We’re used to thinking about growth, scaling, and taking one company from the local neighborhood to the international landscape. But while some startups manage to reach the whole globe, the truth is that the vast majority of companies cannot grow their operations beyond a certain point.
And this is quite intriguing.
The questions I’ve been asking myself for some years already are:
Why do small companies stay small? Don’t their owners want to scale the company? If they already have a stable business, why can’t they simply scale and earn way more money?
You see, as anything in life, the hardest part is always getting started, and they’ve already passed that stage.
So, after a point in which you’re in business for several years and everything’s going apparently OK, you should be able to grow, right?
But these companies still don’t manage to do it right.
For some years I thought the business owners simply didn’t want to. Perhaps they were happy with their business’ current size, they didn’t want things to get bigger.
But wouldn’t that be a tremendous shortsightedness?
So, I just assumed that obviously a lot of companies would like to grow and earn bigger profits. After all, that would allow them to have more impact in the world and the owners would benefit from a better quality of life, as well.
That’s why I’ve realized that the harsh reality is that sometimes we’re so focused on our way of doing things, that we cannot pull ourselves out of the water and have a clear vision on what’s stopping us from growing.
I believe that’s exactly what happens to the big chunk of small companies. The business owners understand their business better than anyone, but because they are too influenced by their way of working and doing things, they cannot make the changes their businesses need to scale.
So, in this article, we will highlight what are the 3 most important reasons why small businesses stay small, and what the business owners should be doing to overcome these barriers.
#1: No Prioritization and No Delegation
The first and most relevant reason, by far, is the fact that in a small company, usually each employee and, specifically the owners, do too many things.
How often you see small businesses that are run by a family, in which the company owner does everything from opening the doors in the morning to making sales calls, to manually invoicing customers, to cleaning the bathrooms when he can, and so on?
It is really common to see a profound lack of understanding of what’s the most important thing that each person can do.
And this is especially critical for the owners because they’re the ones who are responsible – and have the interest – for growing the business. So, why aren’t they only focused on growing their business? Why are they cleaning bathrooms, opening doors, and invoicing customers?
You see, the usual excuse is that they don’t have money to do it another way.
Typical small business owners believe that if they had more money, they probably wouldn’t need to do the things they do every day – they could delegate more. But because they lack that cash flow, they have to do all the work by themselves.
What people do NOT realize is that that’s precisely the reason why they don’t generate more money in the first place. It’s the old chicken and egg dilemma.
Because you do not prioritize, delegate, and focus on what only you can do, the company cannot generate more revenues and, ultimately, stays small.
This is what you need to do if you want to start scaling your business:
- As a business owner, make a list of everything you do every day
- Think thoroughly about what are your biggest strengths and what are the things in which you should spend 100% of your time, if it was even possible
- Now, look at the list and see if what you’re doing on a daily basis already contemplates those things that only YOU can do
- But even more importantly, look at how your time is completely sucked away by things that other people could do.
- So, you must establish a plan to gradually start delegating all the things that you shouldn’t be doing to other people, so you can focus your time on YOUR tasks. Often these are exactly the points that will lead to increasing demand for your company’s products or services.
- Do NOT fear to delegate. Find the right people and be ready to trust them. Initially, they will be slower than you, and they’ll do mistakes. But in two or three weeks, they’ll be doing their job quite nicely – if you find the right people – and it is very likely that all of a sudden they’re doing their job even better than you would do it!
#2: Lack of technology literacy and willingness to try new things
The second issue we can easily identify as one of the main causes for small companies staying small is related to the way people work in these companies.
Usually, you’ll find a lot of manual-handled processes. Things like manual invoicing, or using excel files to manually record customer information or managing stock, or manually counting inventory, you name it.
These manual processes are often in place given the following reasons:
- The owners aren’t aware that there are technologies to automate all these processes
- Even if they are aware of such technologies, they don’t want to pay for the recurring monthly fees to use them
- Business owners don’t usually calculate that the time saved in manual processes can easily be allocated to generating way more revenues that the monthly fees they’d have to pay – given their lack of prioritization and delegation notions we’ve addressed in the previous reason.
- Usually, the owners aren’t used to thinking that there’s a way to streamline operational costs because this is the way they’ve always done things
You see, there are some preconceptions that derive from habits, and these are tough to overcome.
So, here is my humble advice to any business owner that is currently facing this scenario:
- Above anything else, having the passion for learning and the curiosity to find new ways of doing things is absolutely crucial, as that’s the only way to avoid getting stuck in the “that’s how we’ve always done things here”.
