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Episode 110 – 5 Stages of Small Business Growth

Oct 22, 2019

This Episode

Mark Stephenson & Marc Vila

You Will Learn

  • How to understand the stages of your business
  • How to grow your business

Resources & Links

Episode 110 – 5 Stages of Small Business Growth

Show Notes

Inspired by the Harvard Business Review.

It’s important to understand your stages of growth and when you are transitioning to a new stage. If you don’t take specific actions while in each stage, you will get stuck (or worse regress).

Stage 1: Existence

This stage is all about the big question..

  • Can you get customers and deliver a product?
  • Do I have the ability to get started financially?
  • And do you have the money to sustain your business before break even

During this stage of your business, you are heavily involved in every aspect. You may even be the entire business yourself.

The main goal of this stage is making sure the business can exist and making it to stage 2!

Stage 2: Survival

This stage is all about financial survival. You know you CAN be a business. You know you CAN get customers. You know you CAN deliver the product.

But… can you do it profitably?

  • Can you generate enough cash-flow to break even?
  • Including repair, maintenance, and replacement of equipment and supplies?
  • Can you generate enough income compared to your costs to stay afloat?

During this stage, you may actually significantly grow in size. You may have employees and achieve some record breaking sales for yourself.

Many of you will stay here – some on purpose. This is the business that provides a “salary” or pays for the owner’s lifestyle, but never goes beyond that.

This may be satisfying personally, but it’s very vulnerable.

However, you must grow in profitability to get to stage 3.

Stage 3: Traditional “Success”

Getting to this stage means you have some economic health. You are profitable (meaning the business is putting money in the bank after paying you.) This is a place you can stay in indefinitely.

Your business is making money. The owners are getting paid. You are stable enough to handle changes in the market, emergencies and financial setbacks. This differs from stage 2 where you are ‘just making it.’ Now you have a solid business with a growing bank account.

This is the stage where you have some professional staff coming on board (or outsourcing.) You will most likely have employees dedicated to certain tasks (accounting, sales, production, etc.)

During this stage you can go one of 2 ways:

1. Disengagement – You have the opportunity to walk away from certain aspects and know the job will get done. You can choose to only work in the aspects you desire. Maybe you just want to sell or manage staff, or run equipment. This is the ‘dream’ stage. You can do exactly what you want with the business, and leave all the things you hate to employees.

2. Growth – Now that you are profitable and have a business that can leverage that power. Do you risk it and shoot higher? You can take your profits and dive into a new endeavor. You can use your business’s credibility to borrow money and get into bigger business.

This is the stage where you would completely step away from day-to-day operations and focus on making the business grow even more. You have staff that controls every aspect of the business so you can take things to the next level.

Growth has risk though, you could take yourself back a stage if the risks you take don’t work out. Now you are just back to ‘surviving’.

On another hand, if you don’t look for some level of growth you could be at risk of falling behind the competition.

This growth can take you to stage 4.

Stage 4: Take-Off

If you have chosen ‘growth’ then the stage you want to hit is right here. The focus of this stage is to have financial growth including income and profitability. You are no longer focused on what’s happening in your supply chain, but what’s happening with financials.

In order to get to this stage and succeed you must master delegation. You will have to continue to add levels of management to watch over each part of the business (as needed.) You and your team will have to manage cash and staff with precision. The business can really make it to the big leagues here, but without managing people and money, it can crash too.

You can grow HUGE or you can fail miserably. If you make it you enter stage 5.

Stage 5: Resource Maturity

Your business has the ability to get into detailed operational and strategic planning. Your management is mature and very experienced. You have systems in place from sales to production that are well developed.
Learn more about this stage by reading the HBR article.

Here are some factors that determine success or failure and moving through the stages:

Business factors:

  • Financial resources – cash and borrowing power
  • Personnel resources – quality and number of people. Levels of staff and management.
  • System resources – the systems you have in place to keep the business performing at peak.
  • Business resources – customer relations, market share, supplier relations, distribution process

Owner factors:

  • Owner has personal and business goals / dreams
  • Owners abilities to do the important jobs in running the business… marketing, sales, production, delivery
  • Owners managerial ability, willingness and competence on management and delegation.
  • Owners strategic ability – Looking beyond daily operations and into the vision of the company. Seeing strength / weakness

You have to understand these stages and where you want to go. Recognizing where you shift focus and motivation. Your business can be whatever you want!

Resource: https://hbr.org/1983/05/the-five-stages-of-small-business-growth

Transcript

Welcome to the Custom Apparel Startups podcast, your best source for information, news, tips and tricks to get you off the ground running, and earn success with your custom apparel decorating business. So, get ready to soak up some knowledge!

Now, here are your hosts, Mark and Marc!

Mark S: Hey, everyone! Welcome to episode 110 – I can’t believe it! – of the Custom Apparel Startups podcast.

Marc V: Wow!

Mark S: My name is Mark Stephenson, from ColDesi.

Marc V: And this is Marc Vila, from various companies.

Mark S: From ColDesi!

Marc V: ColDesi being the one I really want to focus on.

Mark S: Yeah. We should make a point of this for a while, when we introduce the podcast, to explain to people that Colman and Company used to be a separate corporation, back in the day. It was always tied to ColDesi, but now it’s not. It is the ecommerce arm, among other things, of the ColDesi company.

Marc V: Yeah, and it’s been like that for a while. We just don’t really talk about it. It’s in the logos.

Mark S: And you’re going to see that on the Colman and Company site pretty soon, is kind of the blend. When you call Colman and Company, they’re going to answer “ColDesi.” When you see an invoice now, you already see ColDesi.

Marc V: You’ll see things coming more and more, emerging. You’ll run into this with your business, too, as you grow through different stages of your business. One of the things that might be happening in your business is you might merge with another company, or something like that, and you’re going to have to figure out “How do we not make it confusing?”

With all of that, and talking about that, we’re going to talk about the five stages of small business growth.

