Breaking down brick walls
Exploring the practical and psychological barriers to growing your business.
It’s common for businesses of all shapes and sizes to hit a brick wall at least once in their journey. This article explores the challenges facing entrepreneurs, and gives a 5 step guide to overcoming them.
Growing a business is a journey. In the early stages, with a great idea, limited resources, and an abundance of enthusiasm, many businesses start extremely well.
It takes bravery to start and then bootstrap a business. You live from hand to mouth, go for any scrap of business you can, and use your instincts to make tactical rather than strategic decisions.
Once the business model is proven, the enterprise takes on a completely different nature. When that momentum kicks in, many business owners believe they are on the right path in realising their maximum potential. For some this is true. But for most, this is a temporary reality as the good momentum can quickly come to an abrupt halt and the rollercoaster cycle of business highs/lows is about to begin.
Decisions become delayed as anxiety about the success of the business increases.
Urgency, cash flow and emotions dominate what the business does.
Successful business owners need to accept a constant level of uncertainty, and make it an ally instead of an enemy. Many even thrive on this change. As the rewards grow, so do the risks – and there’s no avoiding it.
If you feel like your business has hit a brick wall in terms of growth, you are not alone. Even the most highly regarded global businesses with long and established brands can hit a brick wall.
From practical to psychological
Running a business is defined by highs and the lows. When business is going well, you are hiring, making money and sales, growing a team, innovating. But even when things are going well, there are constant challenges – around finance, stock, product development, cash flow, team morale.
Running a successful business means taking care of these practical problems. Most of them can be dealt with given the right skills, a little knowledge, and lots of hard work. What holds business owners back from reaching the heights of the success we dream of is usually a different problem altogether. The barriers are often in our own minds, and can prevent businesses from growing to their full potential.
A psychological barrier is a deeply ingrained belief about your own ability or worth about the world. This belief is a limiting one – it isn’t real or accurate – but believing it makes it real enough to prevent growth.
The solution lies in identifying the barrier for what it is – a half-truth at best. From there you can begin to root out those limiting beliefs, and cultivate new, healthy ones instead.
Nowhere is this more evident than when trying to scale a business to the next stage. We’re not talking about creating a multimillion pound business, but things like taking on your first employee, renting office space, moving from one branch to two.
The loneliness barrier
Many business owners believe “I have to do everything myself. It’s me versus the world, and there’s no real support”.
And there’s a little bit of truth in this belief. As an entrepreneur, you walk a lonely road. You create your own vision, define your own terms, and create your own job description. You also have to answer to your toughest critic – yourself.
Yet you are never entirely alone.
One important resource that many business owners are able to tap into is local networking groups, which have increased tenfold over the last 10 years. There has also been a huge increase in enterprise centres, co-working opportunities, angel investment networks, and innovative resources designed specifically to support early-stage businesses.
Every business, from hairdressers to accountants, builders to online retailers, to wedding photographers can take advantage of these networks. Your Local Enterprise Networks (LEPs) can help with much needed advice and support. Many business owners also have mentors – usually experienced business owners within their own network, their chartered accountant, or bank manager – and their advice can be invaluable.
The first brick wall
Sooner or later, many businesses hit a brick wall. For entrepreneurs, it is a tough but salutary experience when they realise that the main obstacle to growing their business is, in fact, themselves.
The first brick wall occurs when the things that worked from day one – that have helped the business grow rapidly in the first few years – are no longer so effective.
When the roller coaster is heading down, self-doubt settles in. Too many business owners become reactive and lack the ability to respond with commercial acumen.
The dirty words of poor cash flow, unproductive staff, low profits, unsold stock, and unhappy customers become a reality, and raw emotion doesn’t help anyone.
When you’re no longer a start-up
The problem is that as a business changes from being a start-up to running a business day-to-day, the focus usually shifts to doing the same thing over and over again, rather than constantly changing direction by trying new ideas.
And this in itself causes issues.
