I first heard the term business desert used by Dent Global. It’s a great way to think about what you might have to endure if you want to your business to grow really big.
When a business gets to about 20 people most entrepreneurs start to struggle to keep on top of what everyone is doing, it’s not as easy as when it’s just a few of you.
On top of that, most of the following happen will too:
- Technology stacks start to get complicated and expensive
- You have to start laying down more robust processes, you can’t just do stuff on the fly anymore
- You have to spend a lot of time training and managing your people, not everyone is going to be easy to manage
- Debtors grow and grow, expenses start pouring in, cash at bank runs dry
- Your people start letting down your beloved clients
- Lots of bookkeeping and compliance mistakes start happening
- The external compliance requirements snowball
- You spend your day putting out fires
- Its faster for you to do it but you don’t have enough hours in the day
- Everything just gets so complicated you wished you stayed small like you used to be when it was fun, and you made more money
There is a lot to unpack here but zoom out with me a minute.
At Middle Office we talk about the 3 legs that make your business inherently stable:
- Increase Performance – You get good perfomance by constantly measuring and improving. Don’t reinvent the wheel though, look to see what the best businesses in your industry measure and do. Copy it.
- Reduce Complexity – Human beings have a natural tendency to complicate things. Think of it like weeding a garden, the more often you do it the more likely it will fit in the green bin. Outsource what you can.
- Manage Compliance – It’s all too easy to think compliance is the problem but it’s there to save us from the worst of ourselves. Use the force for your benefit, be even better by being simple. As they say, run from the monster and it gets bigger.
There is a lot to be said for looking at how much money you might make at each stage, and what’s the probability of surviving the desert. If you get bigger you might have to wait till you sell to get any money at all. It often makes more sense to stay a lifestyle business but focus your energy on increasing profit, and being able to go for a swim. But, if you want to grow big, really big, keep it as simple as you can.
Photo by Hari Nandakumar on Unsplash
Thomas is a CPA qualified accountant, business advisor and on-demand CFO with over 20 years of experience running businesses. He has worked in senior finance roles with some of Australia’s biggest companies and best business leaders.
Thomas been an independent CFO for 20 years, working with B2B businesses from start-up to 30M turnover. Twenty years ago not many people knew what an Outsourced CFO was but they are becoming more widespread these days. Which Thomas thinks is a great thing.