Mark S: We’re also going to mention the fact that that is the best segue I have ever experienced in the podcast!

Marc V: I want to say something about the title here. I added the words “small business” growth in there, because it just seems like whenever we say the words “small business,” it feels more comfortable for our customers. But this is really about you taking your small business and making it a big business, too.

Mark S: And how to recognize where you are, along the way.

Marc V: Why don’t you give us a mini-intro on what this means?

Mark S: First of all, I just want to point out that we got this idea from an article in Harvard Business Review. If you’ve never read Harvard Business Review online, you might want to take a look. It can be really deep and really highbrow kind of stuff. There’s a lot of data. But there is some stuff in there that they make very understandable, and we get a lot of inspiration for our business, and for podcasts, from there.

Marc V: It’s one of the things that – I find that a lot of articles there, they’re hard to relate to, if it’s not like corporate business world type of stuff, which is typically what you listening are not. You’re a small business.

Mark S: Yeah. It’s very Harvard-ish when you read it.

Marc V: Yes, but when you read this stuff, it kind of ties into our previous episode about thinking like a big business, that you and us and so many other people can learn from what these big businesses do, because they have to perfect every stage across the way. Every stage, every step, they have to perfect it. Otherwise, they’ll crash.

So, it’s like the Titanic. That ship was so huge, and the reason why you don’t hear about any huge giant ships crashing now, is because there are so many things they’ve put into place to make them safe and make them good – where you will hear about somebody’s little tiny sailboat going under the water.

Mark S: That’s a good analogy.

Marc V: So, we’re going to help you navigate through these stages, what they are, and then you determine which stage is where you are now, and where you want to be next.

Mark S: And if you want the highbrow version of this, we’re going to link to the Harvard Business Review article, so you can look at the charts that I could not understand.

Marc V: I didn’t understand the charts, either. But we’ve put together the stages here, in a way that we really know – I was going to say feel and think – but we really know this is how it relates to our customers, people like you, small apparel businesses and businesses that go from startup to maybe a reasonable size, where they’ve got 20 or 40 or 100 employees.

This fits from all of the stages.

Mark S: It’s true. Stage one is existence. This is the existential question. Are you really in business, and can you be?

Marc V: Yes. What this means is really, from the highbrow kind of viewpoint on this, can you get customers, and can you deliver that product to those customers?

If you wanted to be in business of “Oh, I’m going to design apps for phones. I don’t know how to program. I don’t do that.” If I say I’m going to start a business by myself, where I’m going to make apps, I’m not even in stage one, because I can’t even make it.

Mark S: Right. You’re not in existence yet.

Marc V: Yeah, so stage one is about possibly what equipment you’re going to work with, how you’re going to make the delivery, what kind of niche are you going to sell to?

Mark S: And can you do those things? Are you able to? If you’re in the wedding marketplace, or that’s where you want to be, can you access those potential customers, and can you actually make or resell a product that they would enjoy?

Marc V: Yeah. Do you have the financial ability to get started?

Mark S: That’s big. I’m just going to say this a little bit more clearly. Do you have enough cash to invest in yourself and your business up front?

Marc V: Or can you borrow enough cash to do it, as well?

Mark S: Do you have the credit cards?

Marc V: Do you have the credit cards, or do you have somebody who is willing to back you? Or can you get approved for a small business loan or for a lease? These are all things that you could do. Can you do all of these things?

Mark S: It’s really interesting. Our customers come to us into these questions, kind of at different places. First, someone will approach us about a direct-to-garment printer or an embroidery machine, to find out how much it costs, to determine whether or not they have the money to get started financially.

Sometimes they’ll have the money, and just be trying to select the right product, and identify a market. They’re trying to figure out “Okay, I know I can do embroidery. I know I can do Digital HeatFX t-shirts. Can I get customers? How do I do that? And can I deliver a product to them?”

Marc V: And part of this – I love that you added that additional note here – “Do I have the money to sustain the business, before I can get to that break-even point?” What else are you going to have to spend money on? Maybe gas, just to drive around and sell. Or business cards. Maybe you need a website for your business model.

You’re going to need to buy some supplies. You’re going to need to buy shirts, to make samples.

Mark S: That’s a big deal. You have to think of all of these things while you’re in this existence stage, because what you don’t want, is you don’t want to get equipment, identify a market, work on all of your creatives, and get ready to make t-shirts, and then not be able to afford to do the business.

You’ve got to be ready to do things like you’ve got to have cash to pay your mortgage, while you start up. If it’s a side hustle, it’s a slightly different story, but it still has to be worth it.

I’ve started businesses before, and it’s only because I could go for six months without making any money. That’s how you know you’re going to be okay.

Marc V: If it’s not going to be a side hustle type of a thing, you’re prepared for that.

Mark S: You’re all in.

Marc V: Part of this stage, I think, also is up to the point where maybe you make some decisions, like “I’ve got this money here I can use for marketing. I’ve got this money here put aside.” Whether it’s a side hustle or full time, however it is, you guys are smart enough to understand what that money needs to look like.

But it’s also about, then you choose your equipment and your niche. You’ve got all that done. “I’ve got the customer I’m going to sell to, the method I’m going to deliver it. Now, I actually have to be able to deliver it.” That means training. Part of this stage is actually going through the training, and learning how to use your equipment, which means taking the time to have money put aside, to make mistakes.

And taking time to have money for whatever, if you’re going to need to hire people to do things for you, like maybe do artwork for you or help you with production, or whatever it is. You’re going to have to make a lot of these decisions, because you’re still in the existence stage, until you can completely get a customer, produce a product, deliver the product.

Mark S: The whole transaction. Because what you don’t want is, like many of you have done in the past, is you order a piece of equipment because you have a huge order. It’s like your first order. So, you’ve demonstrated that you can get customers, but you’ve committed before you’ve demonstrated that you can deliver a product.

Marc V: And if you can’t deliver the product, you’re still in that stage where you’re trying to exist.

