The Most Common Business Growth Plateau

| By Mike Michalowicz (Google+)


I want to ask you a question. It’s multiple choice. Similar to the one that your grade school teacher would spring on you as a pop quiz. Or when she had just enough of your class’s relentless fidgeting.

I want to ask this question because most of us get it wrong. At least, in practice. And until you get this right, your business’s growth will plateau. Here it is:

****

Which is the right answer?

A. It is better to make $1,000 per hour.
B. It is better to make $100 per hour.
C. It is better to make $10 per hour.
D. More information is required.

****

The correct answer is D. Yet most entrepreneurs think the answer is A.

 

Think More Like An Investor (And Less Like An Entrepreneur)

Most entrepreneurs are so hungry to grow – so hungry to cover their monthly nut – that they jump to the bigger money instantly, without considering the investment. The short term monetary win, can be a very costly long term mistake.

Revenue represents only half the equation. To make the right decision you need the other half – the costs. First there’s the hard cost. If it costs $995/hour to make $1,000/hour you net $5/hour, and it costs $93/hour to make $100/hour you net $7/hour, and it costs $2/hour to make $10/hour you net $8/hour. The best choice, therefore is $10/hour. Maybe.

There is a second cost that must be considered, too. It’s way less obvious, but your awareness of it will determine your business success. The second cost is your time. If you are required to do the work, you have become the bottleneck of your business and it will only ever be able to grow to your availability. In the example above, where you net $5/hour, or $7/hour or $8/hour, the best choice is $5/hour if it is the only choice that requires none of your involvement. If you are netting $8/hour, but you are doing the work your business growth will be capped.

 

A New Perspective Your Business Growth Plateau

Here’s the new perspective to consider: First know the revenue that each opportunity generates, second know the costs for each opportunity and determine the profit. Finally, and most importantly, determine which of the most profitable opportunities which ones can be accomplished with the least of your direct involvement. Do that one.

If you find that you need to be involved in every profitable opportunity your business is trapped.  It won’t be able to grow. Period.  Welcome to the most common growth plateau entrepreneurs face.

So what do you do if you are the linchpin to profitability?  You need to get real busy building systems so others can do it. Otherwise your business is guaranteed to plateau when you plateau. And that will be sooner than you ever expected.



Posted in Break to Fix Strategies, Entrepreneur Strategies, Growth Strategies,

2 Responses to “The Most Common Business Growth Plateau”

  1. Kabsl says:

    hey Mike – as usual a very thought provoking article. what sort of systems should we be building?

    • Thanks for checking it out. From my experience: In regards to systems… automate your biggest bottleneck. The parts of the business that swallow up the most time, are best served by systems first…. then move onto other things.

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