It’s All In The Sequence (or, you’re doing the right things but in the wrong order)

I’m sure you’ve heard the scary stat that 50% of small businesses don’t make it past year 5. That’s terrible.

You know what’s more terrible? That 50% tipping doesn’t happen until year 5, which means there are a whole lot of entrepreneurs and business owners struggling through those first 5 years. A whole lot more than the 50% who ultimately close up shop.

Yet the reason for the struggle isn’t that those business owners don’t know what to do. Goodness knows there is no shortage of information out there teaching and telling exactly what to do.

But there's the rub: There is so. much. information out there that the point gets missed: the conversation becomes what information is good and what’s bad instead of whether the information is the important thing or not. 

Because guess what? It’s not about the information. If it was about the information, businesses wouldn’t be able to get to year 5. But they do. They sputter to year 5 on that information and then they can’t get any further.

If it’s not the quality of the information available, what is it? 

It’s the order in which they implement that information.

And that’s something we never talk about: We talk about strategies and steps until we’re blue in the face but we never talk about what order we should do those things. And that order - that sequencing? It matters a lot. 

It makes the difference because when you’re not doing things in the right order, the right sequence, you feel:

• Like you’re constantly running in circles always busy but never moving forward
• Like you’re stuck at an income ceiling you can’t seem to blast through no matter what you throw at it, from the logical to the woo to the everything in between.
• Like you’re constantly selling and creating new things to sell and then selling again and then creating again because that’s the life of an entrepreneur, amirite? (Yes, it’s most entrepreneur’s lives but no, it’s most definitely not the life of entrepreneurs once they get done working with me. #justsayin)
• Like you’re noticing more and more noise in the market everyday (the polite way of saying people who have no idea what they’re doing but are better at marketing and looking cute and throwing glitter than you are popping up everywhere), and you’re worried that any advantage you did have is gone or will be gone soon, or that you’re too late to cash in.
• Like you can’t help but shake the feeling that somehow all the success you’ve had to date has been luck, and pretty soon it’s all going to fall apart because you have no. idea. What. you’re. Doing and everyone else is quite obviously the second coming of Steve Jobs. (spoiler alert: none of us know what we’re doing, and there will never be another Steve Jobs).

And like everyone else, you’re craving more simplicity and more focus and more profit and more bang for your time’s buck, while trying to figure out if that’s actually a thing that really happens (you’re pretty sure it’s not) and if it is (which again, you’re pretty sure it’s not), when is it finally going to happen for you? (For the record it is a thing that happens, and it can happen for you).

Understanding what you need to be focused on and when you need to be focused on is actually really simple. In fact Harvard Business Review spelled it out back in 1983 when it identified the 5 stages of growth all small businesses move through. I’ve adapted those stages to online, microbusinesses, and that means understanding what you need to be working on is in fact simple. So simple you can figure it out in the 3 steps I outline below. 

The 3 Step Process

Step 1 CLASSIFY: This is where you get real with yourself about where your business is at, and identify which stage of growth you’re in.

Step 2 ASSESS: Once you know what stage of growth your business is in, you can assess your current goals, priorities and activities to see how well they match (or don’t match) the priorities you should be focusing on given where you’ve identified your business is at. 

Step 3 PRIORITIZE : Finally, you’ll create a new set of priorities for your business, ones specifically designed to get you back on track to multiplying profits and compounding results.

This all sounds pretty simple, right? 

Maybe you’re thinking too simple, right? Like “ok Michelle, you’re saying all I have to do is understand which of 5 stages I’m in, and all my problems will be solved?”

Well, yes. (and no). 

Here’s the catch: Building a business is simple, but it’s far from easy. 

So yes, if you know what stage your business is in (like really know, not lying to yourself know) then yes, following the priorities and focus for the stage you’re at is all you need to do. 

The trick is in doing actually doing it. 

And we entrepreneurs like to screw this up in 2 common ways:

First, we love to lie to ourselves about where our business is truly at. We like to think we’re 2 or 3 or even 4 steps ahead of where we really are, so we overcomplicate and work on the wrong things all. The. time. 

And the more we lie to ourselves about where our business is, the longer it takes us to get to where we want to be. Which leads to more lying to ourselves. 

