Prison Break: 6 Key Constraints That Stop Small Businesses From Becoming Big Businesses

Recently I met a group of Small and Medium Sized Enterprises (SMEs) business owners who were sharing who were sharing their experiences and exchange ideas on how to grow their businesses. They were entrepreneurs at various stages of running businesses from one year to over ten years.

One lady who has been running a seemingly successful SME for over a decade brought up an interesting question that occupied most of the discussions. She asked why most SMEs struggle to grow into large enterprises. She explained that despite hard work, capital injection, strategic planning majority of SMEs are unable to break some confining walls that ensure the business remains at certain level of turnover and profitability. This happens after some years of exciting growth that plateaus at certain level. I jokingly called what he was describing the being held in the prison of smallness.

Why would theses enterprising, hardworking, passionate and ambitious entrepreneurs be held in this prison? I kept on thinking.

After evaluating my working experience with many SMEs I picked the following factors as the key constraints that combine to create this prison.

1. Unscalable Business Models.

The biggest limitation to SME growth, from my observation, has been unscalable business models.

No business can outperform its business model. A business model describes the integrated means and processes through which you are trying to achieve your business objectives- creating and delivering value to the market for profit. When the perfect combination of such means is put to the highest test they could only give a certain result at best. However hard you work your model will not get any higher results after some point. At this point we say your business model can’t be scaled any further.

Let me explain this with an example. If you were a dairy products processor you could have the following factors as some of the elements that form your business model. You keep dairy cattle, which provide all the raw milk you require. You then process and package the end products in your family run factory. You own two trucks with some delivery people who take the milk to various shops in your neighboring city. As the business keeps on growing you increase your cows, you expand your factory, buy more trucks and hire more delivery boys. But you will only be able to do this to a certain level.

At that point you won’t be able to keep more cows and therefore your raw materials will become a constraint. The factory could only expand to a certain level and the market will only be able to absorb a certain amount of your products. However, much capital is injected into this business for expansion the business will become a prisoner of its own business model. Unless the model is changed to a scalable one, the revenues and profits of this firm will plateau.

A change in model may mean a change in how the firm gets its raw materials – from self production to buy from other dairy farmers; it may also mean selling semi-processed products to other dairy products, it may mean sourcing out its excess capacity to competitors, add other products into its fold rather than focusing on dairy products only, develop a different channel of distribution among many other factors that affect its business model.

As you evaluate your business model you need to fully appreciate all the factors that drive your business and how they relate to each other. If you are a prisoner of smallness then you need to have a thorough look into your business model.

2. Over dependence on new customers

All start up entrepreneurs have great stories of their first customers. The excitement of getting someone to believe in your product or firm is essential to keep you going in the early days of the start up. Unfortunately for most SME entrepreneurs this excitement becomes an obsession and it becomes the only purpose of all its business efforts.

It has been widely believed that the most successful business is the one that has the highest number of first time customers. This is a partial truth. I evaluate business success by the number of repeat customers, how frequent the orders are and whether they are increasing with time. As a growth strategist, marketing consultant and business owner, I know how costly and difficult it is to get a customer make the first purchase. This is incomparable to the easiness of keeping a customer and getting him to make a repeat purchase.

Many SMEs owners will agree with this logic in conversations but in practice the opposite happens. You hear and see the inscription, ‘Lose them once they make the first purchase!’ In their customer dealings. You see it in the customer service, the quality of its products and weak after sale follow-up. After a customer buys don’t ask, “How do I get the next one.” But shout to yourself, “How will I get him to come back!”

3. Flawed Marketing Mindset

For big companies marketing seem to be at the heart of everything they do. They do as much marketing as money can buy. A friend who owns a SME once told me that the market budget of a competitor was more than his company’s annual turnover (not profit). SMEs are limited in financial resources. But that is never an excuse for not marketing.

