Our character in today’s story is Brooke. Brooke has hit a ceiling of growth in her designer practice. She struggles to understand how she can get her million-dollar business to the next level.
Brooke felt like she had done well to grow her interior design business, Brooke's Designs, to over $1,000,000 in annual revenue with only twelve employees. It had been two years and she was continually fearful that she would lose the ground she had gained over the past decade.
She remembered when it was just her. She was an interior designer with some great ideas and got some traction with a few customers to start. Her customers loved her designs and she continued to gain popularity. It wasn't long until she had to hire an administrative assistant and then a few helpers. Customers loved her designs and her ability to completely refurnish and decorate a house within a single month. She now had four other designers; four staff who moved furniture and hung pictures; a few administrators and herself.
She felt like she was at an impasse. If she hired more people, she didn't have enough work for them to do. If she didn't hire more people, she couldn't take on more work. What was wrong? While she was proud of her million-dollar business, she didn't seem to make much more profit than when she was on her own.
Brooke remembered meeting a business coach at a recent networking event. He called himself, Coach Russ. Maybe he could tell her how to make her interior design practice more profitable.
Brooke met Russ at his favorite coffee shop. They got their coffee orders and started chatting.
Brooke decided to talk to Russ about her dilemma, "I just don't know what I'm doing wrong. I've successfully grown my interior design practice but feel like I'm not really doing much better financially than I did when I was on my own."
Russ asked, "What kind of profit are you making with your current practice?"
"I'm making $100,000 in profit with $1,000,000 in revenue."
"That's respectable. What did you hope to make?"
"I thought I could do a lot better. I mean, I am doing okay; but I was making $200,000 per year when it was just me."
"How much work do you perform yourself in your interior design practice today?"
"I do all the high-visibility designs and I help with the hiring and firing of employees."
"Interesting. Do you want to continue to do the designs yourself? Or do you want to grow a business?"
Brooke looked confused, "I don't understand. Why must I choose one or the other?"
"You don't have to do anything. However, it's been my experience that a business owner either wants to grow a business; or they want to practice their profession while they surround themselves with helpers. If they want to practice their profession, they’ll naturally be limited in how much they can grow. Does that make sense?"
"I suppose. Are you saying that I will never be able to do any better than I'm doing right now?"
"Define BETTER."
"I suppose that by BETTER, I mean, I'll grow to two-million dollars in revenue and be able to sell my company and retire."
"Got it. Then, my answer to you is, NO. You will not be able to do any BETTER than you’re doing right now."
Brooke was shocked. She thought, 'Russ is some kind of business guru. Why couldn't he tell me how to grow my business? And, why was he so negative? I’d probably pay him big bucks if he could tell me how to grow my business. What’s his problem?'
After a pause, Brooke asked, "Aren't you a wise business coach? Why can't you help me?"
Russ responded, "I can help you grow your business. I cannot help you grow a business where you insist on being its key performer."
"I don't understand. Are you saying that I’d need to give up doing interior design to grow my business?"
"Not exactly. I'll tell you what. Give me your most recent financial statements and complete the questionnaire that I give all of my first-time business owner clients. I’ll schedule a discovery session with you. We can dig into your situation in more detail."
Brooke felt like Russ was trying to get her to agree to coaching without any promise of being able to help her in any way. But, what was there to lose? It was a low price to figure out if she could move forward or not. Brooke agreed to Russ's terms and they scheduled a discovery session for the following week.
Brooke and Russ met in Russ's office. There, Russ had taken a lot of the information that Brooke had given him and had created several sketches on his white board. They both sat at a small round table that was directly in front of Russ's desk.
After the typical small talk, Russ started, "I want to know the answer to a question. Do you want to be an interior designer; or do you want to lead an interior design business?"
Brooke thought this was as ridiculous as the conversation they had in the coffee shop, "I want to do both."
"You can't do both. You can do one or the other. Which will it be?"
"I don't agree. I've grown my interior design business to a million-dollars per year... and I’m still doing my own designs."
Russ could see that Brooke needed some convincing. He pointed to one of his sketches on the white board. It was a sketch of an organization chart of Brooke's employees.
