Deciding whether or not to grow your business or continue the status quo is one of the biggest decisions any small business owner makes. On its face, the question may seem like a no-brainer. After all, growth is a positive thing, right? But some small business owners lack the delegation skills, while others don’t possess the technical skills needed for growth. Still others lack the time or knowledge involved in raising the capital needed to expand.
Over the past 30 years, Stage 2 Planning Partners founder and principle Josh Patrick has grown his business from a two-person startup to a highly respected independent financial services firm. He says there are three basic types of businesses, and each faces unique challenges and options when it comes to the question of expansion.
The vast majority of U.S. businesses are what he terms “microbusinesses.” Many are new startups, but some have been in business for years. Sole proprietorships and one-man operations fall into this category. Common challenges for these types of small businesses include maintaining a steady income stream and lack of time needed to think and act strategically. Reflecting on his career, Patrick says his first “break” came not from strategically managed growth, but as the result of one of his major competitors going out of business. and As a result, he was able to acquire their assets.
Traditional Small Businesses
The second type of business, “traditional small businesses,” typically have between five and 25 employees. Owners of these types of businesses are often comfortable with this level of success and have no desire to grow beyond it. Owners who wish to grow beyond this level must generate capital for growth and learn the skills needed to manage a larger organization.
Speaking from personal experience, Patrick says owners must possess or develop strong delegation skills in order to successfully move to the next level. “I was convinced that no one could do anything in the business as well as I could,” says Patrick. “I wasn’t ready or willing to let go and have others help run my company.”
Lower Middle Market Business
The third type of business, according to Patrick, is the “lower middle market business,” which is comprised of successful businesses which can be sold. These types of businesses can operate for long periods of time without the owner’s direct involvement. Patrick says these types of businesses typically have more than 25 employees and “function with tactical excellence.” The truly successful businesses of this type have also achieved what he calls “strategic excellence.”
Patrick says reaching this level is the toughest transition and involves trusting your employees and allowing them to make mistakes. It also involves creating dashboards to help owners monitor a variety of matrices with the ultimate goal being to remove themselves from the daily operations of the company.