Hi 👋 - Bruce here.

Happy Friday!

In today’s article I’m going to talk about something we find ourselves saying frequently to small business owners we work with and talk to.

"What got you here, won't get you there."

This article takes about 4-5 minutes to read and might help someone solve some problems and have less moments beating their head on the desk or wall.

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“What got you here, won’t get you there.”

The formula for your business success to-date is likely not the same formula for continued success. What’s the saying about insanity? Insanity is doing the same thing over and over but expecting different results.

If you’re a small business owner, it’s best to jump ahead of ever reaching insanity and recognize early when it’s time to change the formula so let’s discuss what that looks like.

First let me give you examples of what I’d put into the ‘what got you here bucket’ based on what we commonly see.

• In service businesses, the owner delivers a significant portion of the revenue.
• The owner is the only person who can sell for the company.
• The owner doesn’t understand the data or the ‘story’ of the business.
• More specifically, the owner doesn’t understand their gross profit.
• The owner drains the business of most of its cash.
• Making decisions based on gut or the bank account.
• The owner neglects bookkeeping.
• The company spends too little/not enough money on marketing.

I could go on and on but you get the idea.

Now let me tell you why these are a problem or in other words, ‘why they won’t get you there’.

• If the owner delivers a significant portion of the revenue, there’s never enough time to work on the business…vision and strategy. Profitable and purposeful growth needs vision and it needs strategy.
• If the owner is the only person who can sell for the company, the owner is stuck as the one and only effective sales person. There’s only so much selling one can do plus, you have the same issue as above where you cannot focus enough on the business.
• If the owner doesn’t understand what their numbers are telling them, or the ‘story’, they’re guessing at what to do to grow or improve the business and where to focus. At a certain point you have to start making decisions based on reality, not perception.
• If the owner doesn’t understand gross profit it’s really hard to understand things like your breakeven, sales required to maintain the desired profit, how to improve your pricing model, how much they can spend on payroll, marketing and overhead, etc.
• If the owner doesn’t understand their cash flow and is removing too much cash from the business, even while profitable, they might stunt their own growth. It takes cash to allow growth to happen, especially if it’s a business where they sell a product.
• When the owner makes decisions based on their gut and the bank account, bad decisions are bound to happen. This isn’t to say you shouldn’t listen to your gut, we believe your intuition can be a superpower as a leader, but there’s certain things you need to use data to help make decisions for. Here’s a link to an article we wrote about this topic if you missed it.
• When bookkeeping is neglected, it can impact the data which allows you to understand the story happening in the business. This might be OK for that hobby business, but it’s not for serious business owners. It can also be costly when it comes to filing and paying taxes.
• Spending too much or too little money on marketing is relative. This ties into the other points about understanding your data and the story it’s telling you, but sometimes businesses need to spend more in order to unlock some growth, in other cases they’re able to decrease spend (as a percentage of revenue) as they grow. We see both.

These are just a handful of examples of ‘what got you here, won’t get you there’.

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Earlier in the article I mentioned that it’s best to jump ahead of ever reaching the point of insanity, where you’re doing all the same things that got you here but expecting it to take you there (wherever there is but I’m assuming it’s bigger with more profit).

So how do you do this? A great place to start is taking control of the numbers that steer your business. These are what we refer to as revenue, profit and cash flow drivers.

Here’s links to details on each if you’re not familiar with them.

​Revenue​
​Profit​
​Cash Flow​

These numbers help you understand your story and what needs to change in order to ‘get you there’. ‘There’ could be 3x revenue in 2 years, improving net profit % from 9% to 15%, hiring that Director/VP of Operations so you can start getting out of the day-to-day weeds of the business (or take time off), actually start paying yourself, etc.

When you understand these numbers, you can begin to understand what you need to do differently in marketing, sales, operations, pricing, cost management, hiring or not hiring, cash management, etc.

It’s what frees you from saying, “I want to double sales this year and improve net profit by 8%”, but continue doing the same thing that led you to where you are now.

Here’s a great example. If you want to go from $1M to $2M in sales, what needs to change? Does anything need to change at all?

If you understand...

• how many leads are required
• what conversion rate you need on those new customers
• how many retained customers you need
• how many times customers need to buy and at what average amount when they buy...

...you can form a clear path to that $2M in revenue! From that path, you can evaluate if what you’ve been doing has the ability to achieve results in those 5 areas. If not, you know now something needs to change. Otherwise, you’re just guessing and spinning your wheels, likely working harder than you need to.

Too Long; Didn’t Read

1. Recognize what got your business here, won’t get it where you want it to go…and that’s OK.
2. There’s nothing wrong with needing to change the success formula, knowing when it’s time to do so can be difficult and frustrating.
3. Understanding revenue, profit and cash flow drivers help you know when it’s time to do things differently to see new/different results because you understand the story of your business.

We help small business owners do exactly this...take control of the numbers steering your business...so that you can understand the story and focus on what matters in your business. We're pretty good at it and we love to do it. If you need help with this so you can grow revenue, profits and your freedom of time as a business owner, reach out and let's talk.

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See you again next week.

-Bruce

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