Only 1 in 20 Businesses Surpass $1 Million In Annual Revenues. Here Are 5 Reasons Why (2024)

There are many reasons why business struggle to grow. However, many of them are internal and can be addressed with the right focus, the right strategy, and the right financial discipline.

Growing a business is hard. Fewer than five percentof all businesses in the US grow to be more than $1 million in annual revenues. And fewer than one percentmake it to $10 million. There are great number reasons why companies fail to scale to an Owner's desire or their dreams.

However, as a business advisor/coach, having worked for, and with, dozens of companies over the last 4 decades ranging from early-stage startups to successful businesses with multiple of billions in annual revenue, I find that most companies fail to scale primary because of internal reasons not external ones.

Here are the most common problems we most often see. By seriously addressing these now, you'll have a much better chance of reaching your organization's true potential.

1. DYSFUNCTIONAL, OR NON-EXISTENT, LEADERSHIP TEAM

Often, we find that the leadership team is not functioning well, if there truly is one at all. While a visionary Founder is needed to get the company off the ground and a great CEO is needed to lead the growth, without a solid team of key executives to head up the various functions, a company will quickly reach a growth ceiling, or a certain revenue achievement plateau.

One of the first things we do with new clients is to help the Founder/CEO envision the company at the next level in some detail--typically 3-5 times the current size--and have them design the ideal leadership team. By envisioning the departments, functions, and leadership qualities of their ideal teams, we set a clear goal to guide for future talent acquisition and development.

2. PEOPLE NOT ALIGNED AROUND A SET OF CORE VALUES

Nothing kills a company's growth prospect more than if the people do not share a common set of core values. Your values define your priorities and the tradeoffs you're willing to make. If people are not aligned around a common set of values, they will pull in different directions and undermine each other's efforts.

We are strong believer that core values are emergent rather than chosen. Teams need to choose values they feel are representative of their company and then test them by finding examples of them at work in the choices they've made, especially the tough ones. Once you have a core set of values, you promote them in the hiring process to reinforce and propagate them within the company, frequently speaking about them in real-time/live daily examples.

3. POORLY DEFINED CORE CUSTOMER, CORE PRODUCT/SERVICE, AND CORE CHANNEL DEVELOPMENT

The irony of scaling is that the faster you want to scale, the more you need to narrow your focus and the less you need to offer. By choosing a core customer, product or service, and channel, you increase your chances of success because you make it easier to optimize, streamline, train, and communicate.

Many companies want to sell anything to anyone in hopes of getting more business. However, it's better tozero in on a core customer and target a core product or service so that you can streamline and optimize to increase our growth rate and profitability.

4. TOO MUCH DRAMA IN YOUR CRITICAL OPERATIONAL PROCESSES

Every business has 3-8 critical processes that give it a competitive advantage in their market when executed well. If these are not running smoothly, it means you'll scale those same problems when we help you scale the business.

Start by looking at the stream of value that is delivered to your customer and identify the key areas in which the business needs to be successful in order to win. Once you have the top 3-8 identified, we can then look at removing waste and inefficiencies without comprising value. We have a refined process to examine how to create efficiencies and automated processes with non-human capital resources you can deploy.

5. FAILURE TO MASTER YOUR CREDIT, CAPITIAL & CASHFLOW

Everyone knows the saying, "Revenue is vanity, profit is sanity, and cash is king." When you're looking to scale, this catchphrase is twice as true. Many companies grow themselves into a cash crunch because they failed to determine how much additional cash/credit would be consumed by marketing and sales costs, additional raw material and inventory, and hiring and training new staff. This is an area we truly are on the cutting edge of – business entity credit and capital planning is one of our core membership and advisory services.

Creating a detailed understanding or your growth goals and translating them into a blueprint or cash flow map, showing how cash moves into and out of your business is the first step to getting your hands around your finances. Then, you can start making changes to your business credit performance and business credit profile development practices in order to optimize your business credit options, adding additional vendor or credit accounts, managing receivables and liabilities, thereby improving your overall financial position and reducing the cash-on-hand demands that will be put on your business as you scale.

6. IN SUMMARY – GET OUTSIDE EXPERTISE – GET A PLAN

While getting these right won't guarantee success, having these bases covered with a specific plan can greatly reduce the chances you'll get stuck on a financial plateau (or worse - committing financial suicide). And usually, you don't need to address them all at once. Find the one that is currently constraining the business the most and start there. I recommend Examining #5 first – this area in general (more than any of the other areas) creates the greatest number of business failures year after year in the US!

We have deep expertise in this area and have a system that has successfully been utilized by over 60,000 other business owners just like you.

The most expensive thing for you to do is ignore my free advice – So if you are an Owner/Founder get some details and ideas on how we can help you succeed in your dreams or goals today and schedule a discovery meeting with me. Jeff Shada, MBA