One factor in limiting small business growth is an owner’s attempt at managing everything. This may be all right for a business in its start up phase or when its sales are under $1M annually, but this behavior will usually limit the size, growth, and profitability of a business. Few businesses grow beyond $2-3M in annual sales without a clear delineation of a number two position in the organization to handle either operations or sales.
Often owners as entrepreneurs are more interested in identifying markets and developing products or services, as these seem glamorous compared to the more mundane tasks involved in developing and implementing the organizational plumbing or infrastructure necessary to handle the next stage of organizational growth. Owners as technicians are often more interested in producing a service or product, as they are more comfortable working with their technical skills or their hands. For these owners making sales, managing business office activities, planning, and budgeting may seem foreign or unimportant. But to grow profitably, all of the above and more key activities have to be performed effectively.
When a business gets to about $1.5M in annual sales and has approximately 12 or more employees, it becomes a more complex organization and the owner has to decide whether it is more important (for the profitability of the company) for him to focus on either operations (operational focus) or strategy and sales (strategic focus). Both are critical for financial success. Mr. Inside or the operational focus, claims primary responsibilities for managing operations, making products or providing services to customers, and controlling all of the related and necessary internal support structure. Mr. Outside or the strategic focus, concentrates on where the business is going, growing, and where it fits in the business environment. For continued profitable growth, a Mr. Inside owner must hire someone who can make sales and generate effective growth. A Mr. Outside owner must hire or promote someone into an operations manager position or possibly hire a general manager to functioning as a Mr. Inside as his counterpart.
A good example of this conflict of operational and strategic focus is in a construction business where project managers must make sales. In such businesses project managers must first make sales and then manage these projects to completion. This generally works well with simple jobs or easy to handle clients. But if a project hits a snag, turns sour, or a client proves to be high maintenance, then the project manager directs his or her whole attention to completing the project successfully (operational focus). If this goes on for an extended period of time, guess what does not happen? New sales will not take place. So sales can become feast or famine in such businesses. Someone must always be focused on bringing in new sales and where the business is going and growing (strategic focus) or it will not be successful or profitable long term.
Usually the best plan is for the owner to concentrate on the strategic sales focus and for him to hire an operations manager. Often an owner knows his product or service best and is in the best position to make sales or to promote it. After all, his name is usually on the business. If he is out visiting customers then he can see firsthand what is working and what is not. He can see what competitors are doing and develop plans to counteract their influence. The owner is still responsible for the entire organization, however operations are guided directly by a hired hand.
Less frequently an owner chooses to focus on operations, as a Mr. Inside, and hires a salesman to generate sales and to provide feedback as to what’s happening in the market place. However, unless the salesman has a defined role with clear duties, specific prospecting or customer contact goals, and specific gross sales and profit targets, the chances for success is spotty at best. To get a better sales yield, the owner will likely have to function as the Sales Manager in order to help plan and effectively direct the efforts of the salesman. Again, the owner is still responsible for the entire organization, however sales are handled by a salesman.
Where is your business in its quest for growth and profitability? Where are you, the owner, focused? Inside, outside or neither? What do you need to do to make your business more successful, profitable, or to make it easier to manage?