Russ pointed to a group of boxes that was supposed to be the designers that Brooke hired, "What do these people do?"
Brooke smiled, "They’re my interior designers. They do designs for our customers."
Russ smiled, as he pointed to Brooke's position as manager, "What does this person do?"
"I manage my team and I also perform interior designs for high-visibility clients."
"No, you don't."
Now, Brooke was indignant, "Pardon me! I think I know what I do."
"Brooke, for as long as businesses have existed, there’s been small business owner ‘role confusion’. I want to describe your company; and I want you to correct me wherever I go wrong. Deal?"
"Sure."
"You work with your other interior designers. When you have a high-visibility client, you do the work. When you have an average client, you give that client to your other designers and they do the work. Right so far?"
"Sure."
"Your company is operating like an ad-hoc interior designer pool that operates under your brand name. Your designers do their own thing and are too afraid to go out on their own; because you help them get clients. Is that right?"
Brooke seemed upset at this point. Russ seemed to be saying that any of her designers could work on their own and probably would be better off than working for her.
She barked, "Look, Russ. I wanted some helpful advice from you... not insults!"
"Look, Brooke. I think you've done a great job with your interior design practice. Very few interior designers have created the kind of success that you have. However, I feel it's necessary for us to start off with a truthful foundation. I can't help you if we don't start from the right place. I believe that your interior design practice operates as a group of independent interior designers and helpers and administrators. It’s not what I would call a genuine business."
Brooke had calmed down, "Okay. What would make my interior design PRACTICE, a REAL business?"
"I'm glad you asked. You have a knack for interior design. You've said as much. You say that you are the one who will take on your high-visibility clients. You give your other clients to your pool of designers. For you to become a BUSINESS, you need to figure out what makes your design talent so special; and package it."
"What? How can I PACKAGE my talent?"
"If you were to sell your practice some day; which is what you say that you want to do; will you still work in the company after it's sold?"
Brooke saw what Russ was saying. If she was so special that she needed to handle all of the high-visibility clients, and she wanted to leave the company, then her company wouldn’t be able to serve the high-visibility clients; and it wouldn't be worth as much to a buyer.
Brooke responded, "I see what you mean. How can I convert my current practice into an interior design BUSINESS?"
Russ smiled, "You just took your first step. Realizing why you don't have a BUSINESS will help you create a REAL business. Next, you need to stop doing interior design for high-visibility clients."
"What? I love interior design. Why should I stop?"
"Do you think that Michael Dell or Bill Gates like programming computers?"
"I suppose."
"Just because you’ve decided to take what you love to the next level doesn't mean that you don't love it. In fact, it means the opposite. It means that you’ll share your amazing talent to a much broader audience."
"I think I get it. If I train my designers my way of doing interior design; I’ll be multiplying my signature way of designing."
"You got it."
"So, what will I need to do to make this transition complete? Do I just start training my designers?"
"If only it were so easy. Training is a start. However, you need to go deeper than that. You work with creative people who value their artistic creativity. You need to collaborate with your team; and develop a collective culture. A way of doing things that you can repeat and extend beyond your current employees."
Brooke worked with Coach Russ weekly for several months. She learned that it was a lot harder to off-load her high-visibility clients to designers who she thought were rookies. Russ helped Brooke change the way she saw her staff. She started taking their input and together they created a genuine, repeatable design process that was called the ‘Brooke Designs’ Way’.
Brooke had another hurdle to overcome. While she had offloaded much of her design work, she felt like she didn't have much to do in her company. In fact, she felt as if she wasn't really needed at all. She met with Russ for one of their coaching sessions to share her new dilemma.
Russ asked, "What would you like to work on today, Brooke?"
Brooke responded, "While I feel like my design team is quite a bit more competent, we’ve still not grown beyond one-million-dollars in revenue. I had hoped that these changes you advised me to do would help our design practice grow into a larger business."
"I see. Tell me what you think is causing your stagnation?"
"Russ, I thought that you could tell me."
"I can. But, just like I've taught you how to allow your designers to think creatively, I want you to come up with some possibilities."
"I don't feel like I'm productive. I feel like if I was 'doing something' as a designer, we would be further along than we are now."