There’s also nothing at all easy about seeing the reality of where we’re at after we’ve been telling ourselves a different story, and then having the determination to make shifts in our priorities to reflect it. That takes a strong mindset.

(and yes I changed all those pronouns to ‘we’ right there because I’m not exempt from this either).

So my challenge to you today is to be both honest and forgiving with yourself and your business as you go through this exercise, and have a real look at where your business is today. 

Not where you want it to be or where you #pinkypromise it’ll be a month from now. Where it is today. 

Like I said: Simple but not easy. 

Second, once you’ve been real with yourself and know what your priorities and focus areas are, you have to have a strategy that supports those priorities and focus areas. 

You need to be able to look objectively at what is and isn’t working for you within your new area of focus, and where you might need to make changes to your strategy in order to improve.

That means your biggest leaps from stage to stage aren’t coming from a formula, a course or even everybody’s favorite 20k mastermind. They’ll come from you doing the work. 

The good news? Today we get started.

[Step 1]: CLASSIFY: Determine Your Current Stage

Here’s the deal: we all like to think our businesses are special snowflakes (and I for one fervently believe that every business is unique and needs its own strategy), but while there are a zillion different custom strategies and business models out there, there are 5 stages of small business growth, and if you have a small business, your business fits in one of those 5 stages. 

Before I tell you what the stages are, I’m going to flip things over and ask you a few questions first. Take 30 seconds and give me a Yes or a No for each of these (no ‘kinda sorta’, ‘maybe’ or ‘I wish’ right now. Save the in betweens for later, right now I want a yes or a no).

1. Do you have a core product or service that is your bread and butter standard offer?
2. Do you have consistent sales?
3. Are you on a revenue roller coaster from month to month, never sure how much cash is going to come in?
4. Do you regularly make up special packages and rates in order to accommodate customers and clients?
5. Do you do 80% or more of the business work yourself?
6. Do you have a set operating expense budget?
7. Do you have a team, and are the roles for that team well defined?
8. Does your business make money when you’re away?
9. Do you pay yourself a set salary?

Now that you have some unfiltered answers in the bank, let’s define the actual stages of business growth. 

Stage 1: VALIDATE 

Stage 1 businesses have 1 goal and 1 goal only: determining if you have a valid business idea. This means you’re spending your time talking to potential customers, making sales pitches and delivering solutions to your early customers all the while learning what’s working and what’s not about your offers (and your value and your results) as they relate to your customers. 

A Stage 1 business is simple: you’re doing everything yourself and directly supervising any small help you may have. Systems and planning generally don’t exist because you’re figuring it out - and adjusting - as you go. You’re winging it, and that’s exactly what you should be doing.

Stage 2: SALES: 

Stage 2 businesses have proven they have a product or service that’s in demand from a group of clients or customers. In short, the business is viable. In stage 2 the challenge shifts to learning how to create predictable revenue, which means learning how to create predictable marketing efforts that result in a predictable number of leads that convert to a predictable number of paying customers.

At this stage you’re still doing the vast majority of the work, but may have some support. There are still no formal operations or policies and procedures in place, although they are forming in the shape of marketing and sales systems. Revenue is becoming predictable and consistent as the marketing and sales systems become predictable and consistent.

Stage 3: FOUNDATION: 

Stage 3 businesses have created a predictable revenue engine - that is, they have a marketing and sales system that leads to a predictable number of customers (and revenue) each month and those customers are achieving the desired results and receiving their desired value from the product. The front end, client-facing side of their business is thus relatively stable.

The back end, or operations side, is not at all stable. Most would call it a mess. Stage 3 is about fixing that and creating the baseline policies and procedures that will allow you to step out of the day to day. Stage 3 businesses are beginning to hire key team members and getting them trained.

Stage 4: EXPAND: 

Stage 4 businesses have stable marketing and sales, stable revenue, stable results and, as a result of their work in Stage 3, stable operations and a growing team. In Stage 4, therefore, the focus shifts to how to grow, and how to grow fast (if fast growth is desired).