Marketing is not a nice to have thing when you have money it is an essential for growing your business. Today’s business battles are worn or lost in the marketing arena. Many people seem to conclude that you have to invest all your capital into marketing. That is a fallacy. One guy who has been able to start SMEs and convert them into large organizations is Richard Branson. In his book, “Screw It”, he says that since he discovered early that he didn’t have a lot of money for advertising he had to become a publicist of own companies by becoming a news character. By appearing in the media he gets free advertising. I have just given him free advertisement in this article. You get the point.

Unless you want to remain small forever, you have to think of ways of getting marketing leverage for your business at low cost and ensure you get the highest returns possible from your marketing investments. You don’t have to be a marketing guru to do it. In our marketing course for entrepreneurs we cover various aspects of marketing your business with minimal budget- and there are limitless ways of doing so.

4. Lack of Quality Human Capital

You wish I said financial capital. This may be a challenge to some businesses. But, for those that remain small this is more of a consequence than the cause. I have consulted and trained for large organizations and SMEs and the most visible difference between the two is the number of quality of people they have in their team.

While large organizations have a large number of talented, skilled and passionate people, SMEs particularly the ones whose growth has stagnated have only one such person – the owner. That is why minus the physical and mental health of the owner many SMES end up closing doors.

When you hear of a guy who single handedly started and grew a small business into a large multinational just know that is a lie. Businesses are grown by having a wealth of skilled, talented, loyal and passionate employees. Many entrepreneurs running SMEs complain that getting and retaining great people expensive and almost an impossibility. It is difficult but not impossible.

Early last year I advised a client to go for the right attitude and develop skills with time. And for sure they are starting to experience great results from this. You need to craft a strategy and develop a culture that will attract, develop and retain the best people you require for your business. Your business will be as great as the quality of people working in it.

5. Lack of Innovation

Closely related to lack of human capital is lack of innovation. The two are directly proportional. One true measure of business growth is its innovativeness. Majority of the businesses highly admired for their growth from small start ups to success companies are not doing what they started out doing and if at all they are, they are not doing it the same way they did it in the beginning.

The yester-year giants that have stagnated are doing exactly what they started out doing. I don’t want to mention names. The world we live in is continuously changing. That which was a genius idea yesterday will not be appealing tomorrow. That which your customers fought to have last year will be highly inferior compared to what your competitors will introduce next year. How do you grow in this environment?

INNOVATE! Innovation is what fuels of business growth. You have to develop new products, create more selling channels, give your customers more flavors, more service options, different ways of communicating to your customers. Innovation will be possible only if you become more outward looking. Then align everything in your business to the external happenings and prepare for the future. Innovation thrives in a business culture that allows, even encourages, mistakes. Unfortunately this culture is a major deficiency among many SMEs.

The only person who can get away with a mistake is the owner. As a consequence no new ideas come up in the business for fear of failure and the result is being a prisoner of smallness. You will not grow the business if there is a monopoly of idea generation in the business.

6. Lack of systems that support growth

Systems are the skeleton upon which growth is built upon. Too much growth with without strong systems will result into chaos and ultimately the business will tend to shrink to the level that the system can support. Talk of Business Body Mass Index. To move from biology to architecture systems are the pillars upon which the business is built on. They can only hold as much weight as they can support.

I have been involved in assisting SMEs put in place business systems and in most cases the only system that exists in some form is the accounting system all else is dependent on whims, know-how and temperament of the people. People move, people forget, people get sick, people get bored, and all this become your business.

While systems may not completely eliminate the effects of these occurrences they drastically minimize them. You then have a predictable business that can always deliver what it is supposed to deliver regardless of the mood of the moment.

In SMEs mistakes happen all the time. Some are never discovered and corrected, some become habits. While dressing downs, reprimands and firings are the methods used to deal with these problems they are hardly the most effective ways on their own to ensure mistakes are not repeated. Systems go along way to help. If you want to break away from the prison of smallness you need to work on removing all these constraints.

