The first profit plateau is an emotionally challenging time for any small business owner. The hype surrounding your company has died down, the magic and motivation you once felt has vanished. Worse still, your profits may be decreasing. Breaking through this early slump and taking your business to the next level is going to take hard work, passion and courage. Have you got what it takes?
1. Explore Different Market Niches
All businesses start out with a defined target market, but sometimes that market doesn’t hold the potential you expected. Maybe you’re failing to compete with existing market leaders, or new competitors have emerged. Or perhaps you’ve reached the limits of growth within your narrow market niche.
Does this mean you should throw in the towel and abandon all hope of progression? Of course not! Instead of reinventing your product or service, try redefining your market. Pretend you’re just starting out and brainstorm all over again - there are plenty of excellent guides for defining your market from scratch. Often just by shifting or expanding your market niche, you can reinvigorate your business and push past the profit plateau.
For example, there may be alternative uses for your product you hadn’t imagined, allowing you to reach more people. Don’t believe me? The original designers of bubble wrap were attempting to create three dimensional wallpaper! And YouTube started out as a video dating website. Even WorkflowMax began with different intentions - it was designed for an engineering company, but it then became clear that all sorts of other businesses could benefit from its project management capabilities.
Finding different uses or a wider market for your product can help you to reach new customers and fuel growth. It offers a fresh start without having to rebuild your product or service from the ground up. So get researching!
2. Reinvent Your Brand
The first year of business can mould and change you in unexpected ways. Missions and values can shift. Once your company reaches maturity, you may be surprised to discover how little your branding reflects your business personality.
If you suspect this might be the case ask your staff and customers for feedback. Does your brand speak to them? Are you easily known, loved and recognised? If the answer to these questions is no, it could be time for a change - whether it’s new brand visuals, a new website, or even an entirely new name.
A branding overhaul is unlikely to save you from a serious profit plateau, but its potential shouldn’t be underestimated. Rebranding forces you to revisit your mission, values and ideals; and reminds you of who you set out to be. A successful, beautiful rebrand may reignite your passions and inspire your staff. And of course, better branding can help inspire loyalty in your fans and reach new, untapped audiences.
But beware - branding overhauls can incur many hidden costs. Before diving in you’ll need to conduct a thorough assessment of the ramifications. Do you have merchandise or other forgotten items that will be rendered obsolete? Long-lost landing pages that need to be updated? How will rebranding impact clients and partners who use your logo? Take every single expense into account.
3. Embrace Technological Advances
Many startups fall victim to the speed of technological change. If your business doesn’t keep modernising and evolving its systems, you have no chance of keeping up with your competition.
For example, the growth of cloud based systems has had a huge impact on way many small businesses handle their project management and accounting. Xero offers easy online accounting, bank reconciliation, file storage, payroll, billing and more - all within the cloud. WorkflowMax can be integrated with Xero, and handles everything from leads through to quotes, job management and time tracking right through to invoicing.
These cloud based tools can boost your productivity, efficiency and profitability all at once. And even if you don’t use them your competitors probably will. Do you want to give them the edge? While it’s tempting to keep doing things the same way, entrepreneurs simply can’t afford to be resistant to change.
4. Develop Complementary Products
Another approach to stimulating growth (and delighting your customers) is developing complementary products, services or add-ons for your existing range. Survey your current customer base and figure out their pain points. What is your current service missing? What complementary products or add-ons would make their lives easier?
If you can figure out a way to satisfy their unmet needs, breakout sales are basically guaranteed. But be sure to survey how much they’d be willing to spend on complementary products. You don’t want to sink time and money into endless development - sometimes the simplest add-ons or accessories are the most effective.
This also offers the perfect opportunity to re-assess your pricing package. Complementary products or add-ons can be used to create bundles with your existing range; and may allow you to increase prices without upsetting customers.
5. Assess Employee Performance
Your business is only as successful as its employees. If profits are stalling and you don’t know why, it could be time to review your workforce. Assessing employee performance can be uncomfortable - particularly if those staff have been with you since the very beginning - but it’s an important part of growth and optimising your business.
