Ben’s Newsletter: What got me here won’t get me there!

Hi, I was having a coffee with a mate the other day who is quite an accomplished athlete. While she is international level in her age group she was about to change disciplines and take on a new challenge. I suggested that all the work she had done to get to where she is now must help in taking on the leaders in her new sport. Her reply, ‘it may help Ben, but what got me here won’t get me there! I have to change my approach.’ 

It struck me that this is exactly the same for a business as we start to scale. We are building on what got us here, but to succeed at the next stage of growth requires our approach to change in a number of ways. 

I touched on this last month when I looked at The stuff I wish I knew, a reflection on things that might have allowed a mate of mine to scale his business faster. Over the next few months, I’ll look at several of the key themes in a bit more depth. 

And – as promised we have put together the next three months of the Unlocking Growth Masterclass Series (details at the bottom of this Newsletter) specifically for those of you who want to work on any particular theme in depth. 

Business Stages – a reminder

In the Business Stages model a business can go from 

Small – usually under $1m in revenue. This is where many choose to be. Owners are ‘doing the doing’. 

Start Up – I call it this as you are starting to figure out what is needed to grow and have committed to give it a go. Your business leaves this stage when you hit what I call ‘exit velocity’. This is marked by a realisation that you not only have growth, but you can see how to sustain it at better than 10% per year. The core offer and core customer are becoming clearer. You can generally ‘feel’ when the business hits the next stage. In NZ little over 5% of businesses ever get past this stage. 

Platform For Growth – This is a time to take key learnings across a number of areas, clarify strategy and systematise the key components of the business. There is work to be done on the growth engine, on the business model, on introducing management skills and values and a number of other areas. 

As revenue and free cash flow grows and management take on more operating responsibility for the business the business increases its capacity to implement more change. 

At the same time a fight between chaos and order is underway. The entrepreneurial spirit of the business is wary of the wrong type of systems introducing to much rigidity, and owners often rebel against too much ‘corporatisation’. But in the end, what got you here won’t get you there… so a way forward has to be found. 

You leave this phase when you are maintaining the level of growth you have chosen with a sense the key components of the business are under control and will stay stable as you grow. I often see this as the business passes $7m annual revenue. 

Scale Up 1 – This is the next phase of growth, and yet another set of complexity. Often a business will engage the next level of coach or advisory board chair as the number of elements that need to be aligned in a business multiply. Every business is different, but I do see businesses step to another Stage at around $20m revenue. 

Scale Up 2 – and so it goes on. 

The thing to remember is that every stage of business has its own style of complexity for an owner. This is the reason that employees from large companies often don’t get and can’t understand what is going on in a smaller business than they are used to. 

The key lesson from this model is that the stage of business effects -

• what you focus on
• your capacity to deal with multiple challenges, and
• your role as an owner.

Platform for Growth – The Replicator Challenge

When a business is small you can reach out and touch every part of your business. You are in the market, you hear from customers, you hire staff, and you see what is happening inside the business. The challenge at this stage is to figure out what the business can do and for whom that allows the business to scale. 

Once you have figured that out and you enter the Platform for Growth stage you have the Replicator Challenge. 

I remember a business I was involved in which started to grow. I pulled myself out of the business and started to codify what I did. This included processes, CRM templates and the works. It was a disaster! 

What worked for my crazy dyslexic brain did not work for normal people – I had made a classic mistake. I had asked myself ‘how do I replicate what I am doing’ instead of ‘how do I build replicable processes, systems and behaviours to grow’. This is the Replicator Challenge. 

What Happens If You Don’t Deal with This?

What got you here won’t get you there. Typically, systems that work for up to 14 people fall apart when you go over 20. This happens for a variety of reasons. 

Each person you add exponentially adds to the variability of approaches to work, lines of (mis-) communication, and how people behave. And – you are just not there all the time to course correct and coach. 

So, the business introduces guard rails to bring consistency which slow things down, add cost and piss off the good staff. Customer service starts to fall. Good staff start to leave. 

It’s often hard to see that you are in this situation, but as an owner you can feel it. This can also be a time when the revenue starts to flat line. 

Quick note - I have also seen a number of businesses choose to go back to being smaller as owners assess what they want from the business (and life in general). This is a valid choice. 

Process, Systems, People (+ AI)

When you are small the question is What needs to be done, How do I do it?

As the business grows and work needs to be done, we move to the what/how/who model. 

• What work needs to be done?
• How am I going to get it done? (staff here or offshore, partner/outsource and/or technology and/or AI etc), and
• Who is responsible for the work being done and who is accountable for making sure it is done (the manager)?

 In the Platform for Growth Stage our challenge is to rethink not only how we get the work done, but how we view, structure, and run our businesses. Processes (workflow etc), system (the supporting digital systems) and people (right seats right people right place) all tend to evolve. And now AI is here to give us a hand as well. 

