Are You At A Tipping Point?
Sep 01, 2018
Over the last couple of weeks I have heard from a few business owners who have, as they described themselves, had to ‘bite the bullet’ and go back to work either full time or part time in a traditional ‘job-job’.
The recognised summer months ‘lull' has proved to be one thing too many for them to be able to contend with and the understandable need for more consistent income has come to the fore and forced them to reassess the potential viability of their business and decide that (for now at least) that the numbers just don’t stack up.
Times like these in business are recognised as ‘Tipping Points’. These are the make or break moments in time when you are at the threshold of something - good or bad. Perhaps not earning enough this month to pay the bills, or conversely finding that suddenly people have fallen in love with your product or service and business growth is beginning to boom.
We’ve all heard the stories of businesses that were failing; people who were about to give up, who gave it one last try, only to find great success beyond their wildest dreams. Many famous business stories focus on such Tipping Points.
As business owners part of our role is to recognise the Tipping Points in our business and then make assessments and assumptions upon which we can base our decisions. Decisions about how to proceed; what to do next; whether our business is working for us or not; whether to invest more time and effort in pursuit of our dream business or whether it is time to cut our losses, and return to a more traditional job.
So how do we spot when we are at a Tippling Point in our business and how should we decide what to do? Should we continue to push froward to the next level or is it time to reign things back in and retreat?
When I am coaching it often helps if I start by describing how business growth happens. Many people picture business growth as a long (potentially hard) incline, with occasional bumps in the road a long the way. Things begin to make more sense however, when I describe to them a picture which is more like a steps going up. With sheer faces to tackle and plateaus along the way, and ‘Tipping points’ at each intersection.
This more accurately describes the journey that most people recognise.
All business growth is based upon our ability to assess and quantify risk. Part of our business plans are based upon our assumptions about future performance.
At the start of our business our ability to tolerate risk is considerably less than when we have been running for some time. The benefits of the additional experience of our market place and how income generation may ebb and flow in cycles throughout the year; or perhaps having had the opportunity to build a financial cushion to smooth out the highs and lows; give us greater confidence to manage more risk, and keep pushing forward.
In good business planning we need to estimate what and where the major Tipping Points might be for us in our business and to set out plans and contingencies where necessary, based on these assumptions.
We assign a probability to each Tipping Point becoming reality and ask the question: what is the likelihood of each assumption we make coming true. In addition, 'Tipping Point Analysis' applies your company’s tolerance for risk to this equation, in essence answering the question “How confident do you need to be before you are willing to make a significant additional investment?” (Of either time or money)
So when you reach a tipping point what business drivers should you be considering when making your decision about how to proceed?
Typical drivers to consider would include viewing your original Vision for your business; changes in sales volume; operating costs and customer service expectations/trends (and how we will meet them).
🔸Reviewing your original Vision has to be your starting point. What are you trying to achieve - for you; your family; your clients / customers? How does the way your business is currently fit with your Vision for where you want it to go? Your plans may change, but you have to feel as if you are moving towards your ultimate end goal.
🔸Sales growth of 30% will result in very a different strategy than growth in the single digits. But also how that sales volume manifests is equally important. For example, do you expect to expand your product line or rationalise your offerings? You need to be constantly vigilant as to what is working; what your customers are buying and what is not proving to be as popular.
🔸 Operating costs are a vital, but often forgotten factor in small businesses. I often find businesses owner are unable to describe what their operating costs are. You need to master these numbers so that you can know at exactly what point a rise in operating costs should impact on your choice of strategy. For example at the start of my business delivering events here on the ground in Scotland we needed to understand the impact of choosing to use high-end venues rather than cheaper training venues on our growth. In the future if those costs were to rise drastically we would need to ensure that we were considering alternatives.
🔸 Shifts in customer expectations regarding levels of service can also have huge implications on our ability to grow our businesses as we reach each new Tipping Point. We need to move with the times, keep abreast of new developments in our industry and factor in improved levels of customer service as out business grows.
It’s important to understand that there is no “one size fits all” solution. Evaluating your own data about your situation, your personal vision and drivers for your business; your tolerance for risk (based on your business and personal finances), is the only way to get to the answer that’s right for you.
But by estimating in advance where your Tipping Points might be and monitoring your progress routinely you can be certain that you are making the best decisions that you can as each Tipping Point arrives’ using a set of holistic measures that put you in a proactive rather than reactive position.
At most Tipping Points there lies the potential to either fall back (down that sheer face) or to move forwards. Whilst external factors can impact on which of these prevails by far the greatest factor is how well you have anticipated them and prepared your strategy in advance.
It’s always sad to hear that people have had to shelve, or at least delay, their plans for their business, because I recognise the importance of their vision of the future for them and their families, but sometimes it is a necessary step along the journey of growing their business. For most I feel certain they will return to their business vision at some point in the future.
I know myself that each business that I have created over the years has seen me learn the lessons of the last one and improve my model each time.
But it is so important to make sure that as well as working on the day to day things in front of you, you are also planning your route ahead; estimating what and where your Tipping Points will come and formulating strategies to ensure that you are ready, and can capitalise on every opportunity to move forward in your business.
So this week take some time to consider where your Tipping Points may come, and what your strategy for growth will be.
Are you aware? Are you prepared?
Until next week,
If you’re ready to plan how you are going to scale your business over the next 1-5 years; to become a business owner rather than a self-employed person and take your Business to the next level, why not join us at our September Business Bootcamps: Master Your Business Owner Mindset or The Four Steps to Scaling Your Business. Tickets are on sale now, follow the link to secure your seat now:https://www.karenyates.com/p/bootcamps-events