Hidden barriers: the four reasons why only 0.4% of firms get to £10M in sales
Courage – the lack of it
The first type of hidden barrier to growth is fear. Nearly 50% of all businesses remain as one-person bands until they either fail or the person retires. ‘The first brick wall’, is when someone tries to hire another person to join them in the business and it doesn’t work out. Very few keep trying until they learn to do it right and many never even try. Fear of failure holds them back.
The second brick wall is when you reach the limit of your personal span of control. Again, many get to this point and go no further. Fear of losing control limits the size of the business.
The second type of hidden barrier to growth is complexity. At the lowest level, known as the first valley of death, is very similar in its effect to the second brick wall – fear of losing control. Complexity emerges in three ways: leadership; infrastructure; and market dynamics. Are you growing enough leaders to whom you can delegate? Do you have the systems and structures in place to handle growth? Are the increased competitive pressures, that come with scale, eroding margins?
Complexity tends to increase exponentially with the number of employees you have. Finance is a good example. You start doing it all yourself, then you hire a bookkeeper part-time, then you need a financial controller, and finally, you need a Finance Director to run your finance department.
The third type of hidden barrier is competency. Simply put, if you aren’t good enough, the market will find you out. Since it tends to be technicians who start businesses, what are you doing to bring in competency behind you, so that your personal strength doesn’t become your company’s greatest weakness? If you are the best salesperson, will you be selling for the rest of your working life?
The last type of hidden barrier is culture. Organisations evolve through cultural stages which each ends in crisis if not anticipated. The spider at the centre of the web is the first stage, which ends at the crisis of control. The pillars of the temple built around key individuals is the second stage which ends with the crisis of bureaucracy. The silos of competence emerge from that crisis, but cause another, the crisis of performance. Finally, the distributed network emerges – which includes people working from home and sub-contractors providing services instead of employees. At each stage your organisation needs a different culture.
Now you know why only 0.4% of companies ever reach $10M in revenue. Probably similar in the UK and other countries. It’s not about the known stuff – products, services, delivery – that’s straightforward. It’s always what you don’t know that catches you out.
If there is one big lesson from all of this, it is that one size definitely does not fit all. Each business has different needs dependent on its stage of evolution. The same is true of each business owner. The best coaches and advisors understand this and can tune in to exactly what you need. Make sure you are getting the right advice.