How to tackle the next stage of Business Growth

[seedubya]

Hi all,

This post is going to be slightly long, so I apologise in advance. It might be worth a quick glance at my reply to http://www.technibble.com/forums/showthread.php?t=3030 for a quick bit of background.

Currently my business is doing quite well. I have been established in my current guise for 5 years now and despite some hiccups at different stages, I have survived, become quite profitable and have grown a nice group of customers. I work from my converted garage and my current costs are low around €200 per week ex. salary. Almost all of my revenue comes from SOHO's with 15 or less computers and 1 server. However I am solely break-fix. I still have a large consumer customer base but I don't actively seek new domestic customers and in fact turn away quite a few domestic jobs. My business turned €250K last year and I took home a net salary of about €70K i.e. tax paid/social insurance etc. paid. It's not a bad living but I work v. long hours and I've worked completely alone now for a good number of months. To be honest, if I worked the same number of hours in a similar position for someone else, I'd earn (much) more money. I've had employees in the past but none of them have worked out. The last one was great but was hired away on a salary that I could just not afford to match. That being said I always have 3 or 4 months cash in hand which is more than most.

However, I know I'm starting to burn out. I've really gotten tired of working in my business when I know I should be working on it. At the moment, if I never saw a virus or DNS error or blue screen again, or even a goddam dusty cpu fan I'd die happy. I haven't had a proper holiday in 2 years and I reckon my disenchantment is affecting my work, only slightly now but it will get worse, I suppose. THEREFORE, I reckon it's again time to attempt to expand and for me to step back a little from the technical side and more into business management and growth. How, though, is the $64,000 question? I have failed at the expansion phase twice before and the first time caused me to go bankrupt. The second time I got away with it, but only just. I have, however, managed significant personal growth in the intervening time and reckon I'm somewhat better prepared for the challenge this time round. I'm also scared shitless and far from convinced that I have what it takes to do this. I am not however asking you guys for reassurance just well considered advice.

At the moment, there are just two roles to be fulfilled in my business. Technical stuff and "everything else". Currently, everything else doesn't get done i.e. no marketing, no sales, accounts are way behind, I have 4 customers waiting between 2-5 days for quotes on jobs worth €20K, my office looks like an origami artist's nighmare, I've a new website up but it has no content and I've had to hire an answering service to try manage my calls. The way I see it, any good tech. can do the Technical stuff with me filling in the gaps, and using most of my time to a) get some business systems in place and b) generate more business. However, a good tech is going to want a lot of money and will end up almost doubling my current cost base. Now my projections indicate that I should be able to make up for this within 4-8 months but the "other stuff" role pushes me WAAAAAAAAY outside my comfort zone and I'm unsure if I'll be any good. Also, I don't have 8 months worth of cash to keep the ship afloat should things not go as quickly as planned and I can't get my wife's agreement to raise credit after our experience with bankruptcy. I don't however really see any alternative courses of action to what I've tried to describe. What do you guys think?

I really appreciate you all reading this.

Colm

 

[Wheelie]

Wow. I could've written that myself except for the part about not taking any vacation and about being burnt out. I took more than 8 weeks off last year and I will do at least that again this year. I have learned the importance of the need to balance work and play. As far as being burned out ... I still truly enjoy each day serving my customers and seeing the next BSOD. They need me and I need them. Hell I got burned out at every job I've ever had and this one is no different in that regard.

However, you are indeed correct about the need to do something to grow the business to the next phase. Because you cannot retire doing this (your income drops to zero).

The conundrum of adding help while maintaining profitability is indeed daunting. My examination of this is that the entire business would change. My role would be to manage employees that do what I am currently doing. From a quick and dirty look at it I think I'd need about 5 to 7 employees just to break even with my current take home pay. Is this what you've discovered? I guess that also means I'd need 5 to 7 times the customer base? so my work of marketing the business will go way up and thus advertising costs go way up. So to make significantly more money I'd need 8 to 12 employees, then I'd need someone to help me manage I am sure. Throw in an accountant, payroll, etc and now it all becomes a blur. That's probably where I'd get burned out.

I am so glad you started this thread. I sincerely hope it draws some good input. I intend to head this way some day as well and I need to know as much about this as I can.

Thanks for bringing this up!