Mark S: You’re not a real business yet.

Marc V: You’re not a business yet, because you can’t deliver the product. You’ve got the customer, you own the equipment, and you can’t produce anything yet. You’ve got to work through all of this, where you can go completely from getting a customer to delivering it.

This doesn’t mean, yet, that you’ve made money. This doesn’t mean you’ve made money yet, or you’re breaking even, or you’re profitable. This just means you’re actually able to do that.

Mark S: Yeah. You’re in business. You’ve got everything set up and you’re ready to go, and you know that you can do it.

Marc V: Now that you know that your business can actually exist, and repeat it – that means you’re able to get a customer, or your customer even exists. We joked about making noodling shirts. I guess that customer kind of exists.

Mark S: I know it does! I watched the videos. I still wake up at night, sometimes!

Marc V: But is there a market for that? You identify that customers exist. You identify you have the ability to produce the product that they want, or the service, or both. Then in the end, you have the ability to actually deliver that product.

Once you’ve completed those three things, now you exist as a business. This has nothing to do with paperwork.

Mark S: Right. You should do the paperwork, though.

Marc V: Yeah. But functionally, it’s not the paperwork. Functioning is to be able to do all of the tasks.

Mark S: Agreed.

Marc V: Now that you can officially know that you can exist, now we move to the next stage.

Mark S: Right, which is survival. I think it’s really good – like existence is a word I wasn’t-.

Marc V: Harvard said it was the right word.

Mark S: They did, and they should know! Survival is a great term for it, because it’s the idea of do you have an ongoing concern? Just because you can do business, you can make shirts and you can find customers, doesn’t mean that your business will survive.

I guarantee you’ve been to a restaurant, and you go in and you like it, and they’re employing 20 people. There’s a chef, and they do advertising and things like that. Three months later, they’re closed. Because they could get customers in the door, they could deliver the product, and they had a short period of time where they could handle it financially. But they couldn’t sustain that.

Marc V: Yeah. That means they never moved out of stage one. They only existed. They had customers, they cooked them food, they put it in front of them, and the people liked it. Let’s assume that the product is what they wanted. That’s all they could do, though.

The main point of survival is money, financial.

Mark S: It’s that break-even point. If you’re not familiar with break-even, that is when it doesn’t cost you money to be in business. That’s really the way to think about it. All of your bills are paid. You’re basically at zero.

For some businesses, they don’t get there for a long time. I don’t know if it applies to this conversation, but Amazon was not profitable for a long time. They existed. They could turn out a product, and they could deliver it. But they weren’t making any money.

Marc V: This existence to survival stage, it’s not unhealthy, necessarily, for it to be a long time, when it makes sense. An example would be that you’ve maybe been saving money all your life, and you’ve got money aside. You say “Okay, this is going to last me a year.”

Or maybe you’ve got a rich uncle that’s going to finance you. In the big corporate world, it would be like a venture capitalist or investors, where you have big investors saying “We’re going to give you $300,000 to make this business.”

This existence stage can last as long as it helpfully needs to last for. But you have to have a plan of “When am I going to be able to get to that survival stage?” Meaning that every month, you spend a certain amount of money to get customers and produce the product, and in the end, you’ve made enough to make that zero.

Also, by the way, in this stage, you might be paying yourself a salary.

Mark S: I would think so. That’s part of survival. It’s your survival, too.

Marc V: Yeah. At this point in time, you’re paying yourself a salary. Then, this business is truly in survival mode.

Mark S: Yeah, it’s going.

Marc V: Because you’re an employee, that you’ve got to pay your personal bills, which is different than the business. So, the business can now survive at this stage. You can actually survive a really long time.

Mark S: You could stay here. This is also a place where maybe this is all you want. Not everybody wants to go through the rest of the stages and be a big business, nor do they care about being particularly profitable. What they really want to do is they want to work for themselves, maybe from home, and they just want to break even.

Marc V: Which is fine. But we put a good note on the bottom here, that it’s vulnerable.

Mark S: Yeah. Let’s just make sure. You’re generating enough cash flow to break even, and that includes repair and maintenance and replacement of your equipment. Because one of the first dangers to a long time in survival mode is that you buy a piece of equipment, and that could be a graphics computer, it could be a heat press, it could be a screen printing press. It could be one of the ColDesi pieces of equipment.

Eventually, those things die out. They need regular maintenance. They may need parts. You may need to replace them. So, if you’re in survival mode and you’re at break-even, and let’s say it’s time for you to get a new embroidery machine, where is that $12,000 going to come from?

That’s the danger of staying in that survival mode, is you’re very vulnerable to equipment failure. You’re more vulnerable to competition.

Marc V: Yeah, losing a big customer.

Mark S: Market conditions. It’s a very precarious kind of position.

Marc V: You could just get sick for a period of time. You could break your hand, and now you can’t operate properly for six weeks. You could easily drop out of this survival stage, and now you’re back.

Mark S: You’re back in the existence. The important thing here to remember, because a lot of you are here, and even if you are happy here in the existence mode or in the first level of the survival mode – even if you’re happy here, just be aware of this overall risk that you’re taking.

You may be doing what you love every day, but really, you’ve kind of got like a job with another employer. You could get fired at any time. Right? There’s no inherent security here. There’s a lot of risk, so while you may be happy, you may not be safe.

Marc V: And this is a stage where you may be hiring employees, at this stage. These are all things you could do in this stage. You could be hiring people. You could be bringing on new vendors. You could be still investing in new equipment.

There’s a lot of things you could be doing in this stage, where you’re surviving, and every month you’re paying yourself, you’re paying your employees, but the business really doesn’t have a big profit that it’s creating. We’ve talked about that in podcasts.

Mark S: Yeah, but like you said, it’s okay to stay in survival mode on purpose, like Amazon did. They did not care about going to the next step, until they were ready. They planned this out. Then, they went boom!

