I’m sure you’ve heard the scary stat that 50% of small businesses don’t make it past year 5. That’s terrible.
You know what’s more terrible? That 50% tipping doesn’t happen until year 5, which means there are a whole lot of entrepreneurs and business owners struggling through those first 5 years. A whole lot more than the 50% who ultimately close up shop.
Yet the reason for the struggle isn’t that those business owners don’t know what to do. Goodness knows there is no shortage of information out there teaching and telling exactly what to do.
But there's the rub: There is so. much. information out there that the point gets missed: the conversation becomes what information is good and what’s bad instead of whether the information is the important thing or not.
Because guess what? It’s not about the information. If it was about the information, businesses wouldn’t be able to get to year 5. But they do. They sputter to year 5 on that information and then they can’t get any further.
If it’s not the quality of the information available, what is it?
It’s the order in which they implement that information.
And that’s something we never talk about: We talk about strategies and steps until we’re blue in the face but we never talk about what order we should do those things. And that order - that sequencing? It matters a lot.
It makes the difference because when you’re not doing things in the right order, the right sequence, you feel:
And like everyone else, you’re craving more simplicity and more focus and more profit and more bang for your time’s buck, while trying to figure out if that’s actually a thing that really happens (you’re pretty sure it’s not) and if it is (which again, you’re pretty sure it’s not), when is it finally going to happen for you? (For the record it is a thing that happens, and it can happen for you).
Understanding what you need to be focused on and when you need to be focused on is actually really simple. In fact Harvard Business Review spelled it out back in 1983 when it identified the 5 stages of growth all small businesses move through. I’ve adapted those stages to online, microbusinesses, and that means understanding what you need to be working on is in fact simple. So simple you can figure it out in the 3 steps I outline below.
Step 1 CLASSIFY: This is where you get real with yourself about where your business is at, and identify which stage of growth you’re in.
Step 2 ASSESS: Once you know what stage of growth your business is in, you can assess your current goals, priorities and activities to see how well they match (or don’t match) the priorities you should be focusing on given where you’ve identified your business is at.
Step 3 PRIORITIZE : Finally, you’ll create a new set of priorities for your business, ones specifically designed to get you back on track to multiplying profits and compounding results.
This all sounds pretty simple, right?
Maybe you’re thinking too simple, right? Like “ok Michelle, you’re saying all I have to do is understand which of 5 stages I’m in, and all my problems will be solved?”
Well, yes. (and no).
Here’s the catch: Building a business is simple, but it’s far from easy.
So yes, if you know what stage your business is in (like really know, not lying to yourself know) then yes, following the priorities and focus for the stage you’re at is all you need to do.
The trick is in doing actually doing it.
And we entrepreneurs like to screw this up in 2 common ways:
First, we love to lie to ourselves about where our business is truly at. We like to think we’re 2 or 3 or even 4 steps ahead of where we really are, so we overcomplicate and work on the wrong things all. The. time.
And the more we lie to ourselves about where our business is, the longer it takes us to get to where we want to be. Which leads to more lying to ourselves.
There’s also nothing at all easy about seeing the reality of where we’re at after we’ve been telling ourselves a different story, and then having the determination to make shifts in our priorities to reflect it. That takes a strong mindset.
(and yes I changed all those pronouns to ‘we’ right there because I’m not exempt from this either).
So my challenge to you today is to be both honest and forgiving with yourself and your business as you go through this exercise, and have a real look at where your business is today.
Not where you want it to be or where you #pinkypromise it’ll be a month from now. Where it is today.
Like I said: Simple but not easy.
Second, once you’ve been real with yourself and know what your priorities and focus areas are, you have to have a strategy that supports those priorities and focus areas.
You need to be able to look objectively at what is and isn’t working for you within your new area of focus, and where you might need to make changes to your strategy in order to improve.
That means your biggest leaps from stage to stage aren’t coming from a formula, a course or even everybody’s favorite 20k mastermind. They’ll come from you doing the work.
The good news? Today we get started.
Here’s the deal: we all like to think our businesses are special snowflakes (and I for one fervently believe that every business is unique and needs its own strategy), but while there are a zillion different custom strategies and business models out there, there are 5 stages of small business growth, and if you have a small business, your business fits in one of those 5 stages.
Before I tell you what the stages are, I’m going to flip things over and ask you a few questions first. Take 30 seconds and give me a Yes or a No for each of these (no ‘kinda sorta’, ‘maybe’ or ‘I wish’ right now. Save the in betweens for later, right now I want a yes or a no).
Now that you have some unfiltered answers in the bank, let’s define the actual stages of business growth.
Stage 1: VALIDATE
Stage 1 businesses have 1 goal and 1 goal only: determining if you have a valid business idea. This means you’re spending your time talking to potential customers, making sales pitches and delivering solutions to your early customers all the while learning what’s working and what’s not about your offers (and your value and your results) as they relate to your customers.
A Stage 1 business is simple: you’re doing everything yourself and directly supervising any small help you may have. Systems and planning generally don’t exist because you’re figuring it out - and adjusting - as you go. You’re winging it, and that’s exactly what you should be doing.
