When your business reaches the million-dollar revenue mark, it’s a milestone to be celebrated. While it's fine to enjoy your moment in the spotlight, keep in mind that many unforeseen dangers lie ahead. The first million may have been hard, but the second million could kill your business.
Don't Forget Where You Came From
When you’re starting from zero and trying to build your business, 100 percent of your effort, energy and creativity are focused on growth: Acquiring new customers, closing on investments, hiring new employees—everything is about more. But after you start to experience growth and reach a key milestone, like the million-dollar mark, conditions change. It’s no longer just about acquiring more; it’s about taking care of what you have already built.
If you just focus on growth, then current operations, angel investors, existing staff and original customers can suffer. The cash that allows you to acquire new business likely comes from your existing operations and original stakeholders. Failing to make sure they are taken care of means you could lose what you have already achieved and cut yourself off from the resources that can allow you to grow.
Be Honest About Your Skills and Capabilities
Being an entrepreneur is all about building something from nothing. This requires creativity, tenacity, discipline, work ethic, self-confidence and resilience. Not everyone is cut out for it. But successful entrepreneurs who are aiming for that second million in sales logically rely on the same skills and capabilities that helped them achieve the first million.
The problem is that this usually doesn’t work. Achieving sustainable growth within an existing organization requires discipline, structure, processes, a greater focus on operations and a careful eye on finance. While there are always exceptions, many times the same person who makes a good entrepreneur doesn’t necessarily make a good manager. You don’t have to walk away entirely; but definitely consider hiring a very strong operations executive and a finance person. Let them complement you.
Build a Safety Margin
Small business means small problems; big business means big problems. Entrepreneurs and startups have to continually self-correct. You adapt to the realities of your market, environmental changes and customer preferences. Very few startups get their business models and products right from the beginning. Usually by the time it reaches its first million, the company has changed so much that it may not be recognizable! This type of rapid change is entirely feasible within a small business. Only a few people need to change, and updating your product or service can be done with a certain level of informality since your entire company may consist of only two people and a few computers.
But when you have dozens of employees, hundreds of customers, a public reputation and high-value fixed assets, making big changes can be costly. Before making a change you need to map out how to make the change, how to communicate it to stakeholders and, most importantly, how much it will cost.
The Risks Are Much Higher
For these reasons, it’s important to have several safety margins. Have a cash safety margin to ensure that you can afford to cover all the costs related to a major change like rebranding, product redevelopment, moving locations or price restructuring. Also have a “reputational safety margin” in place. This will allow you to maintain your credibility despite having to make major changes in a highly visible way.
Congratulations on reaching that first big milestone in business. You have already made it further than most. But don’t limit your true potential by failing to recognize that you need to adapt to see that second million.
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