Perhaps the team cannot handle a step up in the volume of business in a cost-effective way, so customer satisfaction slips. Or perhaps new leads are no longer being generated, or converted with any degree of certainty. New competitors, new legislation, or simply a shift in consumer demand, may have a sudden and detrimental effect on the business. Psychological barriers and fears compound and confuse these real challenges and lead to a focus on the wrong things.
The way business owners react to this is often to invest in sales or marketing resources, CRM systems, social media. However, the reality is that this will not necessarily address the real issues, and one of two things might happen:
1. Despite investment, sales drop and new business does not come in; or
2. Leads come in, but they are not the right type of leads. Either they are impossible to convert or they are not the right type of customer – unprofitable, time-gobbling, or out of kilter with your business plan.
There’s a reason for this.
What got you to the brick wall, won’t get you past the brick wall
In the early days, it is the founder or leadership team that is going out and making new connections, and there is an implied trust in that team. You are pre-sold. You are your brand. You are also watching the market with sharp eyes, seeing opportunities, changing strategies.
But in the second stage of growth, your focus changes. Relying on paid-for resources to do the watching for you, whilst your overheads, and the time needed to keep the business running day-to-day, both increase.
And so, unless you are very shrewd in terms of how you invest to get past the brick wall, you will find that you have invested £10,000, £20,000 or perhaps much, much more, with very little to show for it.
There are five potential solutions to these challenges:
1. Make time to work on your business, rather than working in the business. Those businesses where the business owner remains highly involved in growing the business, rather than running the business, are much more likely to be able to leapfrog the first brick wall.
2. Become more rigorous in your accounting. Produce proper monthly management accounts and also projections. Set targets for cash flow and put systems in place to monitor and forecast this, other than simply keeping an eye on the daily balance of the current account.
Know the brick wall is coming before you hit it!
3. Reconsider the role of business finance. 42% of SME business owners think of themselves as “permanent non-borrowers”, according to the British Business Bank’s latest Small Business Finance Markets report. However, the reality is that for many businesses an injection of business finance (either equity or debt) also brings with it much-needed external advice and support. When the cash flow heat is on, business owners all too often forget that they too have product and service choices in dealing with banks and lenders. There is always a choice and it is all too easy to make a reactive cash flow funding decision during turbulent times.
The partners listed in the Business Finance Guide all offer information and support, and link to relevant finance providers – or simply ask your peers, your accountant, or a finance broker for advice.
4. Focus on your key strengths. It can be tempting for business owners chasing growth to take on too much new business that does not support their business proposition, and then they wonder why it’s hard to manage clients’ expectations, or to articulate a compelling reason to engage.
Keeping focus allows you to build a really strong proposition that will pay off. This doesn’t necessarily mean turning away work – but being a bit more assertive about how you can help can pay dividends.
5. Take a leaner, more iterative approach to growing your business. By testing continually, and investing a much smaller amount in marketing and other new initiatives from day 1, there is never a big leap in expenditure. You may even be able to circumvent the first brick wall entirely. Many business coaches and mentors can help make this transition.
Scaling your business
The first brick wall is likely to be just one of many – the world is changing all the time. And whilst the UK may be an optimum place to start a small business (with an average of 1,800 start-ups launched every day in Britain during 2016, according to figures from Startup Britain) it lags behind the US and other leading economies in terms of the number of companies that successfully scale.
Taking the five steps above – not just once, but continually – will help your business to scale successfully. You may not be able to avoid the highs and lows – but you will be able to manage them much more effectively.
A plethora of grants and regional funding options exist, but many are for very early-stage development rather than growth. The ScaleUp Institute is one exception, while the British Business Bank is backed by the Government and exists to support businesses as they grow.
Advisory services, such as the Federation of Small Businesses and the ICAEW Business Advice Service can give further support to help your business run and grow.
Are you ready to reconsider the role of business finance in your business? Visit the Business Finance Guide’s interactive journey to explore the finance options suited to your business’ future plans.