This takes thinking, this takes work. There is no short cut. 

Systems – choices

When looking at digital systems I find most companies face three broad choices –

Industry Software – some industry niches have great software that solves all or nearly all of your challenges – In the mid-sized construction sector for example Procore handles everything. While it looks pricey at first glance when you look at savings in staff time, tracking costs and administration it is well worth the investment.

Connected SAAS – Less common but highly effective approach is integrating SAAS services and automating tasks. It is extraordinary what you can achieve with the right sort of help. I have seen companies free up several staff for other tasks by taking this approach. It takes a bit of fresh thinking and a lot of skill. Andy Carruthers is a master at this.

Be-spoke solutions – This is often more costly up front but can give scalability and a competitive edge if the other solutions above will not work for you. I have seen a couple of different companies in NZ build systems that allow for the co-ordination of work from customers through to sub-contractors that have allowed them to dominate their market niche and grow nationally and internationally. In this case its about being crystal clear about what the business problem you are solving is, and who for. 

What works for you will depend on the industry you are in, what is available to you, and what adds the most value. We will be looking at these business questions and approaches at one of our upcoming masterclasses in May with Bruce Howe from putti. 

It’s Not Just Efficiency and Capacity, It’s About Business Value

There is a tendency to look at process and systems activity as a cost of efficiency and scale. But keep in mind, if you invest to solve a problem in a way others have not, and it can allow you and others to scale you can also materially change how your business is valued, particularly to trade buyers. 

Thinking Differently About the Information You Have (And the Information You Could Get)

Lee Retimana tells a great story about a marketing client she met a number of years ago. She walked into a business and the owner told her he wanted more business. She looked around his office and saw a box full of papers. She asked what they were and the client said they were invoices of old clients. She suggested they call all clients they had served over a year ago and see if they needed maintenance or anything else. Business boomed. 

She tells me one of the things she looks closely at when they engage with a new client is what information they have that they are not using. Often the next phase of growth is sitting in a box, or on a database. 

But, it is not just the information you have. It is the information that you could have that could change the growth and or value of your business. Michael Masterson calls this an Intrinsic Asset. 

He had a client who dominated their market. They sold their product through retailers, and had extensive personal information on the store managers and they invested heavily in these relationships. Michael suggested that they start a program to collect the end user information of everyone who bought their products. The company appointed a Chief Intrinsic Assets manager whose role was to build out this information set. Three years later they went to sell the business. Private equity firms loved the business and where all offering similar amounts. A global supplier who had complementary products came in and offered nearly twice as much as the other offers. For them the information held by the company was a gold mine for future revenue. 

And remember, with AI starting to feature more these information (data) sets could also form the basis for future competitive advantage. 

AI

In my newsletter a couple of months ago I shared an image of the impact of AI on larger companies in the US. The short story - less cost more margin. 

Recently Elon Musk predicted AI will overtake human intelligence in 2025. 

I can’t tell you what the impact of AI will be on your business or your industry, but I can share a couple of stories. 

Company A is run by a guy I rate as a master of the Replicator Challenge. When he sat back and looked at his business he saw two things. One – ultimately consumer behaviour was going to change because of AI so he had to position his company to help his customers with that and secondly how they did their work had to change significantly. He hired the most expensive person he could find and has spent a year redesigning his business and integrating a variety of AI tools into nearly everything they do. Business is booming. 

Company B is disrupting the delivery of services to a very traditional industry. They do this by taking a significant amount of non-customer facing work off their client’s hands – this gives their clients certainty of pricing, takes away staff management and fixed overhead, and increases customer facing time. This industry is dominated by two global information suppliers who are now providing AI to do some of this work for larger companies in the market. These two information suppliers are most likely to dominate AI services in this space as they are the only ones with access to the information both old and current to train the AI and they have existing market relationships globally. This owner is taking time to understand not just the services offered but the information suppliers AI development pathway - as any commitment to an AI supplier is likely to be a long-term strategic commitment for her business. 

These two businesses are in quite different services industries. The common thread is that AI should double staff productivity, and initially at least will not affect top line revenue so gross margin will improve. Both these companies are growing fast. The AI allows more work capacity, and the margin allows them to invest in faster growth and new services. And, if margin pressure comes later they will have established a market leading position. 

Their customers point of view is also interesting. Their customers are telling them they see AI as really helpful, but it is adding another layer of complexity that many existing staff cannot adapt to. They would rather partner with companies who specialise in using it than search for someone who might be able to use it internally and could leave when they get a better offer. 

The question most owners I know are asking is does/how does AI reshape my market, and where do I want to be to capitalise on this? 

So, enough about internal operations let’s have a chat about… 

The Growth Engine

For several decades Nick Paul has been involved in driving revenue growth, initially running large sales teams, then as a CEO, and since 2016 as the owner of The Sales Factory, a consultancy business that specialises in helping emerging growth companies scale revenue. 