So, if that’s what you’re doing, if you are purposely taking every cent and putting it into growth, and you’re okay with the break-even, you want to stay in that survival mode specifically because you have somewhere bigger to go, then okay. You’re doing that on purpose.

Marc V: But the goal really should always be to move to stage three.

Mark S: Stage three is the – so, I qualified this, because the folks at Harvard just term this as “success” – and I added “traditional success.” Because like I said before, a lot of you, you don’t want to go here. It’s not necessarily your goal.

For those people that it is, which I think should be everyone – it should be everyone, because now, once you’re successful, you are significantly more secure, as well.

Marc V: Yeah. You’re economically healthy, is kind of how they described it, meaning that the business is able to churn a regular profit, at least kind of what would be considered an average for a small business type of a profit. And the business has it’s own wealth, that it’s growing.

Mark S: We’ll talk about profit, but you should definitely listen to our podcast called “Profit First.” We did an interview with the author of this book, and he had a great take on what profit is. But you should know that profit is money left over in the bank, after you are paid. It’s left over money.

Marc V: After everything is covered.

Mark S: Everything. So, if you are just covering your own salary, you are not profitable. If you’re able to pay your bills, cover your own salary, and pay some of your expenses, you’re not profitable. When you do everything that you need to do in the business, with the money that comes in, and there’s still money left over in the bank after the end of the month, that’s profitable.

Marc V: That’s when you know you’ve made it to stage three, which is the successful stage of your business. You’re putting money in the bank. This is the stage that you can truly stay in, indefinitely.

Mark S: Yes.

Marc V: Because when you’re profitable, then your business continues to grow, kind of, its wealth. And whenever there are pitfalls, which will happen in your business, like we mentioned just a few earlier, then the business has room to breathe within that, financially.

You have the ability to not earn some money, because the business has profits to survive off of.

Mark S: I actually love this stage, because it is also where you can start handing off some of the things. In the first couple of stages, it’s usually just you and maybe one or two other people, if you’re in this small custom apparel business that most of you are.

Marc V: It’s typical that it’s going to be one person or a partnership, or a couple, or something like that.

Mark S: This is the point where you, once you’re profitable, you can start looking at “Oh, look. I can bring on a bookkeeper, or I can hire a salesperson, or maybe I can expand the office a little bit, or add some more equipment.”

Marc V: This is what makes it sustainable, because now you can hire somebody. This is where, actually I think I wrote it somewhere in here, but this is like the dream stage.

Mark S: Yeah. It is for me.

Marc V: This is the dream stage, because what’s your dream in this business? You want it to be financially independent, maybe. That might be it. You’re achieving that. Maybe you love the art. We talked about it in the art podcast, the graphics.

Maybe you just love doing the art, and you wanted to be able to do it for a living freely, and make apparel with your art on it. Now you can do that.

Mark S: Or you could love the marketing.

Marc V: Yeah, you could love the marketing. You could love just the production of it. Whatever it is that you love, you can actually do this now, because it’s profitable. You can afford to figure out ways to hire people to do the things you don’t want to do, whether it’s outsource or full time.

Mark S: The most fun for this kind of a stage, for me, is that you get to start thinking about what you want to do, not what you have to do. Once you’re profitable, you’re in that zone where you can go “Oh! I really want to add bling to the business. I really want to start going to events. Not because I have to, to make the business grow. Because I want to, to make the business grow.”

Marc V: That’s actually where this part breaks down into two different stages, where it goes. There’s the disengagement stage. This is your opportunity to say “I only want to do the dream. I only want to do the marketing. I only want to do the sales. I only want to run the embroidery machine. Everything else, I’m paying somebody to do.”

You can completely disengage from all of the things you don’t like. Or maybe your dream was just to own it.

Mark S: Yeah. You don’t do anything.

Marc V: You don’t want to do anything. That’s plenty of peoples’ dreams, is that you want to own the business. You just want to look at the paperwork, be a part of the dream of it and the vision of it.

Mark S: Have somebody send a check.

Marc V: You’re the person that you just show up every day, you look around, you make sure things are going good, and you’re free to do it, if you want. Maybe start another business or do another adventure, or retire.

Mark S: That sounds very familiar to ColDesi!

Marc V: Yeah, the disengagement stage. The second thing you could do is you could choose the growth stage. That’s where you say “I want to be bigger now,” and you have money to leverage.

Mark S: This is really right out of the last podcast episode, where you think like a big business. If when you’re starting, when you’re in the existence phase, you’ve got that vision of what you want your company to be, then this is where you get to actually implement all of that.

Do you want to be bigger? Do you want to have multiple locations? Do you want to be in retail? Do you want to have a bigger online presence? What’s your goal?

If you decide it’s growth, then this is where that happens. I like that.

Marc V: This is where you either have the money to do this yourself, because typically doing this is going to require more money. You’re going to invest in more equipment, buy a new location, whatever it might be. So, you have two things. You either have the money, because you’ve been profitable, and it’s coming in.

Mark S: Saving it.

Marc V: Or you’ve got the leverage to be able to get more money now. You can go to a bank or an investment firm.

Mark S: “I’ve been in business for five years,” or seven years or whatever it is. “Look at my track record. Here’s my profits.”

Marc V: “My profit and loss statement. Here are the business bank statements. I’m able to prove now that for the past five years, we’ve profited every year. We’ve profited, we’ve paid our employees, we’ve paid our taxes, we’ve grown. We’re showing that we are a successful business.”

If you’re going to a bank to get a loan, or you’ve going to an investment firm, or you’ve got a rich uncle that you can talk to, or a rich aunt, or maybe a rich grandma that just wants to see you succeed. I don’t know what it might be, but you’ve got the ability to show on paper, and leverage the power that you have, of a successful business.

Which goes way, way more than just being a brand new business. If you’re a brand new business, maybe you got approved for $50,000, to purchase some equipment.

Mark S: Or a $10,000 lease.