 

[seedubya]

Wheelie,

By my estimation a good tech could bill €80/hr. approx 25-30 hrs. per week. That excludes sales of goods and software and any time I would bill myself. However, I am currently only billing about 15 hours/week because of all the other demands on my time the single largest of which is answering the phone. Answering service or not, I still end up having to filter or return every call and that takes up so much time it's scary. IF I could get the business billing 35 hrs. per week in the short to medium term I could keep my current take home pay and concentrate on business building. I reckon I've only got about 3-4% of the local business market giving me lots of room for growth.

So, to answer your question, I think 1.25 - 1.5 tech's if managed properly could give me my current take home.

 

[hawks5999]

Couple recommendations for reading:

The E-Myth books by Michael Gerber
Good to Great by Jim Collins
The 4 Hour Work Week by Timothy Ferriss
and for fun: The Wealth of Nations by Adam Smith

Some questions to ask yourself:
What are your real strengths? Being technical or being a people person?
What are your weaknesses? Organization? Administrivia?
What do you enjoy doing? Computers or Finance? Sales or Administration?

Identify where your strengths are and focus on them. Don't try to focus on improving your weaknesses... outsource those tasks. Focus on improving your strengths. I read on another thread I think that you are doing Robin Robins. Is sales where your strength is? If so, hire the techs and go sell. If you have an origami office (don't feel bad, I do too) then hire an admin assistant to come in and file papers and handle the paperwork. Typically an admin is cheaper than a tech. Accounting behind, hire a part time bookkeeper. Again, probably cheaper than a technician.

As some reference, here in the US, depending on the market (I'll talk in Seattle terms), you can get the admin for probably $15/hr for 12-15 hours/week and your paperwork is handled. Get the bookkeeper for $20-$25/hr for 12-20 hours per month and you have your accounting taken care of. You've got your administration and accounting working and have just got back probably 30+ hours of your time per week. Take 20 hours per week to focus on sales and marketing activities until you've built up enough clients that you've bumped your 15 hours billable to 25 or so. Now, if you really hate the tech work, hire a young guy on for your redundant work - antivirus cleanup, windows reinstall, etc. And you can spend your time on things you like to do.

Your very next step though should be this. Set your answering service to tell all callers that you are unavailable for 2 weeks. Go run by the flower shop and get your wife a dozen roses, stop by the book shop and pick up the books above, then swing home, give your wife the flowers and head out to a beach, a cabin, a ritzy hotel or whatever. Leave your laptop, phone and pager at home and enjoy the last two weeks of summer and come back refreshed. You have a few months saved up as an emergency fund. Well, burn a month of that money and live a little before you end up dead with nothing but regret for your lost time. If you lose a customer or 3, too bad. If they can't grok the idea that you need a vacation you don't need them as customers. Really, it's that important.

 

[bitznpcz]

Your very next step though should be this. Set your answering service to tell all callers that you are unavailable for 2 weeks. Go run by the flower shop and get your wife a dozen roses, stop by the book shop and pick up the books above, then swing home, give your wife the flowers and head out to a beach, a cabin, a ritzy hotel or whatever. Leave your laptop, phone and pager at home and enjoy the last two weeks of summer and come back refreshed. You have a few months saved up as an emergency fund. Well, burn a month of that money and live a little before you end up dead with nothing but regret for your lost time. If you lose a customer or 3, too bad. If they can't grok the idea that you need a vacation you don't need them as customers. Really, it's that important.

Great advice! A business coach once told me the secret to getting 4 holidays a year... book them!

Seriously, this can be a stressful business and holidays give us the opportunity to relax and recouperate - very important not to lose site of this when the phone doesn't stop ringing and you are up to your neck in work.

I am at a similar cross-roads myself and reading Technibble makes me realise that I am not alone in my troubles!

 

[TimeCode]

Take some time for yourself!

Great advice! A business coach once told me the secret to getting 4 holidays a year... book them!

I agree whole heartedly... That's why I'm leaving Friday morning to go camping and boating with friends. Gone Friday back on Sunday. Not a huge vacation but certain to be enjoyable. And my wife and I just got back from a week in Maine 2 weeks ago.

My biggest problem is that I don't schedule any time to go surfing.

And I agree, take care of your wife. if she isn't happy, you're not going to be either.

 

[seedubya]

Thanks to all for the feedback. Please continue to post. I will update this thread as things develop over the coming weeks.

CW

 

[bagellad]

Why cant you just hire some part time staff to lighten your work load and get you caught up? maybe keep them in the shop to keep an eye on them or something? or send them out directly tracking their time?

