We're finding it difficult to grow

Salted

Hi all,
Our business is 4 years old. We have been doing okay so far, growing from 2 cofounders to having 2 additional full-time employees and sending an additional amount of more specialised work out to various subcontractors.

At this point though we feel we should be doing a lot better than we are, and would appreciate any advice and input here.

A few key points;

1. We are in a competitive field but have a couple of USPs that strongly differentiate us from our competitors.

2. These have worked to our advantage and gain us a comparatively high volume of leads - we have been able to grow a large customer base probably a lot quicker than most of our competitors.

4. Our prices are competitive but not bottom of the market. We have different products for different customers (lower end and higher end) and attract business from both ends.

Despite our high volume of leads we're finding it hard to grow the business in terms of revenue. We bottleneck when we get busy, this means we can't pay more attention to closing leads, and then we experience a quiet patch as a result, during which we can put more attention into closing leads, which brings another busy patch, rinse and repeat. Even if we did have a steady stream of jobs we'd find it difficult to keep up with the work while ensuring a high level of service/quality.

As such we're making enough to get by but not much more than that - with all the above we should really be doing a lot better. Because of this we're not in a position to bring on more staff so it's a bit of a catch 22 situation.

It could be that we're charging too little but I feel that our pricing is okay, and we have increased it significantly over the years.

Our current thinking is that we need to be more structured - at the moment we all do a bit of everything and I think this is working against us.

I don't want this post to be too long so I'll leave it there but would love to hear your thoughts.

BrokenArrows

Sounds like you and your staff are at capacity.

Assuming there are no efficiency improvements to be made you need to find the funding to hire more staff so that you dont get the busy/quiet period loop.

Unfortunately there is no way to avoid the fact that you need to take the risk of employing extra staff and eating the cost of it until they start turning a profit.
Where you get the funding more more staff is a different matter.

mrawkward

You can only grow a business by investing in it, growth costs money and unless you have a huge internal rate of return, throwing off excess cash you need to take some risk. Real entrepreneurs take risks and back their own talents and abilities by using borrowed or investor cash when all of their own is gone. Otherwise you risk morphing into the zombie world of the living dead!

antoinolachtnai

You need to understand your cost mode from end to beginning. What resources does it take to get paid for work done? What resources does it take to deliver a job for a customer? What resources does it take to win a piece of business? What resources does it take to win a sale?

There might be a better way to do each of these processes. If you can figure out how to improve each of these four areas by a few percent, you will get somewhere.

It might be that you need to grow the business to get it to make sense. But it is also possible that the opposite is the case. It really depends.

a.

Salted

Hi all thanks very much for the replies, taking it all onboard.

To expand a bit;

For each new job we get there's usually an ongoing maintenance contract. This isn't worth loads but it's regular recurring revenue that we have to do relatively little for. So even if we don't massively change things, over time we will become more and more profitable as these contracts pile up (however it's a slow build).

All the evidence is there that the business model has great potential, we just need the right structure.

We're not sales guys and we've no formal background in business at all. Essentially we've been winging it (that's not to say we're not good at what we do, because we are!), so we're going to seek some business mentoring and see if that can steer us in the right direction.

Ideally we would get out of this rut without having to hire new staff so I'm wondering if you would have advice on how this might be restructured. For example is it common in a team of 4 that everyone does some of the 'work', or is it more common that 1 person would do most of the sales/admin/communication and the others would do the 'work'?

Our mode of working has grown organically really but I don't think it's ideal at all as we've been in this position for too long now. Furthermore I worry that if we don't fix these issues, even if we did hire new staff it would just be a bigger version of the same mess.

Thanks again

amcalester

Do the tasks rotate between the 4 of you or do you just decide what needs doing individually and then do it?

Who has oversight of the task allocation/output etc?

How long does it take each person to perform each task, how many tasks are being done and how much duplication is happening?

It all sounds very chaotic.

Can you assign certain tasks on a rotating basis?

On a larger team people could have more defined roles but for a small business flexibility is required while also maximising your workforce.

Salted

amcalester wrote: »

Do the tasks rotate between the 4 of you or do you just decide what needs doing individually and then do it?

Who has oversight of the task allocation/output etc?

How long does it take each person to perform each task, how many tasks are being done and how much duplication is happening?

It all sounds very chaotic.

Can you assign certain tasks on a rotating basis?

On a larger team people could have more defined roles but for a small business flexibility is required while also maximising your workforce.