You should also encourage employees to give feedback on management. Do they feel satisfied with the levels of coaching, support and career development available? Do they still feel committed to the mission and values of your company? Profit plateaus are often reflected in staff motivation and performance.
Many startups hire quickly during their initial growth phase, and because of the changing and chaotic environment staff turnover can be high. Now that you’re settled you should be aiming to retain skills and talent, rather than churning out people as and when you need them. Shift your focus to hiring the right people and personalities, rather than just skillsets.
6. Align Marketing With Popular Trends
Something strange happened in July of this year. Pokemon Go exploded onto the scene; and its popularity left many observers perplexed. Why were millions of adults suddenly wandering around with their face stuck to their phones, playing a game seemingly for children?
This confusion soon gave way to the realisation that where a massive trend exists, there is money to be made. Astute marketers quickly jumped on board, using strategic in-app tools to lure players to their retail locations. Other businesses were simply lucky; a struggling, small town ice cream shop in Washington credits it’s accidental survival to the game.
Of course, not everyone wants to run outside and catch a Snorlax - this is simply one example of trend marketing. Is your audience passionate about current sporting events, national holidays, festivals, environmental movements or political elections? Check out popular hashtags on social media to see what topics cause buzz among your consumers or clients.
The relevance of trends will vary wildly depending on your business and industry - but if you can make a meaningful connection, the marketing potential is there. And a well-timed marketing initiative could be your ticket to the next level of growth.
7. Seek Objective Help
As a small business owner, I’m sure you’re a skilled and tenacious multitasker. You’re used to taking on challenges and doing everything yourself. But when your business hits a profit plateau and growth grinds to a halt, it’s definitely time to call in reinforcements.
Many small business owners are reluctant to hire external consultants. I hear the same objection all the time - “My business is my baby, I understand it better than anyone. How can a complete stranger offer useful insights?” But there are incredible benefits to be reaped from hiring an outsider.
Business consultants are valuable because they know nothing about your company. This makes them completely objective, and allows them to view your strategy with fresh eyes, free from bias. As a business owner your emotions can cloud your judgement, but a consultant should pinpoint any problem areas you’ve been ignoring.
Of course, hiring a business consultant costs money, and this can be hard to justify when budgets are already tight. But it’s worse to sit on your hands and do nothing. You can’t ride out the profit plateau and simply wait for things to get better; your business needs a powerful jolt to break out of its comatose state.
8. Avoid the Sunk Cost Fallacy
If I told you to stop throwing money away, you’d think I was joking - it’s such mind numbingly obvious advice. We all know that cutting unnecessary costs is the quickest way to increase profit margins. So why do we feel uncomfortable axing projects that are failing to achieve ROI?
The answer lies in human psychology; and our natural predisposition towards the sunk cost fallacy. All humans are innately averse to failure and loss. We go to great lengths to avoid feeling like we’ve wasted time or money, even if it means making irrational decisions about future gain.
You probably don’t even notice yourself doing it, but I bet you’ve fallen into the clutches of the sunk cost fallacy. Have you ever cooked too much food for one person, and forced yourself to eat it anyway? Have you ever gone to an event while sick and miserable, because you didn’t want the tickets to go to waste? The sunk cost fallacy is often at play in our personal lives.
Unfortunately, the same thing can happen when making business decisions. This is particularly true for small business owners who have powerful emotional ties to their company. You’ve poured your precious savings, time and undying love into a certain strategic approach. A year in you analyse the ROI and find its not working - in fact you’re losing significant amounts of money.
Do you quit or keep at it? Now that you’ve reached a profit plateau, it’s time to ask yourself some serious questions:
- Which marketing initiatives are we spending money on without seeing any ROI?
- Are any features of our product or service too expensive or unsustainable?
- Do we have any unnecessary human resources? Did we overhire?
- Have we targeted the wrong market niche?
Brutal honesty is required here - cut your losses and take remedial action, fast.