 

[NWPhotog]

Wheelie,

By my estimation a good tech could bill €80/hr. approx 25-30 hrs. per week. That excludes sales of goods and software and any time I would bill myself. However, I am currently only billing about 15 hours/week because of all the other demands on my time the single largest of which is answering the phone. Answering service or not, I still end up having to filter or return every call and that takes up so much time it's scary. IF I could get the business billing 35 hrs. per week in the short to medium term I could keep my current take home pay and concentrate on business building. I reckon I've only got about 3-4% of the local business market giving me lots of room for growth.

So, to answer your question, I think 1.25 - 1.5 tech's if managed properly could give me my current take home.

15 hours a week may be a little low but 30 a week of billable time is way above average. I don't think you are so far away from where you need to be. It seems like the burn out feeling may be the biggest issue you face.

 

[seedubya]

Why cant you just hire some part time staff to lighten your work load and get you caught up? maybe keep them in the shop to keep an eye on them or something? or send them out directly tracking their time?

I suppose I could, bagellad but I don't think that would address the underlying issue which, as I see it, is my reluctance until now to take on the business owner role fully. I have always enjoyed the tech. role and went into business for that reason. I'm a classic example of "All About Pies" from the E-Myth books (as mentioned earlier in the thread by Doug Hawks).

Being honest I'm think I'm just kicking out against having to take on a role(s) that I never forsaw or wanted when starting out (blind optimism and inexperience). However the realities of business are such that at some stage most business owners arrive at where I am now. I've known this for a couple of years but haven't managed to remedy the situation for all kinds of different reasons mostly to do with procrastination and lack of belief in my own abilities. You see I KNOW I'm a good tech., and I knew that before I started on my own. But the rest of it...well.....

Regardless, there is really only one answer and that's to get on with what Michael Gerber calls systemising your business. Stop being a technician and start being a REAL entrepreneur not a mythical one.

I'm just going off now to start a different thread to ask a question of you all about the E-Myth ideas.

I'm sure I'll be back here later. Thanks to all again.

 

[eric281]

Currently, everything else doesn't get done i.e. no marketing, no sales, accounts are way behind, I have 4 customers waiting between 2-5 days for quotes on jobs worth €20K, my office looks like an origami artist's nighmare, I've a new website up but it has no content

There are three consistent ways to get rich in this world - other people's money, other people's time, or real estate. You aren't in real estate so you have to find a way to leverage other people's time or other people's money. Using other people's money would be finding investors to give you funding to expand or develop something, and that's probably not what you are needing to do. That leaves you with leveraging other people's time.

When you are trying to use other people's time to make money, it only makes sense that you use them to free you up from the tasks that are not your strength. I feel that I'm a great network designer, salesman, and marketer, so I use people to do the things that keep me from doing what I do best. Once my marketing brings me in a new client, I meet with them, get their needs, design the network, and make my sales pitch. Once the contract is signed, it would cost me money to run cable and put together a server rack, because I make more money per hour doing what I do best. You have to keep this in mind and focus on your strengths.

I might be wrong here, but it really sounds like what you do best is the tech work, and you are ignoring the rest. Your business will never reach it's full potential if you ignore those things. It would be great if you could find someone to hire that is smart and motivated enough to step into the "manager" position and run the business for you so that you could go knock out those billable hours. Unfortunately, finding people that are cheap enough to do that is next to impossible, because people that work on that level get snatched up.

Something I've seen many independent techs like yourself do is to partner together with another small firm. If you could find an existing firm that has an existing client base and is being run well, you could join together and combine your client base. Hopefully this other company/person that you could partner with would complement you well, letting you focus more on servicing the customers with the other side doing more of the things you have been ignoring. It's something that could be worth exploring.

It's also been stated before, but hiring other people or even companies to do your accounting, billing, etc could also take a lot of the extra work off of you. If you go that route, you still need to be ready to push your marketing, and to make sure that you knock out those quotes as fast as possible. Every day a quote is sitting on your desk instead of the customer's desk, you are losing money. That is never acceptable.

My business turned €250K last year and I took home a net salary of about €70K i.e. tax paid/social insurance etc. paid. It's not a bad living but I work v. long hours and I've worked completely alone now for a good number of months. To be honest, if I worked the same number of hours in a similar position for someone else, I'd earn (much) more money.