Marc V: If you’re a profitable business that’s been in business for five years, and you can show profits, you can get a half a million dollar loan.

Mark S: The bank wants to do business with you.

Marc V: You can get massive loans on this. There are plenty of companies out there that have been able to finance growth, out of being this little startup. They got to that profit stage, and then boom!

Mark S: It sounds like I’m the doomsayer in this episode. Because we talked about the vulnerability, if you’re just in the existence stage, how that goes a way a bit, if you’re in the survival stage. If you’re in the success stage, what you have to be careful of, or what you have to look at, is you’ve got to be ready to respond to competition.

That’s one of the things that is inherently attractive about growth, is if you are in a market, and you’re selling a specific product or you’re in a specific geographic area, if you are not improving and growing, and the market is, then you are going to get squeezed out by your competition.

Marc V: Yeah. There’s definitely a potential for that eventually to happen. We see that with businesses all the time.

Mark S: It happens to ColDesi. We’ll bring in a product, and we will popularize it, and make a lot of people successful. Then, a competitor will come in, because they see what’s happening. And if we weren’t always growing and improving, like a lot of people in our business, we’d be out of business.

Marc V: You’ve got to figure out where. This stage is a tricky one. It’s not easy. It’s great, and it should be celebrated to be here. And if you want to stay in this stage, you’ve just got to balance the disengagement and the growth, and make it comfortable. This is really where you’re consistently strategically planning what’s happening next with your business.

Because you want to stay here, or go a number higher. You never want to regress.

Mark S: I’ll use our example of the owner of ColDesi, Scott Colman. Scott is a terrific manager, but he’s not in the building managing people every day. He’s not doing functions within the business. He’s not picking and packing stuff. He’s not creating artwork, or working on websites.

What he does in this stage is he will go out and find things that inspire our growth. So, if we have a new product coming out, it’s because Scott went out and found it, or made the arrangement. We are in that success stage, and he’s making sure that we are growing and moving forward, beating the competition at every turn.

Marc V: Exactly. And he has the balance that he wants for his dream, as the owner of this company, between the disengagement and the growth. His dream was not to be preparing embroidery machines and building them by hand. That’s somebody else’s dream.

But his dream also is to make sure that the business continues to grow and maintain.

Mark S: To be in the business, yeah.

Marc V: So, you find that balance. You find the balance in your business, but I think that until you get here, you should always be strategically planning “How am I going to get myself to the success stage?” Which means you’re consistently profitable, and you’re able to reach the dream.

Like we said, maybe your dream is to just do the art or just do the marketing, or to continue to grow and have 100 employees. If you want to get there, you’ve got to get to this stage.

Mark S: My favorite stage! Talk to us a little bit about stage four, which I think is the last one that we’re really going to get into, and that is the takeoff stage.

Marc V: If you have really focused on the growth stage, once you’ve gotten to success, and you’ve focused on growth, then you’re waiting to get to the takeoff stage.

Mark S: Right. Again, the option here is you’ve got a profitable running business. Do you want to handle phone calls from the beach, until that business runs out? Or do you want to kick it into high gear, and grow? If that’s the case, then you’re shooting for the takeoff stage.

Marc V: The takeoff stage is when, and this could also be compared to our business now, too – the business runs in and of itself. It’s profitable, without you having to turn all of the cranks.

Mark S: Absolutely.

Marc V: The business is profitable. It has very built-in core things that are working out great for you. Going from customer to delivery, you’ve got a whole system for that. You have a system for paying the bills. You’ve got a way for tracking everything.

Everything is going on it’s own, and your primary focus is taking this business completely to a new level. You are no longer thinking about “How do I make shirts? Should I do production here? How do we do the art?”

Mark S: And you’re not making sure that everyone inside the business is doing their job, either. You’re not managing. You’re really at this time where you are the growth manager. That’s what you’re spending your time doing, is trying to figure out the best and most profitable way to grow the business.

Marc V: Your job strictly is driving the rocket ship up, up into space, if you’re taking off, and that’s all you’re focused on. In order to get to this stage, you cannot get to this stage, unless you are a master of delegation, a master of managing people and having the right people below, managing further below.

Mark S: Back in the existence stage, as you’re thinking about what you want your business to be like, and where you’re going, and like we referenced again in the Thinking Like a Big Business podcast, what you’re looking for is that super long-term view. Like “What do I have to do to get to $1 million? What do I have to do to get to $3 million or $10 million, or just get into this perpetual growth mindset? What needs to happen?”

And it can’t be “I need to try to figure out how to do my financials.” It can’t be “First, I’ve got to make sure that my shipping guy knows what he’s doing.” It’s got to be, at this stage, that you are ready to let go of all of the nuts and bolts, unless something catches fire. And then, you’re ready to take the next step.

Marc V: That’s what you’ll find when you see particularly fast and growing big businesses, that the owner of the business is not typically, like I said, actually moving the parts around, micro-managing the staff.

In order to be in this stage, you have to have, whether it’s multiple levels of management or a series of directors, or however your business is going to run. You have to have somebody who is in charge of production and somebody who is in charge of sales, somebody who is charge of maybe customer satisfaction.

Maybe some of these people wear multiple hats, depending on what it is, but you have to have people who are in charge of all of these things. You also have to have a very well-experienced staff that knows what they’re doing, because when fires happen, they are fighting all of the fires, really.

Mark S: That’s true.

Marc V: There’s where you want to be, that you’re not fighting any fires, unless it is five alarm. You’re not getting involved, unless it’s five alarm. That’s what you’ll see with a really big company. The CEO of AT&T Wireless, for example, is not dealing with a customer whose phone isn’t working.

Mark S: Yeah. Jeff Bezos from Amazon isn’t helping you track your package.

Marc V: Or figuring out why the delivery system is broken. There are nine people below him on levels of management, that are figuring all of that out. Unless seriously, their entire system is broken down, Bezos is not involved.