It is Nick who introduced me to the Growth Engine. 

The Growth Engine is an integrated view of your marketing, sales and customer experience system. But interestingly not in that order. 

Typically, if you are at the platform for growth stage you might have $2m to $7m turnover. You have customers you have been servicing, they have taught you a lot and sitting inside what you currently do is some gold. What Nick has found is you start at Customer Experience, then you sort your sales system, then you work on lead generation. 

His experience is that there is no point pouring leads into a sales system that is not working, who then convert some of them and send them to a poor on boarding and crappy ongoing service situation. 

He also points out that typically tidying up the customer experience funds the rest of the work you have to do on sales and marketing. 

Customer Experience

I met a guy the other day whose biggest source of growth is business customers who have had a poor experience with his main competitor. He says that he can’t figure out how they are so good at sourcing leads and selling. But he does know that it takes a few short months, and the customers turn up at his door slightly wounded by the experience. Three months of great service and they are his customers for life. 

You can lose 50% of your business through poor onboarding. Once customers are on board, working with you and love you, you have earnt the right to do other work for them. This is your opportunity – do more for them, over a longer period… the lifetime value of a client goes up. 

The Sales System

Developing a sales system from what you are doing well is part science, part art. Done well it is a games changer. Firstly, you capture what is best from your current approach, then you fix the holes, and then you set up a replicable system. Equally important is that you become very clear of what each sales stage in the process is and the ‘gate’ a customer has to go through to earn the right to have more of your businesses time, effort and insight at the next stage. 

I have seen swollen sales pipelines that seem to have potential clients lying around everywhere. I call it being hooked on hope-ium. The truth is, especially in NZ where people are reluctant to say no, that in a poor sales system many of these ‘potential’ customers are not going to be customers at all. 

Clear sales stages start to tell a true story of future revenue and allows you to focus resource on the potential customers who matter. 

Leads, Relationships and Brand

I suspect there is not an industry that has more charlatans and bulls*&ter’s than marketing. 

But find the right partner and marketing at the platform for growth stage can be a game changer. And sometimes it has to be. It maybe you have run out of relationships you have in the market, or you are entering new markets, or adding services. 

Your business at this stage has also probably evolved significantly from the early days – the story you tell, and even your name may need to evolve to match who you are. 

It is also probably time to stop using your mate’s daughter (or Mum) to ‘do your social media’ and start taking a business focused, strategic look at what you are doing and what needs to be done to get more leads, stay in touch with existing, previous, and future customers (e.g. I write this newsletter) and tell your story. 

Partner? Partner? Partner?

Over the last few weeks, I have met separately with the owners of four digital marketing agencies from Christchurch, Hamilton, Tauranga, and Auckland that support emerging growth and mid-market companies. 

They are all seeing significant enquiry and growth. 

Notably they are seeing companies outsource most or all of their marketing activity. I have been seeing this from the owner side as well. An increasing number of mid-market company owners I talk to are narrowing the internal focus of their companies and seeking to partner with experts not just for advice, but for delivery, particularly in the marketing space. 

When we are small we tend to do a lot ourselves. As we grow we then often bring ‘someone in’ to help and next minute there are several people doing who knows what and who knows how well? Partnering with the right expert is certainly an option worth considering as you build you platform for growth. 

Connector Auckland – be my guest.

If you own a growing business, want to meet other like minded business owners, learn and share Connector Auckland might be for you. This business community is going from strength to strength. Touch base with me if you want to attend as my guest to check it out. Dates and contact details are below in my signature. On May 7th we have Bruce from putti shining a light on a number of themes covered above, and a bit of AI as well. 

Unlocking Growth Masterclass Series – New dates are out!

If you like this newsletter our masterclasses are designed for you. Get real world insights on how to drive the growth and value of your business. 

The details of the next three months of masterclasses are out. Details are below my signature and at this link.  As promised we are focused on the platform for growth challenges I have been discussing in recent newsletters. 

The masterclasses are hands on, interactive 3-hour long sessions where you can work on the questions facing your business. They are limited to a small number of companies. We encourage owners to bring another person from your business. 

The workshops in May are – 

The Replicator Challenge in an AI World with putti – 21 May

Taking a fresh look at how you build digital systems that allow you to scale your business at pace (or at least ensure the wheels don't fall off). 

Bruce Howe and the team at putti are experts at simplifying the complex. They specialise in helping business owners understand how to build digital systems that solve business problems, and increasingly are helping businesses reposition to take advantage of AI a fast-moving world. 

Line of Sight with Leigh Paulden – 28 May

How do you scale by driving compounding revenue growth and generating the cash required to keep on going. 