You may not be interested in this, but it also sounds like another alternative for you might be to go work for someone else. Find another firm that will buy your business (for your client database), and then give you a job with a nice salary, or a big cut of the billable hours. Even if you couldn't find a deal like that, if you could really make more money working for someone else, probably less hours, less stress, and more stability - why would you keep doing what you are doing?

I know I'm new, sorry for the long post, and I hope you find success and happiness with whatever you do.

- Eric

 

[seedubya]

Hi Eric, thanks for the post and welcome to Technibble.

I honestly believe that there are some jobs in a small business that should never be outsourced, even to the very best employee. I'm sure not going to work as a deckhand on my own ship I'm moving from a one man sloop to a two man cutter and I've got to learn how to handle the tiller on the larger vessel and leave the sails and lines to the crew. Of course I've first got to find a crew........

 

[Wheelie]

... I'm sure not going to work as a deckhand on my own ship I'm moving from a one man sloop to a two man cutter and I've got to learn how to handle the tiller on the larger vessel and leave the sails and lines to the crew. Of course I've first got to find a crew........

There's the right attitude!!!

Fantastic thread everyone! This is really helping me so much! It's starting to open my eyes to what lays ahead.

 

[eric281]

Hi Eric, thanks for the post and welcome to Technibble.

I honestly believe that there are some jobs in a small business that should never be outsourced, even to the very best employee. I'm sure not going to work as a deckhand on my own ship I'm moving from a one man sloop to a two man cutter and I've got to learn how to handle the tiller on the larger vessel and leave the sails and lines to the crew. Of course I've first got to find a crew........

I'm not sure I understand what you mean. I have no idea what job there is that couldn't be outsourced. For me, the point of owning my own business is freedom. I want to be the boss so that I am able to control my life. The problem is, when you can't trust anyone else to do what you do, and are unable to delegate all of your tasks, you will never be free. You will be handcuffed to a business that will fail without you. I want my business to get to a point where I have enough people working for me that I don't have to work. Once I'm to that point, I will have the freedom to decide how much I want to work and what I want to work on. This also provides even more stability for my family. As a one man operation or a business where there are aspects you refuse to delegate, if something was to happen to you so that you couldn't work, your income stops. Wasting your time working on things someone else would do for $30/hour when you could be billing hours at $125+ seems like a bad decision based on pride or bravado, and could be detrimental to your family if something horrible were to happen to you.

 

[hawks5999]

Eric, welcome to the forums. It's good to have someone delineate the concepts of business owner vs. self-employed so well. Keep it up.

 

[seedubya]

I'm not sure I understand what you mean.

Obviously. I didn't say "couldn't" I said shouldn't. I'm talking about strategy and growth and vision and leadership. You tell me how to outsource those to an employee without just giving that person your business on a plate? Certainly it could be done later when the business is much bigger but not now at such a critical time. I actually have a vision for my business but that vision has not even started to be realised because I have allowed doing what I LIKE to do i.e. technical get in the way of what I NEED to do i.e. business growth. Now explain to me how realising that and attempting to deal with it is pride or bravado?

It boils down to this I don't really have a business, I have a job. A really crappy job because I work way too much for what I get paid even though the pay is relatively high. As long as I continue to do that job to the exclusion of business growth activities I will NEVER have anything but a job. However, if I move outside my comfort zone to the areas that I know I should be concentrating on like marketing, like systemising my business, like networking etc. then my business has some hope of growth. My business is currently ME. There is too much work in the overall business for ME. I need to hire someone other than ME. I can hire a tech which is about 40% of the overall workload currently or I can hire someone to try and take on the mess that is the other 60%. The tech role is clearly defined and already systemised well therefore logic dicatates that that is the easiest role to fill by bringing in someone. It doesn't MATTER that I don't feel confident about the other stuff because it's stuff that cannot CURRENTLY be done by an employee because it is not systemised.

The ONLY thing I am refusing to delegate is overall responsibility for my business.

 

[Nathan H]

The ONLY thing I am refusing to delegate is overall responsibility for my business.

I have been reading this post with avid interest.

I have learnt a lot and I mean a LOT!!!

seedubya I understand your dilema and would like to offer some advice to assist sterring you in your right direction, unfortunitly I have no experiece of this to fall back on, so sorry mate.

I Don't know if you have already thought of this or if like me you get so focused in your goal that we fail to see things in front of us..

What I mean is if you were to go down the route of out sourcing parts of your business such as hiring a business manger or the route that eric mentioned.