That’s where you’re going to be, if you want to be in this takeoff stage, that the business runs on its own, and you are just 100% focused on getting more business, making more money, innovating, finding something new to do, and continuing on with that.

Mark S: It’s a good point that you make here. This is a place where you can grow huge, or you can fail miserably. One of the positions I held in the past was I worked for Audiovisual Innovations. They’re an AV company that now has merged, and they’re worth basically a bajillion dollars.

But early on in his career, the owner, Marty, he had gotten to this takeoff stage, and he had tried to open up more than one location. This was before he really hit it big. He tried to open up more than one location, and that failed miserably. So, it closed very quickly.

That was a potential – if he didn’t have the financial wherewithal and the business skills right there, the company could have folded, because he invested so much in that expansion. And then, it didn’t work out. He was still okay.

Marc V: Yeah. This is like a risk it all stage. It can be a risk it all stage, too.

Mark S: It can be.

Marc V: You determine what the level of risk you’re taking is. But any time, if you’re trying to go into takeoff, like “Listen, we sell 10,000 shirts every single month. We’ve got this whole production thing. I want to get to 100,000 a month. What do I have to do?”

New facility, new equipment, more management, a loan to get this done. Taking the profits from the company, and investing it in new things. Just banging all of this stuff out. And if you’re doing well in this stage, that’s when you go from making $1 million a year to $10 million a year. That’s when you achieve that growth, is during this takeoff stage.

But there’s risk involved in that, because all of these things you’re doing potentially are eating away at that success stage, if they don’t succeed. That’s when you’ll see a big business make some really big investments, make some really big moves, and the next thing you know, they’re out of money. It didn’t work, and they can no longer do stage one, exist. They can’t even produce the product for the customer anymore.

Mark S: And you could go through a list of big names that have done that, like Kodak, Polaroid. A lot of tech companies, especially, have swung for the fences in this stage, and not paid attention to the survival part, and not made it.

Marc V: Kodak is actually an example, because they’re still a really big company, they just don’t make the cameras anymore.

Mark S: They’re a big company, but they’re not KODAK, not anymore.

Marc V: Yeah. They fell back stages, probably, and came back up through stages.

Mark S: IBM did it, Apple.

Marc V: There’s plenty of these companies that have gone through the stages. Apple is a great example. Did you see the movie Jobs?

Mark S: No.

Marc V: It’s cool, because you see that story happening, where they go from “Can we even make this computer?”

Mark S: It did see Pirates of Silicon Valley, though. That was good.

Marc V: Similar story. The stories are “Can we make it? Now we can make it. Now we’re profitable. Now, let’s shoot for a takeoff.”

Mark S: “Whoops!”

Marc V: Back to “Can we even survive now?” And going through that. The smart business owner figures out a way to survive again, and figures out a way to be successful again, and take off again.

Mark S: All of this is really interesting, because what we’re asking you guys to do is think about your business as a whole, and as an ongoing concern, instead of just your business and your job and your income, and what’s happening next month.

You’re not going to go into the takeoff stage, unless you have a vision of growth, you have a vision of what you want things to be. If you don’t have that vision, and you just try to take off, because you really like Pirates of Silicon Valley, then it’s not going to work.

Marc V: The thing is that these stages, you might have read a book or heard a story, or seen a documentary, where it seems like somebody skips all of these stages. But we’ve talked about this a lot in the podcasts. Don’t let the anomalous events define who you are. You could do that, and the chances of failing are huge.

Colonel Sanders, in no house, living out of his car, trying to sell his chicken recipe. The next thing you know, there’s crappy chicken everywhere in the country.

But I don’t think his dream was what KFC has become.

Mark S: I don’t know.

Marc V: He died, so his dream -.

Mark S: It doesn’t really matter.

Marc V: But with that, I want you to consider, in my opinion, the way I try to live is that you live your life according to what the major rules are. And if you see the opportunity to do something [inaudible 38:47], you go for it, of course. But for the most part, you go through these stages.

Because the last stage you want to get to, which you can read, really, the intense Harvard terminology on this stuff if you want to, but they refer to it as “resource maturity.”

This is where your business is really experienced. It operates, it’s a smooth running machine everywhere. It’s already kind of reached past the takeoff stage. It’s like AT&T or Verizon. Where are they going to take off to, from where they are?

Mark S: Even on a smaller scale, it’s relative to where you are and where you want to be. Your version of being at resource maturity could be a $2 million business. It doesn’t have to be a $200 million business. Right?

Marc V: It just means that there’s tons of strategic planning happening. You’re constantly focused on efficiency. This is the time. When you get here, this is when you can go ahead and figure out how to save a nickel on a cone of thread.

Mark S: Right! That’s good! Because it’s going to make a difference. You’re big enough.

Marc V: Yeah, you’re big. You don’t have any other real issues to worry about, because you’ve reached the potential of growth in your market that you feel might be the maximum you can get to, or what you want to get to. You’ve got efficiencies. You’ve got systems set up like crazy.

Really, all that’s left at this point in stage is just making sure you continue to maintain your high level. If you’re number one in your industry, and that was your goal, was to be there, you just want to make sure you stay there. That’s really what this stage is about.

Mark S: You really do. Now, you’re focused on things like “Am I using the best supplies possible? Am I getting the best rates on those things as possible? Do I have the absolutely best people, doing the things that they should be doing, at all times?”

This is where you have the chance to look at your staff, and why big businesses even replace CEOs, periodically. It’s because they realize that this person isn’t in the right chair. This is the time where you really look back at supply chain, your finances.

Do you need to renegotiate things with your bank? Should you be investing in the real estate that you use, and what does that look like? Is there a better way you can work with a financial guy, to leverage your investments, to better fund the business?

Marc V: Are all of the millions in taxes you’re paying -?

Mark S: Yeah. Should you be doing that? Or should you be in the Bahamas?

Marc V: Yeah. But you can read the article, to really kind of dive into more of this stuff.

