What Does Taking Your Business to the Next Level Mean?

June 11, 2014

 

People frequently say, "We're going to take it to the next level." It's almost cliché. But, what does that really mean?

 

In sports, people frequently mean that they are going to move up to a league that is more competitive than the one in which they are currently competing. They plan to graduate from playing Little League baseball to playing high school ball. They aspire to move from high school to college or from college to the pros. At the next level, the competition is stiffer. 

 

At Whitestone Partners, we've developed a construct that gives meaning to the phrase, "Take your business to the next level." The first level is a micro business. In a micro business, the principal does the primary work of the enterprise.  The entrepreneur is often the company's only employee. Even if there are other employees, the preponderance of the company's revenue comes directly from the efforts of the owner. In such an operation, it's clear that success is determined by how well the principal does the primary work of the business.

 

The game changes significantly when the company transitions from micro to small. In a small business, the principal has hired employees who do the primary work of the enterprise. The entrepreneur may want to keep his or her hand in the work, but the preponderance of the revenue comes directly from the efforts of others.

 

As a micro business, the most important factor in determining the success of the organization was how good the principal was at doing the primary work of the business. As a small business, this matters less because the principal has delegated this to others. The most important factor in determining the success of a small business is the principal's ability to hire good people and manage them well. For the principal of a micro business, taking his or her business to the next level (i.e., becoming a small business) means delegating the primary work of the business to others and moving from a "doer" to a "manager."

 

In a midsize business there will be at least one layer of management between the principal and the front line workers. The principal is now managing managers rather than managing workers. That may sound like a small change  -  it's not. To succeed at the midsize level, the principal will have to delegate decision-making responsibility. For many entrepreneurs this is a very difficult transition. Unfortunately, if the principal doesn't delegate tactical decision-making and the hiring and managing of the workers, he or she will become overwhelmed and things will start to fall through the cracks. The business will stagnate. Growth will stop and profits will evaporate. The enterprise will reach an unhappy equilibrium where for every new customer that is gained, a disappointed customer is lost. Often without knowing it, the principal will have become the constraint to growth.

 

The only thing worse than not delegating when it's necessary is delegating before the proper infrastructure is put in place. Developing the proper infrastructure involves three things: (1) Getting the right managers in place. (2) Documenting processes to communicate how things are to be done. (3) Developing metrics that will reveal what is happening in the bowels of the business without the owner having to be there personally. Failure to develop the appropriate infrastructure prior to delegating is a recipe for disaster. Taking a small business to the next level (i.e., becoming a midsize business) means that the principal will have to put the proper infrastructure in place, delegate authority to managers and hold them accountable for delivering results.

 

Taking a business to the next level is difficult. It means that the principal will have to let go of doing the very thing that previously made him or her successful when the company was smaller. The principal will also have to master a new and more complex skill set as the business grows.  Taking your business to the next level can be rewarding - it can also be fraught with risk. Being aware of what's required at the next level can help business owners succeed as their enterprise expands.

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