25% compounding growth does not sound like much. But in 10 years your business will be 10 times the size it is now. So how do you do that for your business? This workshop will provide you with your Line of Sight and the tools you need to scale at pace using cashflow. Leigh will show you what you need so that you can start executing on your plan immediately. 

And remember - if you have a question feel free to touch base. I may not have the answer, but I probably know who does. And - if you are reluctant to take up my time for free… feel free to buy me a bottle of Shiraz afterwards. 

Until next time –have fun out there! And enjoy ANZAC day. Lest we forget.

Cheers

 Ben

Mobile: 027 4799 950

Email: ben@marris.co.nz

Website Link: Connector Communities

Website Link: Unlocking Growth Masterclass Series

About The Author: Ben Marris has been working with the owners of privately held growth companies in New Zealand and across the Pacific for over 15 years. He believes that these companies are vital for the prosperity of our community in a fast-changing world.

 He runs a business community called Connector Auckland and the Unlocking Growth Masterclass Series for the owners and leaders of emerging ($2m + turnover) growth companies. He is also a coach and strategy advisor to privately owned growth companies.

 Ben loves red wine and a good story. He is also dyslexic, so if there are any spelling mistakes or grammatical errors blame his spell check, he does!

 Connector Auckland 2024 Dates: Usually the first Tuesday of the month. Tuesday 13 February, Tuesday 5 March, Tuesday 2 April, Tuesday 7 May, Tuesday 4 June, Tuesday 2 July, Tuesday 6 August, Tuesday 3 September, Tuesday 1 October, Tuesday 5 November.

 If you want to come along to Connector Auckland as my guest email me at ben@marris.co.nz  or register on this link

Unlocking Growth Masterclass Series (click here for details and to reserve a place) 

The Replicator Challenge in an AI World with putti – 21 May

Taking a fresh look at how you build digital systems that allow you to scale your business at pace (or at least ensure the wheels don't fall off). 

Bruce Howe and the team at putti are experts simplifying the complex. They specialise in helping business owners understand how to build digital systems that solve business problems, and increasingly are helping businesses reposition to take advantage of AI a fast-moving world 

Line of Sight with Leigh Paulden – 28 May

How do you scale by driving compounding revenue growth and generating the cash required to keep on going? 

25% compounding growth does not sound like much. But in 10 years your business will be 10 times the size it is now. So how do you do that for your business? This workshop will provide you with your Line of Sight and the tools you need to scale at pace using cashflow. Leigh will show you what you need so that you can start executing on your plan immediately. 

Secret Formulas for Scaling Growth with Dsrupt – 18 June

There are eight broad approaches to scaling a business and five different growth journeys to get there, which one should you choose? 

Debbie Humphrey and the team from Dsrupt specialise in scanning the market to understand the approach that works best for you, and then identifies the strategy or best strategies to get there. They are your growth navigators. This workshop will give you frameworks and tools to start making smart choices to scale. 

People Stages of Growth with Sprout People – 25 June

How to navigate growing numbers of staff and what it means for the role of managers and the owner.

This Unlocking Growth Masterclass is all about humans. As you put more in a business the way you structure and operate your business has to change., and so does your role as an owner. This happens in stages at roughly 10 then, 20 then, 50 then, 100 people.

Brien Keegan and the team at Sprout People work with owners to understand what people ‘stage’ your business is at and plan to optimise the stage and prepare for the next one. They specialise in fast growing businesses that keep on adding people, and businesses where the owner has got to a point they feel ‘stuck’ (or are falling out of love with the business) and can’t put their finger on why.

Building True Business Value with Intrinsika – 23 July

Everything you have heard about building business value is wrong, and so is your Accountant. This Unlocking Growth Masterclass is all about building real business value.

Most of us know that ‘intangible assets’ make up a big part of the value of our businesses. They can potentially account for most of our company worth. But what really matters is understanding what the key 1% is that really determines our value and helps us grow.

Intrinsika works with companies to highlight those critical intrinsic assets that distinguish you from the competition and that drive the growth and value for your company. Michael Masterson will look at how we figure out your ‘magic 1%’, what strategies will unlock value in your business and what you need to protect. This will be an interactive, challenging and fun look at your business from a completely different perspective.

Advice, Advancing and Accountability with Faraday – 30 July

Have you been told you need a Board of Directors? Trust me - you probably don't! Big businesses have boards of directors. But often this is the wrong structure for a growing business. They can be slow, rigid, and risk adverse.

But you might want to access the right people and support to take the business forward and hold you to account? So, what could that look like?

 This Unlocking Growth Masterclass is for owners wanting to build a system that will support them with –

• Advice - on what is coming, and what they do not know
• Advancing - strategy and.. all the traps that come with implementing growth at pace, and
• Accountability (no not telling you what to do) but helping the business hold to the plan and pace required to deliver on your goals.

This workshop will show you what could work for you as an owner of a growing business.