When a job comes in it's either directly allocated, or it becomes kind of shared amongst individuals in a fairly loose manner, based on who seems to be busy/free at the time.

One individual in particular is almost always directly allocated a particular type of job and these jobs actually tend to go very smoothly.

For others working on other jobs, in the bottleneck busy times others often end up assisting to get things done in a timely manner, which as BrokenArrows said suggests we're over capacity.

How long does it take each person to perform each task, how many tasks are being done and how much duplication is happening?

I actually don't know these stats. All we know is that we seem to be busy all the time. (in saying that there's not much wastage/duplication)

I see what you mean re larger teams and flexibility within smaller teams. We are quite flexible and we help each other out very often. My worry is that the current structure is keeping us in this loop of slow progress, and I wonder would a more rigid structure pave the way for growth (even though we may suffer in some ways in the short term).

antoinolachtnai

You really need to measure the resources devoted to each job and figure out which work is profitable, and why.

I would be really careful about investing any money or time in restructuring until you have figured this out.

amcalester

Antonio is right, without proper structures and processes in place another resource will just get absorbed into the business without the corresponding increase in output.

I would start by listing all the tasks related to existing busines and new business, assign a time duration to each and from there work out how many staff hours you need in a week.

That'll tell you if you're over/under resourced.

You could also rank the tasks in terms of importance/difficulty so if you do need more resource you can assign the more junior tasks to this person.

From there you can divide up the tasks into defined roles, ensuring that you have adequate oversight,accountability and cover in place.

is anyone actually managing the business or are you just completing the tasks?

Salted

amcalester wrote: »

Antonio is right, without proper structures and processes in place another resource will just get absorbed into the business without the corresponding increase in output.

I would start by listing all the tasks related to existing busines and new business, assign a time duration to each and from there work out how many staff hours you need in a week.

That'll tell you if you're over/under resourced.

You could also rank the tasks in terms of importance/difficulty so if you do need more resource you can assign the more junior tasks to this person.

From there you can divide up the tasks into defined roles, ensuring that you have adequate oversight,accountability and cover in place.

Unfortunately it's not very easy to measure (jobs can vary quite a bit in time/effort required and are not always proportional to the price - it's the nature of the field) but I absolutely agree in principle. It would be great to have data for say 3 months tracking all time spent on all jobs by all individuals just to get an idea on the numbers.

is anyone actually managing the business or are you just completing the tasks?

One individual does the vast majority of admin and general customer communication (including majority of sales) and probably the majority of task allocation & general coordination. This individual would also do the least by far in terms of working on jobs themselves.

WicklowTiger

Kind of in a similar boat OP, just sent you a PM...

antoinolachtnai

Well, I would suggest that as a first step you try to log a week's work.

If you 'box clever' even with the data you have already you can find out a lot of things.

If you have order books, invoices and payments, you should be able to put some time in, analyse these and get some sort of insight on where the problem is. There are a number of approaches you could take. But just look at the stuff, job-by-job at first and see if you can figure it out.

Digital_Guy

It'd pretty much be a case of doing one or more of these three things:

-Outsource some of the work to lower cost workers who will do an equally good job.

-Increase efficiency so that the same workers are doing more work within the same work week (thus more leads and more of those who are ready to go can be converted into clients / jobs).

-Increase your prices.

The last one in particular can't be underestimated. Ask the question - "if we increased our prices by 20, 40, 50 or more %, to a level where we still felt the customer was getting great value, would we still have enough customers to fill a working week?

If the answer is yes, then you're not charging enough! It means you're undervaluing your services and pitching your prices at a level you feel customers will accept, rather than what you feel they are worth.

And if your prices aren't at that higher level, then you're leaving revenue on the table that could be moving the business forward and invested into growing it.

If the answer is "no - we feel prices are just about right for the value and service we provide", then it's a cost or an efficiency issue - or both. There are weak links in the chain or process (not saying people, although that could be the case), and until these are strengthened, you won't get very far..

A lot of the time, things get complicated and you get stuck in a rut because of other people - you have to manage them, coordinate, go back and forth and it gets chaotic, as another poster said.

One way of resolving this is to imagine you were a one-person business. A solo operator who naturally wanted to make the most profit with the least cost / time invested. Ask yourself what optimal processes you would have in place, and then look to apply this to the team as a whole. You will need to modify first, but it all starts with having those systems and processes.

Finally - niche down! That's another option. Everything is easier when you're in a niche, and you're specialising. There are loads of companies out there who only deal with x part of a market, or deal with x type of business. Because they do, they get to know the needs of that market REALLY well, certainly extremely well 4 years in.

