6 Stages of a Profitable Local Small Business
What is Possible in Your Local Small Business?
September 30, 20197 Pricing Mistakes Small Business Owners Make
February 20, 2023
WHAT STAGE OF SUCCESS IS YOUR SMALL BUSINESS IN?
When looking at all the various small businesses across all our neighborhoods, we discover that they are in various stages of success. Look closer when dealing with tough financial situations, you realize that there are actually 6 stages a typical business might be found – Launching, Surviving, Existing, Growing, Expanding, or Ending.
What if I told you that the amount of money you make in your business, will be directly linked to the stage your business is currently in?
Do you want to start your own business? rent space for your beauty salon and start making you dreams come true as an entrepreneur.
How Do You Know You Have a Successful Business?
WHAT DEFINES A SUCCESSFUL BUSINESS?
Is business success defined by the sales you take in? If you have revenue of $1,000,000 does that make you successful?
Is it possible that a business doing $350,000 is more successful than one that does that $1,000,000?
The answer is yes. Success has very little to do with revenue & sales. Don’t get me wrong, if you figure out the right formula, all those sales can be amazing. But without the right formula, you could just be working your butt off for nothing.
Now, before I jump into this concept, check out these tips and please know that “success” is also about your service, your quality, your people, etc. But for the purpose of this conversation, we are discussing what makes a business financially successful. You may also want to consider contacting a business expert like Andy DeFrancesco who can give you perfect tips and recommendations on how you can establish and achieve your business success, you should also learn the benefits of working on a salary.
WHAT’S THE SECRET TO A SUCCESSFUL BUSINESS?
The reality is a successful business is actually defined by the profits it makes as well for the HR management. Business in nowadays can outsource this processes to get better results, there are professionals in payroll administration services that can help business reaching their goals.
Notice I did not say the profits the owner makes. Way too many small business owners confuse the money they take home as both profits and the company being “successful”. The reality is, for many local small business owners, the money they have been taking home each week isn’t profits at all.
You see, you pay yourself as both an “employee” who “does” the work and then as the business owner with the business profits. The problem is, if you only make enough to pay yourself as an employee in your business, you actually don’t have profits.
You actually have just created a job for yourself vs a business. I cover this in the podcast on a regular basis and I talk about this in greater detail in this video: Where Do Owner's Wages Go in the Profit & Loss Income Statement? | How Should an Owner Pay Themself?
THE STAGES OF A BUSINESS TIE INTO THE PROFITS YOU ARE MAKING
While each of the 6 stages of a business has unique attributes to them, one of the common themes has to do with the profits the company is making. But not just the profits, more importantly, the understanding of those profits.
So many business owners focus on creating more sales in their business and not on how to create more profits. They hide their head in the sand and assume that as long as they are putting money in their pockets, they are successful and that just isn’t true, you need to invest in other thing that will add a lot of value like using the top boutique PR agency Dubai for their public relations or getting content marketing services.
It is only in the later stages of their business that they discover that true success only happens once they start to understand their business numbers better.
(To learn more about your business numbers check out the Know Your Business Numbers Course)
WHAT STAGE IS YOUR BUSINESS IN?
Now that we know that profits play a huge role in what stage our small business is in, what other ways can help you determine where you are in your business journey?
Each stage has some unique characteristics, and you might be surprised to find that even a 5-year-old business could be stuck in the 2nd stage. So, let’s take a look at each stage so you can determine where your business currently sits today.
If you prefer video, here is a video I did on these as well: What Stage of Success is Your Small Business In? | The 6 Stages of a Small Business
STAGE 1 – LAUNCHING
Every small business starts here. Even if you bought your business from someone else, it launched at some point.
It is an exciting time! You are investing a significant amount for working capital and making the entrepreneurial leap to be your own boss. You are grabbing the tiger by the tail and carving out a future for you and your family.
It is scary and exhilarating at the same time!
Some of you did your homework, some of you just jumped right in, and some of you ended up an accidental business owner. But no matter how you did it, you started in the launching stage.
You have high hopes for big profits but at this stage, it is just a concept. Once you take that first official sale, you jump into stage 2… the surviving stage!
STAGE 2 – SURVIVING
You are now helping customers and trying to survive and make a living. You are learning from your mistakes and typically you are living job to job.
Unfortunately, for many, they are paying the bills of the business, but they still aren’t taking any money for themselves. In addition to this, one should not forget to settle fees for Donor Advised Funds to have a smooth-flowing business. Everything that comes in, quickly goes back out.
They are working 60, 70, 80 hours and rarely get a day off. It is all about hustling to survive.
It takes everything you have to keep the business going. For some of you, you are reaching into your savings to survive, or using tools and services like a financial planning short pump in order to get out of the red safely. It takes everything you have to keep going. You feel defeated and often think of throwing in the towel. You might have some good sales, but for some reason, you still aren’t making any money.
By the way, over 50% of the business that are started, crash and burn at this stage. They immediately move to stage 6 and the business folds before it even really got started.
They are focused way too much on their competition vs being focused on the pain point they solve.
