“I want to take my business to the next level” is a phrase one often hears from people in their own businesses. We talk about “levels” of business, but what do we actually mean?
From the business owners point of view, this is significant because the “level” implies the degree of personal involvement required, which is a function of the management structure of the business. The more developed the management structure, the easier the business is to run. As such, the business’s level is somewhat independent of traditional measures such a turnover. Through the typical evolution of a business from micro to small to medium to large etc, the role of the owner changes dramatically. So in order for the business to get to the next level, the owner has to continually redefine and adapt their role to the requirements of the level they would like to get to; a perennial challenge for most.
Level 0: Micro
This level is a one man show with perhaps occasional helpers that require close supervision on a daily basis. Most of the business’s revenue is due to the efforts of the owner. At this level the majority of time is spent doing low order tasks and what the business really needs is for the owner to step up as quickly as possible to doing higher order, higher value tasks. The Level 0 business’s biggest challenge in moving to the next level is appointing capable staff to whom meaningful work can be delegated to. At this level, the owner usually has little money and has to use his time to compensate. As such the owner does not have a lot of control of how time is spent, hindering progress to Level 1.
The most difficult aspect of moving out of Level 0 is to know when and how to appoint the first employees.
Level 1: Small
At this level typically, there would typically be up to 6 or 7 employees working under the owners direct management. Some effort will have gone into structuring and organising the team and the owner’s time is a lot more discretionary. The biggest ongoing challenge is to avoid revenue fluctuations and to stabilise cash flow by working on the sales and marketing such that there is a steady flow of business. The owners skill at hiring staff and making them effective and productive, will be properly tested and be the biggest determining factor for transition into Level 2.
Level 2: Medium
Medium sized businesses are characterised by a management layer between the owner and the team, and the existence of proper systems to ensure the smooth running of the business. The owner’s focus is now on empowering the managers and he or she is now removed from the day to day operations and decisions of the business. This is a major shift for the owner as their personal significance in the business must be subordinated to that of the business itself. It is often a real struggle for the owner to let go of tasks, responsibilities and decision making that he or she has owned since the start of the business. For the business to run effectively at this level, there needs to be a proper management infrastructure in place. Businesses processes have to be well documented and systematised, and appropriate and robust metrics need to be in place. The owners vision for the business has to be well understood and the team needs to be committed to the business’s mission.
The owner spends most of their time doing strategic work such as planning, networking with important prospects, customers and suppliers. The owner now has full discretion on how he or she chooses to spend their time.
What it takes to get to the next level
If one looks at the distribution of businesses as a function of stage, you will find that the further up the scale one goes, the smaller the number of businesses at that level. What is the reason for this? Well, taking a business from micro all the way to through to medium size (and beyond) takes considerable acumen, fortitude and time. There are many factors that can either aid or hinder this process. For example, recruiting an exceptional individual early-on can have a big impact on the speed of progress. Market conditions can have a big impact, either slowing things down or hopefully helping to speed them along.
During the Micro and Small stages, the business owner has to work hard and needs to have the moral and emotional strength to deal with the multitude of issues they have to face. In addition, many business owners discover after some time in their own business that they require skills and knowledge they do not have to continue to grow the business. Some rise to this challenge, others don’t and their businesses therefore plateau.
As a function of the available knowledge, capital and capacity, a business will reach an equilibrium point with market forces and stop growing. To get to the next level, i.e. to continue to grow, it is usually the knowledge and emotional strength components that will provide the impetus for further growth.