Should you grow or consolidate?
When it comes to business, you need to keep moving to avoid going backwards and that means growth. You might expect that to mean your team grows too, and it may. We all think bigger is better, growth means getting bigger, right?
The truth is that’s not always the case these days. Sure you might have the type of business that needs multiple locations or offices or hundreds of thousands of customers online – that’s inherently going to bring in more revenue, but there is something to be said for keeping things small and sustainable – despite what you might read in the business press about growth, growth, growth at almost any cost.
These days the word sustainability gets bandied about rather willy nilly – usually to do with ‘the environment’. But for us, a sustainable business is one that keeps on keeping on producing quality revenue, where its owners don’t burnout or burn through significant amounts of cash reserves. Oh, and make a sustainable business profit out the backend.
So this blog, we thought we might look at how to achieve a more sustainable business.
Delegate – but do it right
Delegation is one of the best tools you have at your disposal when it comes to building a sustainable business. The moment when you realise it is no longer worth your time to answer your phone or write that report can be quite paradigm shifting. It makes sense to want to lean into it and do it all until you consider the cost of doing so. At that point it can be tempting to run out and go on a hiring spree.
But whilst it’s worth it to make sure you’re using your time most effectively, you don’t want to break the bank hiring a team of admins, when some outsourcing or some smart tech could do the same job. Look for creative solutions and make sure you’re not falling into the money pit that is impulse hiring. If you are going to hire, hire people who are likely to be revenue producing.
Smaller teams = tighter customer focus
The term ‘boutique’ has made a real resurgence in the last few years with more and more companies trying to appear to be that outsider that really cares about their clients.
You might not have the resources of your bigger competitors, but often, smaller teams offer something larger teams won’t be able to guarantee, focus. A small, well-oiled team can offer the kind of boutique service and customer care that can get lost in a larger operation. Clients notice and often prefer working with smaller teams for that very reason. By keeping things smaller and more sustainable, because you’re not dealing with the high volumes of clients that can turn things into a numbers game, you can then play the value game. What’s that? Making sure your clients get personalised service – the kind of service they’re likely to be happier to pay more for, stick around for longer, share your contact with their friends or all three.
Small can equal more profitable
There’s no doubt that big business can make big profits. But, whilst smaller businesses might make smaller profit numbers, the percentage of profit to turnover can be significantly higher.
Why? Well, by keeping things smaller, you’re likely to pay less in payroll tax (at a rate of 5.45% for businesses with wages greater than $900K or more in 2019-20), overheads (someone has to pay for all that coffee, toilet paper, stationery, personal internet usage, etc) and space. And if you’ve looked at renting space or renting a bigger space, you’ll know it’s expensive. Housing a team of 6, 10, 20 or 100+ is a lot of square metre-age to pay for – not just in terms of rent, but also in cleaning, kit-out and ongoing management.
Keeping things smaller often means keeping a tighter rein on costs too. So before you go all in on growth, think about what the actual costs of that really are.
When you win, win together
Ideally, you want your people to be invested in the success of the business. Whether that’s because they’re thinking about their own future, because they like you or the customers; you want them to be on your team, trying to make sure you stay one step ahead of the business pack.
Keeping things small is great for this kind of mentality. You genuinely know everyone’s names, their families, what makes them tick – and they know you too. They want you to do well and they trust that when things go wrong you’re going to look out for them. They’re also way more willing to cut you some slack when you fumble.
Having that kind of relationship with your people means you’re less likely to have to worry about significant staff turn-over. Staff turnover can not only be brutal to your profit, it also has psychological effects on you and the rest of the team, all of which have to take up the slack whilst you find (which takes around 68 working days – or just over three months) and train the next person (which is around another three months).
Keeping it small also means you get that awesome feeling of an entire office cheering you on as you win as a team.
At Mason Lloyd, we’re a small team, devoted to really getting to know, understand and help our clients. If you’d like to chat about how we can best help you build a sustainable business or better manage your taxes, we’d love to help. You can call us on 02 6023 1700 or drop us a note via the form below.
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If you've got financial or business questions, or you just want to run something by us, we'd be delighted to really talk to you – in person, over the phone - call us on 02 6023 1700 - or you can use the form below and we'll get back to you.