For most business owners, the idea of hitting the 7 figure mark is a huge milestone akin to winning a marathon, but so few businesses fail to ever reach it.
The average turn-over for UK businesses in 2020 was just under £727,000. With nearly 76% of businesses having no employees other than the owner, it’s clear to see why many owners get stuck in the rut of making just enough to earn a living without ever reaching the point of taking the business to the next stage.
It goes without saying that strategy and planning is vital for hitting 7 figures, but it’s also important to have the drive and mindset to push past simply being comfortable earning enough to keep the business ticking over, and instead begin to focus on exactly how you can reach your next financial goal.
From my own experience, scaling a business up from a home office and a shoestring budget to 6 depots across the UK employing over 120 people, there are a lot of pitfalls to try and avoid when attempting to reach this milestone, and it’s vital to be aware of them as you begin to move towards expansion.
Cashflow is the lifeblood of your business and having a fool proof plan for expansion is next to useless unless you have the finances to implement it and grow.
So many businesses fall into the trap of simply offering the lowest price possible for their goods and services to attract more customers, and while this may fill up that order book for the next 3 or maybe even 6 months, it’s also starving the business of the funds it needs to grow.
Business owners often set their prices to pay themselves a relatively decent wage, and plod on earning themselves an adequate living rather than a great living, resulting in that 7-figure milestone being little more than a pipedream.
By testing the market you are in and setting your prices to reflect current and future overheads, you give yourself enough financial wiggle room to actually grow. Pricing as though you have employees to pay right from the start will allow you to cover overheads while adding in a margin for yourself.
The key is to aim for mid to high level pricing by doing your research and providing real value in your services than your cheaper competition could afford.
Build the right team
As your business begins to expand, and your pricing structure enables further growth, you might find you have a model that works well in one area and could easily be replicated in another with the same success.
It’s tempting to want to retain control in every area, but the reality is that you simply can’t be in two places at once, or oversee every moving part of an expanding business. Being able to recognise this means you must invest in the right people who can replicate your work in those other areas.
This can be especially challenging but being able to successfully hand the reins over to other people is a key step in growth, and requires you to have trust and faith in those you hire. So many business owners fall into the trap of thinking they know everything there is to know about their business, and this can end up stifling not only their own growth and learning, but also their employees’.
Building the right systems and processes and having an operations procedure that can be used by your managers to run those other areas of the business is paramount to expanding beyond trying to manage everything yourself.
It’s important to develop these systems with metrics in mind that you can use to review and monitor the success of your operations. Having clear KPIs and measurable goals will allow you to check for quality, and figure out what works and what needs adjustment.
Know your numbers
Having a solid grasp of your numbers isn’t only vital for reaching the 7 figure milestone, but it can also be the difference between making it past the 5 year mark. Only 45.4-51% of businesses manage to make it to 5 years, with only 1 in 3 businesses surviving ten years. You can do far more to mitigate these risks by knowing your numbers inside out.
Running a shop requires you to know the cost of opening that shop for the day before you’ve made your first sale, and this can be applied to nearly any business model. Without knowing your numbers from the ground upwards, you’re likely to fall into a cycle of generating sales and seeing a profit on paper, but seemingly never having an adequate cashflow.
Breaking the data down will allow you to see the costs of generating an enquiry, making a sale and the cost of delivering that sale. This in turn will allow you to see how your costs are affected by hiring another person, or expanding to another area while taking your overheads into account.
All this requires knowing your own balance sheets, your profits and losses, and having a solid strategy in place for managing your accounts. By keeping this in mind with every decision you make, you can set clear financial goals that can be broken down and measured every step of the way. Suddenly generating those 700 plus sales to reach your next financial goal becomes a far less overwhelming endeavour, because you’ve got clear, measurable metrics for every step of that journey.