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Five Reasons why scale is not right for every business
11 March 2020
This is a question we often get asked as business advisors, and owner managers are sometimes surprised by the answer.
Success can’t be defined solely by a number – an increase in turnover, profit, people or markets, for instance. It also needs to factor in the value of your own experience of running the business, and how this feeds into your preferred lifestyle today and your aspirations for tomorrow.
Run your small business as a large business! The truth is that at some point the person at the helm of every organisation has to ask themselves one vital question: do I want to continue running a big small business, or do I want to grow it into a small big business?
MD versus CEO
Being an MD of a small business and stepping up to the role of CEO of a larger, yet not-quite-mid-market organisation is a much greater transition than you might think.
As an owner of a successful, single-director business, you can earn an excellent wage and retain control over key decisions at the head of an agile, flexible entity. But a bigger business is a very different beast.
Ironically, when you scale up a venture and build out its management team, you lose the ability to implement streamlined decision-making – and with it that single-minded purpose and agility. As CEO of a company with multiple directors, you not only have to share decision-making, but may even end up earning less as you are more restricted on what you can take out of the business.
Time to get personal
We begin the business planning process by establishing the owner’s personal ambitions. We’d ask a series of questions that are designed to reveal the owner’s true path and lifestyle and the things that matter to them.
This includes not only looking at their business and lifestyle aspirations, but goals of where they want to be in five years’ time and their appetite for risk. It also means taking an honest look at their core skills and personality traits.
Five signs that reveal your ambitions
These are the five key questions designed to get business owners thinking in the right way and root out the information to help determine their personal goals:
- Work versus play: is business part of your DNA or a way to fund your lifestyle? Do you enjoy scaling up your challenges at work or is it about the daily experience of running your small business – and also enjoying time with family and doing other hobbies?
- Money motivation: are you happy with the amount you earn today and do you need to maintain this income consistently? Or would you be willing to take home less pay now to achieve greater gains in the long-term?
- One-man-band or team player? Do you enjoy having the ability to make important decisions or would you prefer to work within a senior team? Do you enjoy having a view of the whole business or do you prefer to delegate to people in more specific roles?
- Simplicity or bureaucracy? Do you like an agile and flexible working environment or does a more structured organisational structure appeal to you?
- What’s your end game? How do you envisage your exit from the business? Do you want to retire young, fund a lavish retirement lifestyle or pass on the business to the next generation? Do you have other projects you wish to pursue?
If you’re at that crucial time in the life-cycle of your business – a time when your next move will mean making a decision to scale up, remain the same or sell out, it’s vital you pause to consider what that means for you as the business owner. You may be surprised where you end up.