost goes down. These are your variable costs.
Any cost that is directly related to the sell of your products/services is a variable cost.
The Break-Even Formula
This is a simple formula that you can scratch out on paper with the help of your calculator.
Add up all your fixed costs.
Add up all your variable costs per unit (the average cost per product or service sold).
Subtract your average selling price per unit by the average variable cost per unit. This is your
Divide the total of your fixed costs by the contribution margin.
Break-even point (number of units you must sell in order to break even) = Fixed Costs / Contribution Margin.
If this quick tutorial was confusing for you, consider completing a more in-depth tutorial here.
Are you paying too much?
When you examined your bank statements and receipts, were you surprised?
It is always a good idea to examine your vendors. If a certain vendor charges more than their competitors, have they properly demonstrated to you how they are saving you money in other ways by providing better quality services?
Some vendors charge you bottom prices, but their poor quality costs you money in other places. If so, it is time to make a change.
Lowering your costs will put less pressure on sales when breaking even.
Are you charging the right price?
Many business owners lose money by not having the right price point.
Sometimes low prices drive more sales. But other times, low prices cause customers to view your product in a negative light.
Sometimes high prices increase your bottom line. But other times, customers are turned off by prices they feel are too high.
Finding the right price makes it easier to achieve the required sales to break-even.
Step 3: Examine Your Sales Process
What is it like to be your customer?
Your customer has a problem, and your business has the answer. In the infographic below, HubSpot illustrates the journey that most customers take before buying your products/services.
You need to always strive to understand your customers better.
Where do your customers come from?
Many business owners look for their customer in the wrong places. Other business owners use messaging that doesn’t resonate with their customers.
Your customer had a problem before they came to you. Whether they were hungry or had a problem they didn’t recognize until you confronted them with your brand: your business solved that problem for them.
Your customer hold the key to your success deep in their pain, behavior, dreams, values and the jobs they are trying to accomplish.
It can be helpful to interview a few of your best customers. Ask what drew them to you. Reverse-engineer their journey from when they didn’t know anything about your business to when they paid you money.
Create “buyer personas.”
HubSpot popularized the idea of creating mini bios for your regular customers. These are called “buyer personas.”
Identify the various categories of the customers you serve. In each category, they will share similar demographics and characteristics.
Buyer personas help you understand whether or not you are targeting the right prospects. Consider using HubSpot’s interactive tool for creating buyer personas.
Improve your communication with customers.
You can’t know where your customer’s come from or create buyer personas without talking to your customers. Figure out various ways of gathering customer feedback.
Successful communication is knowing your audience and what is important to them.
Keeping communication open with your customers is vital to harnessing word-of-mouth advertising and growth. Why?
Because customers want to feel like they collaborated with you in their buying decision. When they feel that their voice mattered (even when they are unhappy with your business), then they are likely to view your business favorably.
Customers will feel a sense of identity with a brand that listened to them. They will continue talking about your brand as a result.
Make sure that you have a business profile on all the major social media platforms, including Google Maps and Yelp. Read customer reviews, including complaints.
Use customer feedback to improve.
An interesting case study for customer feedback and word-of-mouth growth is Xero, a startup in the footwear industry. Xero built a business plan with the hopes of generating investor capital. The business plan nearly fell apart when the startup team failed to get the investor capital they needed.
Steven Sashen is the founder of Xero. Determined to make the business work, Steven generated customer input from the very beginning.
Sarah Fister Gale analyzed Xero to understand challenges for startups. She noted that in spite of setbacks in generating investor capital, Xero built the business on the merits of Steven’s “word of mouth approach.”
From the start, Sashen had no problem sharing the secret to his footwear. On the day they started the business, he made a YouTube video showing people how they could make their own sandals… Sashen also asks every customer for feedback and uses that to adapt current and future products.
You never know what key bit of information from customers could unlock the perfect tweak to your business that sends it into overdrive.
Collecting feedback can be done informally with a couple questions at the cash register. There are also plenty of free resources that help you generate survey feedback if you have email addresses.
Don’t disrespect your customers by ignoring their feedback. They want their problems solved, and there are too many businesses out there ignoring vital information about their needs.
Step 4: Examine Your Team
In How Google Works, Google executives noted that…
Culture theorists going back to at least Emile Durkheim have argued that through shared beliefs, values, and norms, culture shapes people’s thoughts and behaviors… Their culture shapes the everyday choices they make.