The team is expanding both in number and in talent level/competence, and you’re stepping further out of the day to day to focus either on new projects or removing yourself altogether to to focus on a new business entirely. Cash flow can tighten in Stage 4 as money is allocated to the expensive process of growth which includes scaling up marketing systems and bringing on staff. The most important questions you’re dealing with in Stage 4 is around delegation and cash.

Stage 5: MULTIPLY: 

Stage 5 businesses are mature businesses. Their priority is to consolidate and control the revenue generated by Stage 4’s growth (and make sure it’s converted to profit and margin now that growth has been achieved) and to retain their entrepreneurial culture now that they’re established. 

I have a secret for you: 90%+ of the entrepreneurs using this Master Plan are going to be in stages 1, 2 or 3. Stages 4 + 5 are the playing field for sophisticated businesses that have been around the block. The vast majority of small businesses are in one of the first 3 stages, and many even have long, successful runs without ever leaving stage 3. So if you’re in an early stage and not feeling great about it, flip that right now. You’re exactly where you need to be.

[Step 1]: ASK YOURSELF: 

1. What stage is your business at?
2. Was your stage a surprise to you? Did you think you were further along than you really are? 
3. Or are you further along than you’ve been giving yourself credit for?

[Step 2]: ASSESS: Audit Your Activities Against Your Current Stage

Now that you have an honest assessment of what business growth stage you’re at, it’s time to have an equally honest look at what activities you’re currently prioritizing and whether or not those are the activities that’ll best serve your business right now.

Start by auditing your time and answer me this: What percentage of your time are you spending on:

1. Marketing / Product Development / Sales
2. Sales Channels
3. Processes / Procedures / Operations / Technology
4. Finances
5. Team

Jot down your best guess before moving to the next question.

Now, it’s time to look at how that aligns with where you should be spending your time.

If you’re in Stage 1: VALIDATE, your time should be spent on:

1. Making Sales
2. Serving Clients
3. Collecting Success Stories

If you’re in Stage 2: SALES, your time should be spent on:

1. Increasing Revenue (making more and consistent sales)
2. Creating a predictable Marketing System
3. Creating a predictable Sales System

Pro Tip: This is the stage where I see most businesses struggle and, frankly, where statistics tell us most businesses fail. That’s because this stage is hard - you’re going from your own hustle to the beginning stages of creating a living thing that can breathe on its own. If you’re in Stage 2 and stuck, give yourself a break and a pat on the  back- you’re doing the work, it will pay off.

If you’re in Stage 3: FOUNDATION, your time should be spent on:

1. Optimizing Technology
2. Creating Standard Processes and Procedures
3. Increasing Revenue and, more importantly, Profitability
4. Building your Team

If you’re in Stage 4: EXPAND, your time should be spent on:

1. Investing in Growth
2. Optimizing and Perfecting the Processes and Procedures created in Stage 3
3. Increasing the Talent on your Team

If you’re in Stage 5: MULTIPLY, your time should be spent on:

1. Optimizing and Maximizing Profit Margin
2. Protecting Culture
3. Creating Exits (if desired)

[Step 2]: ASK YOURSELF: 

1. What did you notice about your current priorities and activities when compared with what you should be focused on right now? 
2. What have you been doing that you need to stop doing?
3. What haven’t you been paying attention to that you need to start looking at?

See a few things that didn’t quite line up? If so, congratulations - you just joined the 98% of us entrepreneurs who have a few things to work on. We’ll solidify your new priorities in the next step.

[Step 3]: PRIORITIZE: Identify Your Priorities Going Forward 

Now that you know what stage you’re in and what that means about what you should be working on, time to reassess your current priorities and start building in appropriate focus so you can quickly move to the next stage and get on with things.

Identify what you should be doing by answering the questions listed below the stage you’re currently in. If you’re not currently addressing one of the answers you give, and it’s not on your list to address later, congratulations! You’ve identified a new priority. 

Because once you complete the answers to each of the questions in each stage below inside of your business (as in actually complete it in a live manner, not just in theory in your journal), your business will have magically transformed into one that’s ready to catapult to its next stage of growth.

