July 22, 2024

You’re the Boss: Reaching Your Limit as a Business Owner


I remember the day I reached my limit with the retail coffee and espresso business that my husband and I started in 2003. When we started our little food service venture, it was supposed to be a fun project that would eventually run itself and act as an additional source of income for our household. But after three years, two locations and countless hours, it became evident that our plan was easier said than done.

I had felt the day coming. There are some things you just know about your business. We were fast asleep one cold, February morning in 2005 when Chris’s cell phone rang at 4:15. It was the lead barista at our north location calling to say she wouldn’t be able to work her shift. That gave one of us 15 minutes to jump out of bed, get dressed and fly into Bentonville, Ark., to open our flagship store in time for the morning rush. This was not the first time this had happened, but it ended up being a wake-up call in more ways than one. In my business-owner bones, I knew things had to change. I also knew that there was something fundamentally wrong with my business: me.

Many business owners reach a point in the life of their businesses where they hit a wall, a point beyond which they are either unable or unwilling to go. “Somewhere around $3 million dollars of revenue, I went from being the driver of my business to the bottleneck,” John Warrillow, author of “Built to Sell: Creating a Business That Can Thrive Without You,” wrote in a recent blog post. “Each year we stood still, I grew more frustrated. I felt like I was trying to swim in a pair of jeans.”

Mr. Warrillow calls this phenomenon the Ceiling of Control, and he describes his book as a field guide to getting beyond it. “I had reached a ceiling beyond which I would never grow until I gave up control of our product and how we sold it,” he wrote in the blog post. “Intellectually I knew I needed to revamp my business model, but emotionally I was tired. Part of me just wanted to lock the doors one night and walk away. In the end, I decided eight years of my life was too important to throw away, so I committed to putting in a few more years to scaling up and getting out.”

Richard Trottier — author of “Middle Market Strategies” and president of Sundial Partners, an investment bank boutique in Sarasota, Fla. — has done extensive research on the landscape of privately held businesses, grouping them by size and determining what prevents them from moving forward. Working with the University of South Florida’s Center for Economic Development and using census data from 2007, Mr. Trottier found the following: There are roughly 27 million businesses in the U.S. but only about 5 million have employees. Of those 5 million, only about 300,000 have annual revenue in excess of $5 million.

“There’s something stopping most businesses from growing,” said Mr. Trottier, who has identified five walls that he says business owners must overcome to grow: 1) motivational, 2) operational, 3) capital, 4) market and 5) transfer. If you’re a business owner and think you may have hit a wall, take heart. You’re not alone. “Fully 95 percent of businesses never grow into the next category,” Mr. Trottier said in a recent interview with The Deal. His advice to business owners who have hit a wall is first to identify which wall it is.

In my case, I felt like a pinball bouncing off three of the walls Mr. Trottier describes. I was managing 16 food-service employees, which felt like more than enough for me. My least favorite management tasks – human resources — were consuming the bulk of my time (operational wall). I knew I needed to scale the business, adding at least one more location to support hiring a full-time manager to take the burden off of my husband and me. In short, growth was the answer to our problem, but it would require more money, most likely in the form of a Small Business Administration loan (capital wall), and I didn’t want to take on either the headache of expanding the business or the worry of incurring debt (motivational wall). Like Mr. Warrillow, my husband and I chose to switch gears and devote the next year to selling our business.

According to Mr. Trottier, the motivational walls tend to be the toughest for business owners. “The cold hard fact is that most private business owners are not interested in growing their business,” Mr. Trottier writes in his book. “Standing pat may appear attractive,” he adds, “but being content with mere survival is a losing strategy.”

Barbara Taylor is co-owner of a business brokerage, Synergy Business Services, in Bentonville, Ark. Here is her guide to selling a business.

Article source: http://feeds.nytimes.com/click.phdo?i=ae8b38838845636f876b5dd8190ac668

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