The culture of your business makes a difference in the work performance of your staff. Google execs continue…
Think about your culture, either what you want it to be or what it already is. Imagine, months or years from now, an employee working late, unable to make up his mind about a tough decision… What values would you want that bleary-eyed employee to consider? Write them down in a simple, concise way. Then share them, not in posters and guides, but through constant, authentic communications.
Do you have a mission statement?
Before you retort, “I don’t need a mission statement to build a business,” that is true. However, your business will be stronger if you do.
In conducting a meta-analysis of 49,928 units across 192 organizations representing 49 different industries in 34 countries, Gallup scientists discovered that margin [profits] and mission are not at odds with one another at all. In fact, the opposite is true.
Gallup went on to point out that a business “focusing on mission” achieves five things:
Mission drives loyalty across generations. Understanding a company’s purpose helps employees answer yes to the question “Do I belong here?”
Mission fosters customer engagement. A strong mission promotes brand differentiation, consumer passion, and brand engagement.
Mission improves strategic alignment. Alignment begins with a clear purpose — the what and why of the organization.
Mission brings clarity. Awareness of mission guides decision making and judgment.
Mission can be measured. See more here…[Gallup identifies surveys as helpful metrics.]
A mission statement is focused, simple, and compelling. It goes beyond the “what you do” and identifies the “why and how you do it.” If you do not have a mission statement (or have a mission statement that inspires you), take a look at what a few mission-driven companies have done. It may help you arrive at a mission that identifies your business’s deeper purpose.
Do you have a mission statement that good employees believe and are attracted to?
Think about your top-performing employees. Why do they work for you?
If the reason they work for you is because they have nothing better to do, then you are in trouble. Because as soon as something else comes along, you are out a great employee.
Good employees want to believe in something. They want to know that the people they work for are consistent and genuine. You alone bear the responsibility of identifying the mission and culture that inspires you and your team.
Step 5: Create Scalability
Scalability means that your business can grow without any major complications. Taking on greater demand can often put the business owner in a bind if they did not plan for it.
So while there are some businesses that suffer as a result of growth, many businesses harness proper scalability early on. And as a result, the business grows stronger than ever.
What is your current max capacity and have you reached it?
Your maximum capacity is the most clients/customers you can currently serve well with your current staff and resources.
The opposite of scalable is labor intensive. If you are an owner-operator working too much already, then you are probably serving as many clients as you can without dropping dead. Your only way to grow is to work harder or hire someone that does the job as good as you do.
This is probably not realistic. You will only drive your staff insane with micromanaging, or you will constantly be surprised with ongoing mediocre work. And it won’t be your staff’s fault.
Hopefully, you have more capacity available before you’ve reach maximum capacity. You should identify how many customers it will take before you will be required to increase your capacity.
What can you do now to increase your capacity for free?
If you find that your business model is too labor intensive, then you need to learn how to automate.
Automating can be as simple as finding easier ways to accomplish more. Or, you can look for technology solutions that do more at the click of a button.
Identify repetitive tasks. Automation frees you and your staff to improve the quality of customized experiences for more customers.
Batching similar tasks or moving staff members around accomplishes this as well.
Finding staff members with technical skills can often help you find easier ways to accomplish more. Lean on those employees to do things you didn’t think possible.
Eliminate waste. Your staff can tell you about superfluous tasks that add no value to your business and merely complicate the process.
Working smarter and not harder is free. It only takes getting heads together to improve process.
What costs should you consider to increase your capacity?
Hiring more staff or getting more equipment is expensive. And you only want to do this when you have to.
If you’ve automated what you can without paying more, the increase in sales by reaching max capacity will justify these new expenses.
Make sure to have a plan for new hires. It is very expensive to hire employees that are not a good fit. Involve your managers in the interview and training process.
When upgrading equipment or technology, talk to experts. Consider refurbished equipment when appropriate.
Build budgets around these new expenses with projections. Having a rough idea of the increase in sales with the cost of increasing capacity will allow you to use your break-even analysis and make smart business decisions.
If you take these 5 steps seriously, you will experience noticeable growth in your business.
And the growth will be two-fold: there will be financial profits to show, and your brand will become more stable, more mature.