Pro Tip: At this step everyone wants to know how much money they should be making at each stage. That’s not a question I can answer because it’s different for every entrepreneur and every business. I’ve worked with businesses who are making 50k a month and are in Stage 1, and businesses making 5k a month who are in Stage 3. It’s all about how your business is set up. 

Stage 1: VALIDATE

• Do you have a product or service that people will pay you money for? (This seems obvious, but I can’t tell you how many business owners spend a year or more building an entire infrastructure around something no one actually wants. Don’t do that. Make sure people want to buy what you’re offering before you invest wildly in it). 
• Can you get enough customers, deliver your products, and provide services well enough to become a viable business? (ie not one that has you working 20 hours a day for a pennies on the dollar in perpetuity) 
• Can you expand from your one anchor customer to broader sales? (ie, is more than one person - more than your best friend - interested in what you have to sell, and if so, can you deliver on that?)
• Stage 1 Bottomline: Are there people willing to buy your thing from you, and if so are you able to deliver a solution that gets results to them?

Stage 2: SALES

• Do you have a marketing and sales process in place so that you are generating consistent leads and converting them to sales at a predictable rate?
• Can you deliver results to clients at the same rate as you were in Stage 1, when you were working with fewer clients?
• Are you generating consistent and/or predictable revenue each month, preferably enough to cover your expenses? (and even leave a little left over for yourself)?
• Stage 2 Bottomline: Have you expanded your sales and marketing efforts enough to generate consistent leads, sales and results at a rate that covers your expenses?

Stage 3: FOUNDATION

• Have you established standard processes and procedures to the extent that you can start bringing on team members - either contract or in house - who are able to accomplish tasks independently?
• Do you have technology in place to automate tasks that had been done manually in Stages 1 and 2?
• Are you continuing to add more efficient ways to deliver your products and services such that your profit margin is increasing as you grow?
• Have you created an Organization or Accountability Chart and begun to hire key team members who can take ownership of tasks?
• Stage 3 Bottomline: In Stage 3 the business should be moving away from being all about you, and moving into a proper company with proper operating rules that allow you to start hiring staff and stepping away.

Stage 4: EXPAND

• Have you identified (and implemented) new Revenue Streams to complement your core products and services?
• Do you have a team in place to the point you can leave for 2 weeks and not be missed?
• Do you have 3-6 months of operating cash on hand to finance growth opportunities? Do you have a system in place to invest that cash, and know whether or not what you’re investing in is working?
• Are you continuing to create best-in-class results for clients within your streamlined Operations?
• Stage 4 Bottomline: In Stage 4 you’re expanding beyond the core of the original business and creating a proper machine that you are not central to. Very few small businesses ever reach this stage.

Stage 5: MULTIPLY

• Are you investing in best-of-class talent, and hiring them in house, to lead critical functional areas of the business?
• Are you implementing an exit plan for yourself, whether that mean looking for acquisition opportunities or removing yourself entirely from the day-to-day of the business (if you so desire)?
• Have you optimized your profit margins, operations, technology and team to the best extent possible? Are you continually looking for ways to invest in order to increase customer satisfaction while also increasing efficient?
• Have you reined in any spending that increased during Stages 3 and 4 as you were growing quickly and investing to seed that growth?
• Do you have things in place to retain your original culture and entrepreneurial flexibility as you become a mature company?
• Stage 5 Bottomline: Stage 5 businesses are what we call Resource Mature, ie they’re done growing in the way we think of growth as entrepreneurs. They’ve reached business maturity and while growth will still happen, they’ve moved from a start-up situation and are now a mature business with detailed operations and regular strategic planning guiding the mission.

[Step 3]: ASK YOURSELF: 

1. What answers do you not yet have for your specific stage?
2. What specifically are you going to focus on now in order to be able to answer that as soon as possible? (ie if you’re a Stage 2 business and you’re not sure if you’re delivering results as consistently as you were in Stage 1, what can you start doing to track that?)

Whew. That was a lot. Still feeling a little uncertain that what you outlined will move the needle for you the way you need it to? I get it, I threw a lot of information at you (a lot), and even if I hadn’t, it’s next to impossible to make decisions for your own business the way you would for someone else’s. (The cobbler’s children have no shoes and all.) 

Good news.

Stick with me and I’ll help you through.