Key Concept ~ When you’re just starting out, you’ll find yourself scrambling for market traction. Once business starts coming in, however, you’ll be faced with another challenge; managing your functional bandwidth. Understanding this upfront can help you move beyond your first revenue plateau.
For any of us starting a business, our primary focus out of the gate is cash flow. While cash flow is king, you may also find yourself faced with another constraint as you begin to secure market traction…managing your operational bandwidth. Once you’re busy with today’s customers, it is easy to focus so much time, energy, and resources on delivery that you begin to lose focus on the activities that secured those customers in the first place. I’ve seen this many times, upon landing the whale, the whale consumes you. In effect, your small business becomes a de facto operational unit of the client. This represents your first inflection point, the point in time and effort where you either move beyond simply delivering value to a scaleable organization that can create value on an ongoing basis.
Depending on your business and marketplace, this doesn’t simply happen by accident. In the medical device arena, I’ve witnessed multi-nationals that like what they see in a small vendor and consume their product or service on such a high level that they, in effect, buy the company’s capabilities without actually buying the company. The vendor becomes so dependent on the one customer they begin to adopt their culture, organize themselves to meet that one customer’s demand, and eventually find themselves in a dictatorial relationship.
Years ago, when I was with my first startup, the company’s president shared with me what he used to do for a living at one point in time. He was a sales consultant for small consultancies. He explained that when sole entrepreneurs or really small consultancies secured a client they ceased their sales activities that would bring in the next customer. They oscillated from delivery to sales to delivery to sales, over and over again. As you can well imagine, their revenues followed suit, from peak to trough, to peak from trough. From a cash flow perspective, this was crippling and stunted their ability to scale past the first revenue plateau. That’s where this gentleman came in. He would handle their sales efforts for a percentage of the revenue he helped generate. It was a nice little business model that leveraged his core competencies and help smooth out the feast or famine nature of early stage companies.
No matter what route you take, there’s going to be some of this occurring early on, it is nearly inevitable. Yet, we can anticipate it, and do some things that help us scale beyond this bandwidth constraint. First, create a Conduit Organizational Structure for your business. This enables you to build a delivery throttle into your business model. When you need additional bandwidth, you can ramp up quickly and deliver on your commitments. Second, take the time to create Standard Operating Procedures for every value creating activity in your business, including sales. This will give you visibility of your time distribution alignment with value generating activities. This will help you plan critical activities weeks in advance, avoiding the last minute disruptions that can consume your bandwidth and disrupt your sales trajectory. Third, find incremental value in everything you do. Ask yourself, how does my doing this today help me accomplish that tomorrow. These three thoughts will help you plant the seeds for scaleability in your business and help you move past your first revenue plateau.
© 2011, Terry Murray