This means they can move ultra fast, keep their costs really low, and also charge a premium because they have all this specialist knowledge and expertise as well. A triple whammy

davindub

Salted wrote: »

When a job comes in it's either directly allocated, or it becomes kind of shared amongst individuals in a fairly loose manner, based on who seems to be busy/free at the time.

One individual in particular is almost always directly allocated a particular type of job and these jobs actually tend to go very smoothly.

For others working on other jobs, in the bottleneck busy times others often end up assisting to get things done in a timely manner, which as BrokenArrows said suggests we're over capacity.



I actually don't know these stats. All we know is that we seem to be busy all the time. (in saying that there's not much wastage/duplication)

I see what you mean re larger teams and flexibility within smaller teams. We are quite flexible and we help each other out very often. My worry is that the current structure is keeping us in this loop of slow progress, and I wonder would a more rigid structure pave the way for growth (even though we may suffer in some ways in the short term).

Op, before you do anything else, you need financial control. Bigger companies hire financial controllers, but there are a few companies you can outsource this to now. Makes sense if you are too busy to train, manage a new team member. I know one company will do monthly management reports and help implement processes. Cost wise approx 12k pa for basic reports.

Then more than likely you will require a sales person (or outsource this too). Cost wise will vary, inbound only sales for small priced items might just require training of your admin person or technically difficult or more expensive items may require an experienced sales person (you should be structuring your marketing activity as well, so justify it as marketing manager/ sales person hybrid role). Outsourcing in this area is actually hard, it may not be feasible depending on the size of the business.

These are the two key areas businesses consistently overlook initially and it does unfortunately lead to the issues you describe.

In regards rigid v flexibility, there is no correct answer for all situations. You certainly want rigid controls around finance functions and your USP's to ensure both are maintained. But you also need to promote creativity and want cross skilled staff when you are small, and staff can only work with a finite amount of procedures.

StupidLikeAFox

Salted wrote: »

For each new job we get there's usually an ongoing maintenance contract. This isn't worth loads but it's regular recurring revenue that we have to do relatively little for. So even if we don't massively change things, over time we will become more and more profitable as these contracts pile up (however it's a slow build)

Other people here have given great advice, but this stuck out for me. Can you change the structure of your contracts to reduce your upfront costs to get the customers in, but increase your monthly maintenance fee?

By getting the customer in the door you will be creating a lock in (people don't like switching), and an increased monthly fee will subsidise the new project work you are undertaking.

It will also shift your income from project based to a more reliable and predictable stream of income.

You might make a loss/break even on the projects, but the profit will be made on the recurring maintenance contract. Not sure what industry you are in but this is a common enough model in software.

antoinolachtnai

Salted wrote: »

Furthermore I worry that if we don't fix these issues, even if we did hire new staff it would just be a bigger version of the same mess.

Thanks again

One thing here, don't be too hard on yourself. It is difficult to run any business and get it to break even. You have done alright to get this far. You have problems, but you will sort them out.

Salted

Hi again everyone, thanks so much for the feedback, seriously valuable stuff and I appreciate the time taken by everyone to reply.

Our monthly directors meeting was on Saturday and we have decided to restructure things a bit to see how things go.

One person will be leading sales, while delegating projects out as they come in - individuals then will 'own' their projects and can seek assistance if/when needed. We feel that a lot of inefficiency comes from there being a bit of ambiguity as to who's actually responsible for a job, so hopefully this will improve things and set in place a structure we can expand on.

We've also signed up to the LEAN enterprise programme run by LEO which is actually starting now so that's really good timing and the mentoring sessions should let us dig in to the details of what's going on and what can be improved upon.

antoinolachtnai

That is great. I would try and get a grip on metrics to understand profitability and so on.

pedroeibar1

Salted wrote: »

For each new job we get there's usually an ongoing maintenance contract. This isn't worth loads but it's regular recurring revenue that we have to do relatively little for. So even if we don't massively change things, over time we will become more and more profitable as these contracts pile up (however it's a slow build).

Your last post suggests that you are on the right track. Pay attention to the bit above, I've seen many firms survive on this through tough times. Some Ec & Mech engineers held on by fingertips with this type of income when building stopped; small auctioneers survived on property management services income when houses stopped selling (or were not put on the market). Don't take it for granted, see it as a means of getting closer to the customer.

Internal communication needs to be watched and structured - regular brief meetings on who is doing what, market news, problem issues, etc.
Best of luck with it.