- List all the manual processes currently in place in your company
- Then, calculate or estimate the average amount of time that each person takes to accomplish those tasks
- Now, multiply their hourly rate times the number of hours and you’ll have your monthly average cost in manual processes.
- Finally, there are multiple ways to find technologies to replace manual processes. You can simply Google for a problem such as “automatic invoicing software” (as an example) or you can reach out to any business advisor or consultant so he helps you streamlining all your operations, cutting costs and focusing your employee’s time in growing your business.
Just imagine what you can accomplish if your workforce can focus on growing the business instead of performing manual tasks that can easily be automated.
#3: Weak understanding of Marketing
I’m sure there are a lot of other things we can pinpoint, but I’d select as the third main reason the lack of understanding of how to properly market a product or a business.
If you read my post on why you don’t need to have a management degree to run a successful business, you’d probably say that I’m contradicting myself when I state that a small business owner should have more marketing knowledge.
The thing is, when I mean Marketing knowledge, what I’m really talking about is the core and nuclear marketing notions, not the tactics and shortcuts that we’re used to reading online.
What every business owner should know about their customers is:
- Who is your typical customer?
- What’s his lifestyle?
- What are his burning pains?
- Why does he buy from you?
- What does he prefer and what does he hate?
- Which channels does he usually use to buy other products such as yours?
- What other things does he also buy?
You see, I’m sure you agree that an owner that has run a business for more than a decade should know exactly who is his type of customer – better said: who are the 20% that accounts for 80% of my revenues?
However, what we see is that a lot of time, small companies aren’t concerned that much about knowing their customers.
What these owners seem to lack is the capability to see beyond the facts and the numbers; to really know customers better than they even do themselves.
The capability to listening to customers and empathizing with their own problems and difficulties, and thinking of ways to add value or solve those problems.
It is quite common to see a small company completely ignoring the cross-selling opportunities (selling other items when the customer purchases a typical one) just because it disregards the importance of knowing its customers; the importance of seeking other ways to add more value to them.
So, what should a small company do to increase its “Marketing knowledge”?
- Marketing is not about promotional tactics and tricks; it is about understanding your customer so well that you can explore other revenue streams or increase the average revenue per customer because you find a way to genuinely solve a specific burning pain.
- So, my advice is that you go back to basics. You must ask yourself once again the fundamental questions of marketing:
- How is my business unique?
- What story do I want my customers to tell their friends about the products they buy from my company?
- What are the values I want them to perceive about my business?
- And then, start dwelling on more tactical stuff such as channels, researching online or in-person to understand where do you customers usually buy, from which companies, and why.
I’m not sure if the whole marketing notion was clearly transmitted by me. What I want to highlight is the importance of going back to the core fundamentals of any business:
We’re here to solve an issue, to help a specific set of people and to improve their quality of life. So, what do we do what we do? Why would anyone pick us instead of any other company? What does my company stand for?
Unfortunately, as the days get busier and busier, small companies and brand new startups often forget all these questions. And, as in turns out, having the answers to these questions quite vivid in our minds will be the tool that will allow us to make great calls that are perfectly aligned with an overall strategy.
And without that, there’s no growth.
And, this is it, guys!
Let’s quickly recap the three main reasons for small companies staying small:
- No prioritization and no delegation
- Lack of technology literacy and willingness to learn
- Week understanding of marketing
Ultimately, it is my true belief that by solving these 3 core barriers, you’ll find the pillars to grow your business.
First, you need to understand that growing means standardizing processes and specializing people. As a business owner, you will have to become more and more focused toward what are your tasks as a leader, and, specifically, what only you can do and know how to do.
You must also understand the importance of automating processes and streamlining operations. Putting the right people on the right sits, and automating everything that can be automated. That will allow you to allocate your employees to roles that cannot be automated and that are highly correlated with growing the company or guaranteeing that operations run smoothly – in an efficient way, which reduces costs and generates more cash flow to invest in scaling.
Finally, as a leader, you must never lose sight of who is your customer and, most of all, what your business and brand stand for. How do you want to position your business? What story do you want people to tell about your brand? And how can you reach out to more customers or have the same customers spending more money with you?
Good luck with your journey.
And if you have any question or if any particular detail wasn’t clear to you, feel free to email me to firstname.lastname@example.org as I’m more than happy to help you.
Thanks for reading,