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October 7, 2019

The Entreprenuer Journey & Building Business Value

Small Business, Systems, Women in Business

Female Entrepreneur business journey

 

Understanding the typical entrepreneurial journey can help female business owners make conscious and strategic decisions about their business.  There is no right or wrong size of business as it’s up to each individual as to how big or small they want their business to be.

Solopreneur/Hobby – $0 to $100,000

Often many business owners will start out small, sometimes as a hobby or a side gig while working in another paid role.  Stress levels are usually quite low as there is the security of other paid work or a partner to support the hobby.

The key challenge at this stage is getting clients/customers and time.  It is usually a juggle managing the side business with other priorities in the solopreneur’s life.  Processes and structure are not too much of a consideration as the owner knows exactly what she is doing and what needs doing.  Turnover at this stage is usually 0 – $100,000.

Micro Business – $100,001 to $300,000

The next stage of growth is generally from $100,001 to $300,000.  This is when the business moves from a side gig or hobby to a serious pursuit.  Stress levels increase as the desire to make it profitable increases.

As sales are growing the owner starts feeling time poor and pulled in many different directions so decides to take on an employee or two.  Managing staff brings its own set of challenges as well as the struggle of the owner no longer knowing everything that is going on.  This is when business owners need to start implementing structure and processes.  Without procedures in place the business is unable to scale to the next level of growth.

The other issue is generally pricing.  If the owner hasn’t appropriately valued their time and priced at true market value, then they may be very busy but not making any money at all.  This is what we call ‘growing broke’.

Small Business – $300,001 to $1 million

If the owner has successfully navigated to $300,000 then they may continue the upward climb to the magic $1 million turnover mark.  In this stage of growth, personal leadership, ability to delegate, organise staff, workflow and manage clients/customers will be far more important than your technical ability.  Stress levels are pretty high as the owner grapples with controlling all the different aspects of their growing business.  You can expect to need between 5 – 10 employees to manage the workload.

Small to Medium Business – $1 million to $10 million

Scaling from $1 million to $10 million is a dream for many and too scary for others to even contemplate.  I’ve seen owners reach this stage and struggle to let go.  For the business to fully develop and maximise its value, the owner needs to let go and put the right people in the right seats to allow the business to flourish.  It is impossible for the owner to micromanage a business nearing the $10 million mark.  Once an owner accepts this then stress levels actually decrease.  The challenges from $1million to $10 million involve capital, structure, leadership and culture.

Building Business Value

As you are growing your business and deciding what stage you’d like to grow to, it’s imperative that you understand what increases business value.  Business value is influenced by risk.  The more you can decrease the risk in your business the higher your business value.  The risk factors can be summarised into eight key areas.

  1. Scalability – A scalable product is one that is teachable, valuable, repeatable and capable of being easily expanded or upgraded on demand.
  2. Customers – Happy customers drive value and predict business growth.
  3. Growth potential of the business. Demand can come from new customers, new products or new geographical areas.
  4. Recurring revenue – contracts recurring over time are more valuable than one off projects.
  5. Distinguishable product – value increases with actual or perceived value. You need to identify and understand your unique value proposition.
  6. Systems and procedures – the business has more value if it’s not reliant on any one person. Your business will have more value if you put procedures in place so that it can operate without you.
  7. Independence of all customers, employees or suppliers. If your business is reliant on any customer, employee or supplier this increases your business’ risk profile and decreases the value of your business.
  8. Financial performance – the more profitable your business, the higher its value.

 

As a business owner, it is important for you to identify what size you want your business to be and the areas of focus at each different stage.  To support your goals, prepare a business plan.  The business plan doesn’t have to be long and can even be one page.  The business plan will shape your task list.  It is important to review and update your business plan regularly.

 

 

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