Stage 2: SALES:
Stage 2 businesses have proven they have a product or service that’s in demand from a group of clients or customers. In short, the business is viable. In stage 2 the challenge shifts to learning how to create predictable revenue, which means learning how to create predictable marketing efforts that result in a predictable number of leads that convert to a predictable number of paying customers.
At this stage you’re still doing the vast majority of the work, but may have some support. There are still no formal operations or policies and procedures in place, although they are forming in the shape of marketing and sales systems. Revenue is becoming predictable and consistent as the marketing and sales systems become predictable and consistent.
Stage 3: FOUNDATION:
Stage 3 businesses have created a predictable revenue engine - that is, they have a marketing and sales system that leads to a predictable number of customers (and revenue) each month and those customers are achieving the desired results and receiving their desired value from the product. The front end, client-facing side of their business is thus relatively stable.
The back end, or operations side, is not at all stable. Most would call it a mess. Stage 3 is about fixing that and creating the baseline policies and procedures that will allow you to step out of the day to day. Stage 3 businesses are beginning to hire key team members and getting them trained.
Stage 4: EXPAND:
Stage 4 businesses have stable marketing and sales, stable revenue, stable results and, as a result of their work in Stage 3, stable operations and a growing team. In Stage 4, therefore, the focus shifts to how to grow, and how to grow fast (if fast growth is desired).
The team is expanding both in number and in talent level/competence, and you’re stepping further out of the day to day to focus either on new projects or removing yourself altogether to to focus on a new business entirely. Cash flow can tighten in Stage 4 as money is allocated to the expensive process of growth which includes scaling up marketing systems and bringing on staff. The most important questions you’re dealing with in Stage 4 is around delegation and cash.
Stage 5: MULTIPLY:
Stage 5 businesses are mature businesses. Their priority is to consolidate and control the revenue generated by Stage 4’s growth (and make sure it’s converted to profit and margin now that growth has been achieved) and to retain their entrepreneurial culture now that they’re established.
I have a secret for you: 90%+ of the entrepreneurs using this Master Plan are going to be in stages 1, 2 or 3. Stages 4 + 5 are the playing field for sophisticated businesses that have been around the block. The vast majority of small businesses are in one of the first 3 stages, and many even have long, successful runs without ever leaving stage 3. So if you’re in an early stage and not feeling great about it, flip that right now. You’re exactly where you need to be.
[Step 1]: ASK YOURSELF:
Now that you have an honest assessment of what business growth stage you’re at, it’s time to have an equally honest look at what activities you’re currently prioritizing and whether or not those are the activities that’ll best serve your business right now.
Start by auditing your time and answer me this: What percentage of your time are you spending on:
Jot down your best guess before moving to the next question.
Now, it’s time to look at how that aligns with where you should be spending your time.
If you’re in Stage 1: VALIDATE, your time should be spent on:
If you’re in Stage 2: SALES, your time should be spent on:
Pro Tip: This is the stage where I see most businesses struggle and, frankly, where statistics tell us most businesses fail. That’s because this stage is hard - you’re going from your own hustle to the beginning stages of creating a living thing that can breathe on its own. If you’re in Stage 2 and stuck, give yourself a break and a pat on the back- you’re doing the work, it will pay off.
If you’re in Stage 3: FOUNDATION, your time should be spent on:
If you’re in Stage 4: EXPAND, your time should be spent on:
If you’re in Stage 5: MULTIPLY, your time should be spent on:
[Step 2]: ASK YOURSELF:
See a few things that didn’t quite line up? If so, congratulations - you just joined the 98% of us entrepreneurs who have a few things to work on. We’ll solidify your new priorities in the next step.
Now that you know what stage you’re in and what that means about what you should be working on, time to reassess your current priorities and start building in appropriate focus so you can quickly move to the next stage and get on with things.
Identify what you should be doing by answering the questions listed below the stage you’re currently in. If you’re not currently addressing one of the answers you give, and it’s not on your list to address later, congratulations! You’ve identified a new priority.
Because once you complete the answers to each of the questions in each stage below inside of your business (as in actually complete it in a live manner, not just in theory in your journal), your business will have magically transformed into one that’s ready to catapult to its next stage of growth.
Pro Tip: At this step everyone wants to know how much money they should be making at each stage. That’s not a question I can answer because it’s different for every entrepreneur and every business. I’ve worked with businesses who are making 50k a month and are in Stage 1, and businesses making 5k a month who are in Stage 3. It’s all about how your business is set up.
Stage 1: VALIDATE
Stage 2: SALES
Stage 3: FOUNDATION
Stage 4: EXPAND
Stage 5: MULTIPLY
[Step 3]: ASK YOURSELF:
Whew. That was a lot. Still feeling a little uncertain that what you outlined will move the needle for you the way you need it to? I get it, I threw a lot of information at you (a lot), and even if I hadn’t, it’s next to impossible to make decisions for your own business the way you would for someone else’s. (The cobbler’s children have no shoes and all.)
Stick with me and I’ll help you through.