Business Owners stuck in the surviving stage are working their butt off. They just don’t know how to turn a profit. By not knowing their business numbers, they never gain traction on how to move to the next stage. If you will like to know more investment options to try, use this link to learn to trade forex.
STAGE 3 – EXISTING
There are some really good businesses in this stage. They are strong, steady small businesses that have good day to day business. They make enough to cover the bills for both the business and personally.
The owner is typically still working tons of hours still, but they can breathe. They are living job to job and need to hustle, but they can take a day off or vacation and know that the business will survive.
Since they are doing ok, they rarely pay attention to their business numbers.
They tend to make their money as an “employee” vs an owner. Because of this, they don’t maximize their profits. They leave money on the table and they struggle to take the business to the next level.
Some folks are perfectly ok staying in this stage. They have a good life and that was always their goal.
For others, they know the business can be so much more but just don’t know how to take the business to the next level. The problem is, they are still working way too many hours “in” the business vs “on” the business.
STAGE 4 – GROWING
Small businesses in this growing stage have made the tweaks needed to grow their profits and their sales.
All the sales in the world mean nothing if you don’t have any profits. Remember, a $350,000 business can make more profit than a $1,000,000 business. As hard as it is to believe, there are people doing almost a million dollars and all they do is earn the same wages as they would working for someone else.
Businesses in the growing stage have started to crack this nut. They realize that in order to grow, they need to tweak their business.
They focus on profits. They focus on improving their processes. They start to hire people and expand their current team. They are no longer the hardest working person in their business. They have hired folks to delegate tasks to so they can focus on growing the business. If you are in this stage of your business, you may consider investing in a candidate management system to help you filter the job candidates and find the right people to work for you.
They are diving into their business numbers and using these numbers to make smart decisions on pricing, how they spend their money, which equipment purchases have a great return on the investment, etc. If you run a local HVAC company, this is also the stage where you may need the services of an expert in bookkeeping for hvac companies to keep track of your finances.
This focus starts to lead to more profits because they are paying attention and making smarter business decisions.
They are finally thinking like the CEO of their business. They are not just paid as an employee, they are transitioning to being paid via an owners draw and can finally start working fewer hours. They are working smarter not harder. They are finally working “on” the business, not just “in” the business.
(To learn more about your business numbers check out the Know Your Business Numbers Course)
STAGE 5 – EXPANDING
Very few local businesses rise to the level of expanding. Most settle happily into growing and making good money.
Those with dreams of world domination hop into the expanding stage. They have goals of opening multiple locations, taking on new markets, and growing to a multi-million-dollar revenue type business. A fleet of used heavy duty trucks or brick and mortar stores in multiple towns is the dream they typically have. The need for your own warehouse may also arise when your business starts to grow. If that is the case, you may invest in a warehouse management system to effectively manage your processes. Growing business also means growing number of employees. You may need more people for CDL Truck Driving Positions, sales and customer service positions.
As an owner, they are no longer “working” in the business. They are the conductor of the orchestra if you will. They are spending their days and nights on how to keep growing the business. Knee deep in marketing and finding ways to hire, train, develop and leverage multiple teams.
They are paid 100% as an owner. They are using business numbers to identify trends, opportunities and focus on staying ahead of their competition. They focus on the brand they are building.
These are the competitors that those in the surviving, existing, and growing stage tend to focus on when they shouldn’t. You can’t compete with them. They are operating at a different level.
They leverage processes and systems to expand their teams, their locations served, and typically have bigger marketing budgets. Some day this might be you, but for now, focus on improving your business and not chasing these businesses. To help you more on your local marketing strategy and local lead generation, check Joe Troyer on LCT.
Remember when you were launching? This was the type of business you hoped to be someday. This is also the stage where business owners usually start planning their estate with the help of a will and trust attorney.
STAGE 6 – ENDING
The ending stage is a complicated one.
Some folks come to this stage from the surviving stage. They can no longer stay afloat and just close the doors. The financial burden of running the business just became too great and they had to throw in the towel. It wasn’t from a lack of desire or hard work. It was due to not being able to make the profits needed to survive.
Other businesses arrive at the ending stage due to retiring. Think of the 30-year plumber that finally calls it a day. They will either just close the doors or sell the business to a buddy or one of their employees.
Another group, will build a great business and have an exit plan to make good money from selling the business. Maybe they have a franchise and just want to get out. Or maybe they have a successful landscaping business, and a larger landscaper wants to buy it.
While there might be many paths to this stage, it really does bring to an end the life of the business of the original owner’s dream.
WHERE IS YOUR BUSINESS?
Now that you have a better understanding on the stages of a small business, let me ask you… Where is your business currently?
Are you working “on” the business vs just “in” the business?
Are you focused on improving your processes and systems”?
Are you diving into your profit and loss income statement monthly?
Are you tired of working so dang hard and you are ready to start earning the money you know you could?
Let’s work together on helping you build that business you always dreamed of. I’d love to be a small part of your journey.
Let’s work together on getting you the profits you work so hard for. Profits that you can earn by working smarter, not harder. With the right focus, you will be amazed at what you can accomplish!
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