You will find 28 million small companies in the US. The sad the fact is that the majority of them fail within the first years of operation. The little percentage that survive stay small forever. A select few manage to grow into huge businesses. But why them and not the others? What are the factors that enable unknowns to become household brands? One thing without a doubt that it requires far more than hard work, luck, and timing. Read on to see if your small business has what it takes to make the leap in to the big league?
Many business owners’ lives are chaotic as a result of insufficient systems. Systems are difficult, but they enable small enterprises to scale. Systems usually are not glorious like sales, marketing, or research and development. Some say that systems are boring, all things considered, this is a back office function. Systems separate struggling small companies from the ones that grow by leaps and bounds. Creating systems can be a daunting task, and then for many, the prospect of taking on one more project is unthinkable. For many, it really is a catch-22 situation. You may say “How do you carve out extra time from my already hectic schedule.” The right way to think of systems is that creating them is surely an investment inside your business.
One of the greatest challenges that small businesses face is that the they are perpetual decision makers. The owner is associated with everything from sales, customer support, research and development, bookkeeping, so an and so forth. Creating systems is the initial step toward a company where not all decision is dependent on the entrepreneur. Systems allow men and women to plug in and go. Systems include operating procedures and manuals that will bring a new team member up to speed very quickly. It is what takes small out of small business.
Franchise businesses are often more lucrative than independently operated ones simply because they are designed on systems. The franchisee may be paying reasonably limited in upstart costs in comparison to an independent business, but it makes sense for most because they don’t have to worry about developing systems. Someone already went ahead and created the necessary systems for achievement. When you buy a franchise you take a process that has been proved to work. Does it mean that you have to buy a franchise to succeed? Certainly not, but you have to think of your own independent business as a franchise. Create procedures for everything. Don’t leave something to guesswork.
Most small businesses do without systems, but it doesn’t imply that it’s a good idea. While you may get away by using it in the beginning lacking systems will create huge bottle necks in the future. The absence of systems will reduce your profits. Why? Because you and the employees will need to reinvent the wheel day in and day trip. systems minimize the element of surprise. With systems in position your team has the capacity to deliver consistent service. Businesses with consistently good service will outperform those that have fluctuating quality service.
In addition to making life simpler, systems also increase the price of your business. Buyers want to buy firms that are made on systems. The actual existence of systems tell buyers that the business doesn’t entirely depend on you. Creating systems enable you to produce a turnkey operation, popular with buyers. Business systems are assets that enable your organization to run without you.
Scalability – Investors love highly scalable companies simply because they have the potential to multiply revenue with minimal incremental cost. You just can’t substantially grow a company without cracking the scaling code. Some business are made to scale and some are forever destined for small enterprise status. Unfortunately, many professional companies usually are not scalable because they rely on personal output. So, in case your goal is always to create a big company avoid consulting types of businesses. An application company, on the contrary, is a highly scalable business model. When the software product has been completed it may be sold millions of times with minimal costs. In other words, their increased revenues cost less to deliver than current revenues. This means that a scalable business will be able to boost the operating margin as revenue grows.
A highly scalable business requires small variable costs the company can control. Variable cost changes with all the amount of business. Fixed costs do not vary with sales. For example, for a software company fixed costs include the expense of the office location, computers, and furniture. These can not be quickly added or liquidated. Salaries on the other hand are a jrysel cost since workers can be hired and fired relatively fast.
Most consulting businesses like marketing agencies are certainly not scalable since they are not able to substantially enhance their revenue without greatly increasing their variable costs. Such businesses are considered poor investments.
To construct a scalable business you can start using a scalable idea. Scalable businesses have high margins. They need low support and staff expenses. Scalable businesses enable you to work on your small business instead of working in your business. If you locate yourself constantly doing work in your small business your enterprise is either not scalable or not yet prepared to scale. Truly scalable businesses are highly automated. Automation helps you reduce variable costs including labor. It is actually at this stage when scaling and systems commence to come together. Should you truly want to become a market leader or dominate your industry, scalability is the only method to get it done with no miracle.