Mark S: Do that. Even if you’re like us, and you really don’t understand everything that is presented, I think being exposed to – I’m not going to say higher levels of thought – but more structured, more well-thought-out educational things like this, it changes your perspective a little bit.

You learn a little bit more, each time. “I remember these factors in the takeoff stage, in this article that I read in Harvard Business Review, so when I read this article in the New York Times or in the Washington Post or on CNBC about this company that I love, I understand what they are trying to accomplish, and that’s a great idea for my business, too, on a smaller scale.”

That’s why we do this stuff. We’re constantly exposing ourselves to marketing and business ideas that don’t even apply to our business.

Marc V: Necessarily, but everything ties together. You listening to this podcast is one of the steps to knowing that. I listen to all types of podcasts. I read books, and some of them have nothing to do with anything I do.

Mark S: That’s true.

Marc V: But then, all of a sudden, you see how they tie together. That’s when you have these epiphany moments, like “I know what I can do for my business!”

We took a couple of little summary points here that are factors that can help you succeed or fail, in moving through these stages. Besides anything in stages or any of this stuff, these are all just simple rules.

Mark S: And I think these are good to not take personally, because a lot of the things that we’re going to talk about, they could be emotional hot buttons. A lot of people feel differently about their money. They feel differently about the people around them.

So, these are objective things that you have to consider. And I like these business factors, like financial resources. What’s your cash and borrowing power?

Marc V: And then, as your business is growing, your cash and borrowing factor will grow with it. It’s just a part of how it works.

Mark S: And be realistic. Don’t take it personally. We get people that get turned down for leases, that don’t understand, you have terrible credit. Don’t think that you do. Plan for it. Realize that you have terrible credit. What else can you do?

Marc V: “I don’t have a lot of borrowing power. What do I have? Who do I have, that I can work with, that does have the cash or the borrowing power?”

Other business factors are personnel resources, the people in the business, the resources of the actual people. So, the person that’s running your embroidery equipment, that’s running the t-shirt, your salespeople. These are your personnel. These are resources for the business, that the business will use to move through the stages of growth.

Mark S: And this is at every stage. We become really attached to all of the people that work here at ColDesi. Occasionally, it doesn’t work it. That’s a painful experience, but you can’t ignore it, even if it’s your cousin or your sister or your spouse.

If the quality and the level of the person that is helping you grow your business or start your business isn’t there, you’ve got to make a change. It’s just like if you don’t have the money, you’ve got to find it. If you don’t have the right people, you’ve got to change it, or find them, too.

Marc V: If somebody is not particularly good at printing t-shirts at the speed that it needs to be done, then you’ve got to help them, or get somebody else to do it, to be a resource for the business. Otherwise, you’re going to be stuck. You’ll be stuck at as fast as they can produce garments, and maybe that’s not enough to get to the success stage.

Mark S: Agreed. System resources are also a big deal. You’ve got to have the systems in place to make shirts, to fill an order, to keeps customers happy. We’ve done tons of podcasts on this.

Marc V: Conceptual systems, too. “This is how we quote a customer.” The systems are really important.

Mark S: We should get some of those for marketing!

Marc V: What’s that?

Mark S: Systems. I’m going to circle that.

Marc V: I keep trying!

Mark S: Business resources, you talk about that one.

Marc V: Sure. The business resources are the fundamental things the business is able to do, and it’s almost because of the above three; being able to handle good relations with customers, leveraging the market share that you have, working with the relationships you have with your suppliers, your distribution process. It’s all of the resources the business has, that you can use.

So, you can say “I’ve got a really good relationship with these customers. Now, I’m trying to get to the next stage. What can I do? I can go to these really good customers, and try to get referral business from them.” That’s using a resource of the business. One of your resources are your good customer relationships.

Mark S: You’ve really got to be aware of that. That’s a great point.

Marc V: And maybe your relationship with your supplier. You are buying – it could be anything, I guess, with that. But as you’re growing with, say Colman and Company, and you’re buying supplies from us, you’re trying to figure out how to do something different or new. So, what do you do?

You call up the ColDesi support department. You leverage that relationship, and say “Hey. I have an idea. I want to print on this. I want to embroider on this. I’m not sure how to do it.” You leverage that relationship you have with us, so they can teach you how to do it, or problem solve.

Now you know how to do it, and maybe you’re the first person in your area to actually produce this.

Then, there’s the factors for the owner. This is you.

Mark S: This is another time to try to be completely as objective as possible, because you’ve got to take a look at yourself, and make sure that you’ve got, first of all that you’ve got some kind of a goal or dream in mind. This can’t be the default, like “I may as well make t-shirts, because I know how.”

I think this really came home for me when we were looking for our marketing assistant. We’ve hired a great marketing assistant, Hannah. You’ll meet her on some videos coming up. But as we were looking, I did a phone interview with this one guy who had a great resume.

As I’m talking to him, it was just clear that he would do it, but he really didn’t want to. It’s not what he wanted to do, like he needed the money, and he could do it. That’s why we were on the phone. But it’s not what he wanted to do.

Don’t start a business like that.

Marc V: You’ve got to have the goals and the dreams.

Mark S: You’ve got to want it.

Marc V: You’re the fuel behind this whole thing.

The owner’s ability to do the important jobs in running the business – that means the reason why, like Steve Jobs, using him, from Apple. He had the ability to get somebody to push beyond what they thought they could do.

“Make the computer smaller. Make it smaller. You can make it smaller.” He had the ability to motivate people to do that. He had the ability to go out and sell and talk and convince people to invest or buy stuff from him.

So, your ability to do all of the things that involve all of these stages, is important. Maybe the first stage is knowing how to print DTG shirts really well. Which means you’ve got to practice, and you’ve got to do it, and you can’t get frustrated. You’ve got to finish your training.

Mark S: Please! Please!

Marc V: If you guys saw the stats on how many of you actually finish your training.

Mark S: I’m just going to say it. If you own ColDesi equipment, do not get trained on YouTube! That’s not where it is.