Have Busy Hands, Not a Busy Body

I suppose I never really gave gossiping much thought before I became saved. In the world, it’s an acceptable thing to do. Everyone does it so therefore it’s ok. But, much like everything else that goes on in the secular world, once a person is born again, none of what the world does and considers to be normal is acceptable in the eyes of God. When you become in fellowship with Him, you can just feel His eyes as they go to and fro upon the earth to see who is righteous and just before Him. If you truly love Him, you live to please Him and you are transformed into a new being. The old ways just aren’t acceptable anymore, not to God and not to yourself. The Holy Spirit becomes your guide and will let you know when you aren’t pleasing God by the things your are doing or saying. You can’t hide from Him.

I am a fortuneate person because I grew up in a Chrisitian home. Both my parents lived godly lives and they projected this way of life into me. Gossip was never made popular in our home. But as I got older and went out in the world on my own, I didn’t practice all these values in my own life. I just never gave it much thought. I suppose I was made to feel regret later for things I had said, and all that did was destroy trust from others. I often wondered why some people got away with gossip and I never could? The truth is, no one gets away with it forever. God will always reveal this stuff to people so they might come to repentance and confess Christ. He will leave us exposed and looking pretty foolish. I myself got tired of looking like that fool. Because of my human weaknesses I remained in the dark about the right way to be living. I got tired of feeling ashamed for things I had done that I never meant to do. But, you can’t deny the things you get caught in doing and you can’t explain your way out of them. You just hope that you will be forgiven. I finally learned that I first needed forgiveness through Christ so that I could forgive myself for the things I had said and done to hurt others in order to expect them to forgive me.

Now that I’m a different person in Christ I dare not say things about people. Repeating things that are said to me just aren’t tantilizing anymore. I have learned that silence speaks louder than words. It’s a wonderful feeling to know that within me I hold the confidence of someone else. I never feel the guilt or worry that they would ever find out that I repeated something that was not intended to be repeated. Gossip does no more than create problems and negativity to those who come in contact with it. This is not Christ-like living. So why do people who call themselves Christian participate in it? It’s my guess that 1.) Either they aren’t really a Christian or 2.) They don’t know God’s Word very well. Both of which are a real problem.

Some people will justify their Christianity by saying they go to church. As the saying goes; you can sit in a garage forever and that still won’t make you a car! Then on the other hand, if you truly are a Christian who attends church and aren’t living a Christian life then you are in disobedience to the Lord and have no excuse for your behavior. Jesus talks about the dangers of a Christian who knowingly causes someone else to stumble and fall into sin. (Matt. 18:6) God will hold us all accountable one day. To which we can’t offer Him excuses.

The Bible says a lot about the problems that gossiping will cause. I find that people who love talking about others are generally bored. They aren’t keeping busy. This doesn’t mean keeping busy in other people’s affairs. God calls us to serve and serving involves using our hands. If we do serve with our mouths, we should be speaking words of God’s love and truth. This is not gossip, it’s edification. There’s a big difference. Gossip tears people down, God’s Word builds them up.

The apostle Paul wrote to the church in Thessalonica and commended them for their Christian beliefs even during persecution. He wrote mainly on the subject of Christ’s return and how they should be prepared in this event. It still holds true today. We should always strive to be ready for Christ’s return. In first Thessalonians Paul writes about the way Christians should be living.

“Furthermore, Brethren, we beg and admonish you in [virtue of our union with] the Lord Jesus, that you (follow the instructions which) you learned from us about how you ought to walk so as to please and gratify God, as indeed you are doing, [and] that you do so even more and more abundantly [attaining yet greater perfection in living this life].” 1 Thes. 4:1 (Amplified)

Walking as a Christian simply means to submit to Christ and let Him lead you into all righteousness. The only way we can do this to pay attention to what teachers and pastors are telling us. It’s for our own good. It’s not meant to go in one ear and out the other, it’s to be heard and done…every day. Virtue is our goal. Gossiping is not virtuous. Paul knew this and that is why he warns us not to do it.

