So, what’s holding back more than 2,500,000 businesses across the UK from crossing that coveted £1m mark?
Shweta Jhajharia, founder of The London Coaching Group, has worked with 100s of businesses and has found that there are some striking differences between the ‘micro’ business owner and the owner of a £1m enterprise.
The first year of the life of a business is the most critical. It is the start-up year that defines whether the business has the potential to reach the £1m mark.
Starting a business requires no formal education or qualification – even the process of going online and registering a new company can be given to a friend, partner or child.
This low bar to start also means that most people assume that what they know is likely to be enough. They then spend the entire first year of existence bravely finding their footing and ‘learning to walk’.
What they fail at and what they focus on develops fundamental skills at this early, critical stage that will allow them to break through the £1m mark later on.
2. The “complexity ceiling”
The start-up phase can build pillars to support a ceiling that the business eventually hits.
This is when the business becomes trapped in what is sometimes called the ‘Hindu rate of growth’ – an average growth rate of around three per cent each year – just enough to keep pace with inflation.
This happens because the way they began, as a start-up, has meant that at this point, further improvement and growth is too complex for them to handle and pursue.
In order to break through this ceiling, new systems need to be employed to allow for growth while at the same time managing the increasing complexity of the business.
It is at times like this that it helps to have an outside party shine fresh light on the business processes. This allows someone who isn’t so close to the company to identify the issues, and provide solutions to decreasing complexity and increasing leverage.
3. The language of numbers
What is often forgotten, or worse yet, never learned by entrepreneurs, is that business speaks a very specific language – the language of numbers: profit, sales, cash flow, receivables, assets, equity, ROI, average value sale, conversion rate – these are all numbers that the professional business person not just understands, but is also able to leverage for every decision that they make in their business.
This is the language that every successful owner is fluent in – and must be fluent in – in order to break through the £1m mark. In every area there are key metrics to measure, estimate and average in order to plan for sustainable growth.
The relative importance of running this business as a ‘business’ increases as you lose the ability to be personally involved in every activity the business undertakes. Understanding numbers helps you keep track of this growth systematically, without having to do everything yourself.
If you have been unsuccessfully targeting this £1m threshold for some time now, and keep hitting that complexity ceiling, it might be time to review the techniques you have been using since you were a start-up and consider making some major changes to your decision-making process. The good news is that reinvesting in personal growth and learning can help you reach this benchmark, perhaps within the year!