Marc V: That’s not where we put it.

Mark S: No. We don’t put our training videos on YouTube. If you find something on how to do something on YouTube, from ColDesi, that’s great, but that’s not a training resource.

Marc V: Yeah. We have training with our equipment. It’s all about you just understanding how to do all of this stuff, whether you’re physically doing it or you understand the process of who is doing it, why they’re doing it, who to hire, have the right people.

Mark S: That moves into your managerial ability. If you are not going to work by yourself, even if you have a partner, and it’s just two people, there’s management involved. Like to do a podcast, Marc Vila manages the podcast. He comes up with most of the topics. He does most of the notes. He makes sure that our contractor gets it published. That is a managerial thing that you do.

That’s one of the things that makes this successful. So for you, it’s if you’re working with your spouse or your kids, or your neighbor or whatever it is, you’ve got to study how to manage them, so you’ll get the most out of them.

Marc V: I would say this is a really hard thing to see, because everyone thinks that they’re a good manager.

Mark S: Oh, yeah. You’re not!

Marc V: Everyone thinks that they are. It’s just something about it. Everyone thinks they’re a good parent. You raise your kids the best. Right? I’ve never met one person who was like “Man, I am just a junk parent! I don’t even know how to raise kids!”

Mark S: I’ve seen some comedians say that!

Marc V: But really, people say “I know how to get my kids to eat food, or I know how to get my kids to go to bed on time.”

Mark S: Is that why everyone gives parenting advice?

Marc V: Yes! Because they’re the best at it. So, chances are you are an average manager.

Mark S: Yes.

Marc V: Because that’s probably -.

Mark S: That’s average! That’s actually what average means.

Marc V: Yeah. Chances are that, and that’s fine. But what you can do, if you want to go through these stages, pick up some books on management. Watch some videos. Talk to other business owners. Ask them.

I think some of the clues to really see if you need this are, do your employees do what you say? I heard a manager from another business friend, talking about “I ask this person to do something, and they don’t do it. I have all these people who are just deficient at their jobs. I keep telling this one person. He’s so smart, and I can’t get him to do it.”

I’m thinking to myself “You’re a bad manager, in some way. Because what are the chances that you hired the smartest, crappiest people in the crew, you could find?” Probably not. Probably you need some help in getting them, motivating them, managing them.

Mark S: I will actually deliver a management tip, and that is that very few people don’t need to be told what to do. And almost no one that you need to tell what to do, can you only say that once. So, if you train someone to answer the phone for you in a specific way that you like, and then two weeks later, they’re not doing that anymore, you have to tell them again.

Don’t get frustrated. And if you just yell at them, or if you ask them and they don’t change, then you need to read one of the management books, to help you get through that.

Marc V: Yeah. These are all skills you build over time. You’re not going to be good at all of them. Some people are naturally good at one thing or another.

We have people that they buy a digital printer, and then they create this artwork, and they just nail it.

Mark S: We never hear from them again!

Marc V: We’re like “What experience do you have?” “None, really. I just kind of play with it.” But for some reason, they can just nail it. However, they might be a really poor manager. Everyone’s got their ups and down.

The last one for owner factors is your strategic ability. That’s your ability to strategize growth, strategize the operation of your business, look at the business from up above, and figure out how things are going to work.

Mark S: Looking beyond what’s happening today.

Marc V: And there’s business strategy books and videos, and stuff like that.

Mark S: Tons!

Marc V: Another thing that you could do is you might look at all of these things and be like “I nail all of these things!” What I would suggest is find a book or a movie or a documentary, or anything like that, on one or more of any of these topics we talked about, and listen to it or read it or watch it. As soon as you do that, you’re gong to realize there’s eight things that you don’t do right, or that you could do better.

Mark S: Here would be my approach. If you feel like you do all four of these things perfectly, then you need to go make a friend who will tell you the truth. That’s really what you need to do.

We do that here, actually. We’ll talk to other business owners, in different industries entirely, just to kind of check, and say “This is what we do for marketing. What do you do? Would you take a look at these emails or this website, and let me know what you think? And I’ll return the favor.” It’s really productive.

Marc V: It’s good to have a big list of things that you write down, that you’re not very good at or you wish you were better at. It may take you years to check those things off, that you finally get to where you are, but if you’ve got that strategic list of where you want to grow, what you want to improve in your business.

You can just say “I want to have a piece of software that tracks orders from beginning to end, every single time. But gosh, it’s so expensive. I can’t afford to buy this $20,000 a year software.”

But you keep it on the list, because you know that if your goal is to get to $2 million a year, you’re going to need that. And then, one day you’ll check that off.

We’ve had plenty of things on our website and in our marketing that we’ve wanted to do forever. Then finally, we do them. We get to do it. So, do that for yourself.

We can wrap this up, I think.

Mark S: Yeah. I love this! This has been the Five Stages of Small Business Growth, episode 110. I still can’t believe that!

Marc V: It’s a good number.

Mark S: And really, we used the Harvard Business Review to inspire this podcast, just so you would think we’re smarter than we are!

Marc V: I stumbled upon this article, and I thought it was interesting, and it was the inspiration. If all of our customers and all of the folks who are listening to this podcast, who are starting small businesses, kind of had an idea of what this was, then you can start to realize, as you’re kind of moving through your business, “What’s happening? Where am I going? Where am I?”

Then, you have an achievable goal to get to. You have a stage to get to. “Okay, I’m just in existence. I want to get to survival.” It’s cool to have these little goals for your business. Then you celebrate yourself, when you officially say to yourself “I’m in a new stage now!”

It’s not like a switch you turn on. You kind of roll over it, and you realize you’re there.

Mark S: Yeah, you wake up one day. Alright, guys. Thanks for listening! Once again, this has been Mark Stephenson, from ColDesi.

Marc V: And Marc Vila, from ColDesi.

Mark S: You guys have a great business!

 

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