Here is what Paul says about not gossiping;

“To make it your ambition and definitely endeavor to live quietly and peacefully, to mind your own affairs, and to work with your hands, as we charged you.” 1 Thes. 4:11

It’s not just a suggestion, it’s valuable life sustaining information for Christian living. We must make it our main ambition to live quietly, which is not talking about others. In other words, mind our own business. If no one can point a finger at us, our lives will be that much more peaceful. By keeping our hands busy in doing things that honor God, that will keep us from being busy bodies and poking our noses where they don’t belong. Then we won’t have to worry about who said what about whom. We can stop this fire of the tongue before it ever ignites.

If you find yourself talking about others, ask God to guard your mouth from saying anything that shouldn’t be said. If you hear gossip simply turn and walk away. Don’t play into the whiles of the devil. Stop and consider how you feel when people are talking about you behind your back. Take your concerns to God, only He can solve the problem. Take action in allowing Him to keep you from creating the problem. If we feel the need to talk, let’s talk about God. Only good can come of it.

Only after talking to God about people are we ready to talk to people about God?

Body Language in Business – How to Find the Most Important Person in the Room

Networking events. Association meetings. Conferences. Regional meetings. Trade shows. Each of these events represents an opportunity. Making the sale. Making the right connection. Exchanging business cards with the right person.

But how do you know who Mr. or Ms. Right is? Who is the person who can green light your product or service within their company?

One option is the internet. Do your research, find the bigwig’s name, do a Google Image search, and you have your target. At the event, you can scan the room until you see the person and introduce yourself.

But what if that’s not possible? What if they don’t show up? What if Google Image search pulls up nothing? What if you’re not sure who your ideal target is?

Thankfully, when this happens, you don’t have to randomly approach people and hope they are your mark. You can be a detective at all your future business meetings and use the skills of deciphering body language to discover the most important people in any group.

After speaking at an event, I went to the hotel’s lounge to relax and unwind. Wanting to enjoy some alone time, I sat in the far corner booth and began one of my favorite activities: people watching.

There was another conference at the hotel and some of their attendees came to the lounge for a social hour. At first everyone was shaking hands, welcoming one another and being very friendly. After awhile the large group started splitting up into subgroups. 5 women chatting at one table. 3 men laughing at another. 2 women standing and gossiping. But, there was one subgroup that caught my attention.

I noticed 3 gentlemen. One tall, good posture, well dressed. The second was of average height, well dressed, good posture. The third was short, had poor posture, and was – quite frankly – poorly dressed. Who is the most important person of the group?

Most people would say one of the first two gentlemen. They had strong posture, knew how to carry themselves, and their clothing reeked of success. Most people would be wrong.

After knowing a few body language basics, you would know to look more closely. While posture and clothing are good variables to observe, they are surface level indicators that can easily and consciously be altered for any situation. As a body language pro, you would want to look at the unconscious indicators to discover your alpha-person of the group.

In this case – as in most – the feet gave it away. Even though the men were standing in a circle, politely facing each other and looking at one another while they spoke, the feet pointed toward Mr. Important himself, gentleman #3. That’s right. Mr. slumped-over-I-don’t-need-to-iron-my-clothes-or-put-together-a-snazzy-outfit-like-the-rest-of-you.

The feet of the other two gentlemen were pointed directly at guy #3 like a pointing dog during the hunt. The feet give away so much information unconsciously. They almost always will point towards the direction where you want to be or towards the person you perceive to be the most important person in the conversation.(Where was Mr. Important’s feet pointing? The door.)

While initial looks might lead you to one conclusion, body language will give you the power to detect the subtleties that lead you to the truth.

Use this body language detective skill for your next meeting. If you want to converse with the “top dog” just follow the feet.