Last week, I spoke to three entrepreneurs with different-sized businesses:
After each conversation, I was struck by one thing:
I knew exactly what problems they were going to have … before speaking with them.
It’s super fascinating how this happens…
How totally different businesses can have entirely predictable problems.
Enter your text here...The reason?
Levels of scale bring predictable challenges.
Of course, when the problems are predictable, the solutions are also straightforward.
Today’s newsletter is about that.
Most businesses I come into contact with are in the $100-250k revenue range.
And that makes sense when you realize that only 7% of businesses generate $1m+ in sales.
Truth is, I love meeting entrepreneurs at this stage, because the excitement and raw potential is through the roof.
In order to get where they are, they’ve done the hardest thing of all…
Create something out of nothing!
Where two years ago, their business didn’t even exist, they‘ve hustled hard, carved out a space for themselves and generated enough revenue to quit their 9-to-5.
Entrepreneurs at this stage are in an interesting position.
On the one hand, memories of their full-time job are fresh, and they can’t believe how lucky they are to have escaped the rat race.
On the other hand, they’ve pretty much swapped one job for another. The business relies on them, team and structures are non-existent, and they can’t take their foot off the gas without slowing down.
This can be quite scary.
Without the knowledge of how to grow, they’re almost living with the threat of it all going away, and having to go back to their job…
And don’t nobody wanna do that.
The mistake I see most entrepreneurs make at this stage is to start doing far too much stuff. New products to sell to their audience, starting YouTube and TikTok… adding a membership site to their course, because… Recurring revenue is good right?
A bit like a shark who smells blood thrashing around in the water.
It’s counterintuitive, but the big opportunity for someone in the situation is to focus down and scale what they are already doing.
Because if you’ve managed to get traction with relatively little knowledge, imagine what you can do with expertise!
For example, if you’re getting traction with your blog and SEO, your biggest opportunity is to double down on that platform and get better results. It’s not to split your attention and start something else new.
Likewise, making lots of new products is often a bad idea at this stage, because the positioning and value proposition of the entrepreneur usually isn’t clear.
This means you end up with a bunch of mediocre, poorly performing products, rather than a tight sweet of properly positions, products that cancel for higher prices and are far easier to maintain.
So all in all, the name of the game is focus, simplicity, and doubling down on what you’ve already got.
Entrepreneurs at the $500k-1m revenue range are seriously driven people…
But under the scenes at this level, it’s often chaos.
Too many revenue streams…
Too much overhead…
And this happens because of the crazy drive that made them successful in the first place.
More more more!
(Everything that I was warning against at the lower revenue level!)
This is actually my favourite level to work with, because there is enough traction that you can clearly see what’s working… and what’s not.
And this creates an exciting opportunity to reposition the business for scale:
- Identify the core value drivers in the business
- Reposition the business for a higher-level opportunity
- Cut a whole bunch of costs that are not core to the business
And that’s the great thing about identifying the next level opportunity…
- Cut unnecessary costs
- Cut bloat from the team
- Smooth out operations
It’s so easy to overlook the fact that it’s far easier to grow profit than top-line revenue.
But here’s the great thing…
You also end up with a much more focused business, and THIS is what you can scale.
You can’t scale complexity, but simplicity scales like a well oiled machine.
“Shouldn’t this be obvious to the business owner?”
It’s tempting to think this.
But the truth is that when you’ve been working flat out on a business for 4-5 years, it’s super difficult to see the wood for the trees.
And often it’s just a bit of outside perspective that people need in order to see what they’ve been blind to the whole time
Making over 1 million a year? Everything’s rosy right?
Well it can be…
But some of the most chaotic businesses I ever see are $1-3 million in revenue.
Without exception, these are exceptionally talented and driven entrepreneurs.
But when you look behind the scenes, what you find is something resembling the latter stages of an episode of Fawlty Towers, where Basil is running around like a headless chicken in a disaster purely of his own making.
- 80 hour work weeks
- A handful of staff (at their wits end)
- Customers who need servicing
- Cohorts that need promoting
It’s like driving down the motorway at 120mph in an old banger…
You may be getting where you want to go, but it’s only a matter of time until things start going wrong in style!
$3m seems to be the limit of what a lone wolf entrepreneur can build, relying on natural charisma, ungodly levels of willpower and a great product.
But even superhumans like this start to fall apart after $3m without a strong management team to hold things together.
(Let’s be real, you need a good team far earlier than this, but logic has exited the building a long ago in this scenario!)
The problem for entrepreneurs in this situation?
Total lack of structure —both in terms of business systems and team.
The business is chaotic because of the lack of systems, but the systems can’t exist with the team to create and run them.
And the uncomfortable truth is this…
If the business has grown this big without proper team or infrastructure… there’s usually a serious mindset block going on.
Sometimes, it’s because the entrepreneur is just incapable of slowing down for long enough to think and plan.
Other times, it can be because of a negative prior experience with people — incompetent employees or dishonest business partners, for example.
And so, the advice to “slow down and build systems” often isn’t enough…
That’s when they need more direct intervention from someone who can see under the hood of the business, get their hands dirty and support with the change:
- Removing the founder from delivery
- Creating automated / predictable marketing systems
- Introducing management structure
I suppose it’s a bit like therapy, where there’s a knotted web of stuff that’s been with you since childhood…
It would’ve been better to fix when you were younger, but the next best time to start untangling it is…now!
When you’re working this hard, it’s not just your business at stake… it’s your health and family too!
In this newsletter, I’ve described three kinds of entrepreneurs at different stages of business:
…and the predictable challenges they face at each level.
At the lower levels, it’s all about doubling-down and maximising what you’ve got. (Without getting distracted or running scared.)
At the higher levels, it’s about positioning your business for scale and building infrastructure that removes you from delivery.
Of course, not all businesses are like this!
There’s a selection bias…
By definition, I only tend to hear from businesses with issues.
But since that’s what this newsletter is all about, there’s a chance it might be useful!
Now, before signing off…
I’m in La Gomera this week, part of the Canary Islands.
It’s for a mastermind event I run over at Creator Empires each year.
This time we had 19 education entrepreneurs joining us, and it was an absolute blast.
The hardest part of the whole thing is finding a villa big enough to accommodate everyone, but we’ve got it down to a fine art now!
Bringing people together really is the most fun part of what I do, and I hope you and I will get to hang out in person one day!
Until next week...
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