You are stiil in Charge and have total Control, I say this as any decisions made that you arn't happy with, you being the owner can simply over rule or if the situation warrented it dismiss the manager...

Well that's my two pence worth, sorry for adding more confusion to the topic.

 

[Wheelie]

It's not as easy as you might think to add staff. The second you add a member your net profit tumbles. It falls by the amount you have to pay him/her plus the amount of revenue you stop bringing in because you are now managing that person.

So now you have to have a cash reserve to fall back on while you implement your pre-planned strategy for increasing the revenue. In other words: you will need reserve cash while you very quickly get enough additional revenue coming in to cover the additional staff member.

Sooooo .... not to put the cart in front of the horse ... the question of the day is this: are you adding staff so you can be freed up to do more technical work? Or are you adding staff so they can do the technical work? That is a very important distinction.

For me it is going to mean that I do less of the technical work, and more business management. So now I have to look at how much that person can earn per year and how much I can profit from each person.

Example: Let's say one tech could generate $80k (US) in gross revenue and everything related to that person costs me $60k. I've just earned $20k on this person.

Now let's say that my net income (after tax & other business related overhead) was $90k per year while I was on my own. I think a good estimate will be that I need 4.5 technicians working in the field - each making $80k - just to break even with what I was doing on my own (4.5 x $20k = $90k). Now wait a sec. So ... 4.5 techs gets me to my prior year's net (not gross). So now I have to pay income taxes on that $90 so I really did not break even so I'd need another 1 or 2 techs to cover my taxes (roughly 20%) to get me back to the real break even.

So I'm thinking I need 5 or 6 techs just to make what I was making the year before while on my own. And now get this: I will also need 5 or 6 times $80k in gross sales to do all this! In other words - to support this business I have to be able to triple the annual gross receipts vs being on my own. That is not a trivial point and therein lies the problem we face.

I know all my numbers above are subject to heavy scrutiny based on where you live, what your billable rate is, how much your overhead is, and bla bla bla ... just thought I'd throw that up there and see what sticks.

Love this thread - glad seedubya started it - and would love for input/comments/encouragement!

 

[seedubya]

seedubya I understand your dilema and would like to offer some advice to assist sterring you in your right direction, unfortunitly I have no experiece of this to fall back on, so sorry mate.

What I mean is if you were to go down the route of out sourcing parts of your business such as hiring a business manger or the route that eric mentioned

God, Nathan, why bother posting if you can't offer any advice???

It is my heartfelt belief that leadership can't be hired into a small business. Maybe management skills can be, but building a business takes a committment that few (if any) employees could/would give. It's different in a large company where hiring CEO's is normal. But they're slightly outside my budget Although maybe Bill Gates would like something part-time now that he's at a loose end. I can certainly outsource some of the "everything else" role I spoke of earlier. Phone answering, accounts even marketing donkey work like cold calling/list compiling etc. However, EVERY successful small business I know has the owner fulfilling the business leadership/growth role and not the technical one, at least no more than occaisonally. And by small business I DON'T mean SOHO or Mom'n'Pop operations. That's what I'm aiming for, a couple of dozen techs, large corporate and national accounts, multiple locations... the whole shooting match. That cannot be built by a guy installing servers all day every day.

 

[seedubya]

@ Wheelie

If your maths are correct Wheelie then growing would be a huge decision. However a highly experienced tech will cost me an extra €55K full time including all the extra associated expenses and, assuming I do my NEW job properly, generate WORST case €95K in labour alone. That's assuming I do NO labour at all. Now all I've got to do is maintain my existing rate of increase of sales of goods and services and I'm close to break-even (My salary is down about €7k BUT business is growing). Best case scenario is he does €115k in labour, I do about 25K in labour and I double my turnover from soft/hard sales, he gets a 5k bonus and I get a €20k bonus. I then have (best case) and extra 50K in profit in the business which I then re-invest in growing further next year. Worst thing that can happen is I loose my little nest egg and have to let the guy go after 6 months. In worst case terms I only have to attract about 5 extra hours labour per WEEK to do this. Mind you, I'll make a very hefty tax saving on last year with the added expenses, about 9K.

In your own case, are those figures you threw out accurate? It's worth sitting down and doing the maths. The hardest part is trying to make educated guesses as to what EXTRA income could be generated and through what activities. Partnering with other companies and adding new goods and services to my current offerings features highly in what I'll have to do to squeeze more money out of my existing customers and attract new ones.