"Let me ask you. What's the job of a business owner?"
"I suppose that I tell my designers and other employees what to do."
Russ frowned, "You know better than that. What have we been talking about this past six months?"
"Ok. I don't tell my employees what to do; I inspire them, and they figure out what they need to do on their own. But, if they’re on their own; what am I supposed to do?"
Russ could see that he may need to offer some help, "What is preventing you from hiring an additional designer or helper in your business?"
"I can't afford to pay an additional designer?"
"Why not?"
"Because I don't have enough interior design work for them to do?"
"Why don't you have enough work for them to do?"
"Because I don't have enough interior design customers."
"How will you get more interior design customers?"
"I suppose I’ll have to market and sell... right?"
"Wrong. You need to hire a marketing and salesperson to do it for you. Haven't you learned anything from our past six months?"
Brooke smiled, "I got it. I need to stop DOING and start LEADING."
"You got it. So, what are you going to do?"
"I will hire a salesperson."
"Good for you."
Brooke was turning into a genuine business owner.
After she hired a salesperson, she realized that sales would increase and so she hired a manager to run her business. They created a system on hiring and growing as they increased their interior design backlog. Not only were Brooke's designers on autopilot; so was her manager, her saleswoman and everyone else.
While her interior design business had reached two-million-dollars per year in revenue, Brooke decided to open another design studio in another city. She’d created a sure-fire business that didn't require a second of her time. The only thing she had to do is duplicate her business model in a different location.
Two years after she started working with Coach Russ, Brooke was approached by a large, national home builder. This builder wanted to offer interior design services with every home they built. It was a high-end custom home builder and they were convinced that Brooke's Designs was exactly what their firm needed to dominate the high-end customer home building market.
Brooke now had an odd decision to make. Does she take the $5M buy-out offer from this large builder; or does she continue duplicating her successful business model in major cities? Either way, Brooke was convinced that she had created a REAL BUSINESS instead of a design practice.
Lessons Learned
In our story of Brooke, she learned one major lesson that’s very difficult for most professionals who start their own business. Professionals have a true option of either growing their practice or growing a business. There’s no WRONG decision. Frankly, our story would have had a happy ending, if Brooke decided to continue her million-dollar practice as it was.
If you want to grow a business, it always progresses along a specific four-stage path: 1) Technician; 2) Manager; 3) Entrepreneur; and 4) Investor. Had Brooke remained a practitioner, her design practice wouldn’t have progressed past the ‘manager’ phase. In fact, Brooke was straddling the Technician and Manager phase of growth.
As a business coach, I help business owners’ transition from one phase of business ownership to the other. Because at each phase of transition there is resistance.
Employee to Technician
Most professionals are employees before they try to start a business. As a valued employee, you have job-security. Chances are you don’t make as much money as you’d like, but you have health benefits and a 401k, and you feel secure. In order to start your own business one of three things must happen:
you get fired or laid off and can’t find another job;
you have a brief moment of insanity, quit your job and start your own business; or
you plan out your business using my Starting Your Business from Scratch online training and quit your day job once you’re convinced your new venture will work.
Regardless, of how you move from employee to technician, you will either fail to gain the customers you need; or you will be super busy doing the work of your “technician based” business.
Technician to Manager
To be clear, this transition often happens in three phases. The first phase is where you hire administrators, bookkeepers, and other support staff for your expertise. In the second phase, you may hire salespeople or other less-skilled professionals. The third phase requires you to stop doing the professional work of your business and rely solely on the expertise of your staff. In Brooke’s story, she was in the second phase of this Manager stage.
The resistance experienced by Technicians in moving through this stage of business growth is letting go of the thing they love to do… which is their trade. Let’s face it. If you’re an engineer, you spent years in school, then in on the job and you LOVE engineering. The thought of becoming a “business manager” and pushing papers for the rest of your life is not appealing at all. If you’re a chef, you love creating masterpieces in the kitchen.
Frankly, that’s the "limiting belief" that I coach my professional business owners on. The best way to grow and share your skill with the world, is to transfer it to others… not to keep it to yourself. The truth is that as a manager or leader, you dramatically amplify the good that you can do for others with your profession.
Manager to Entrepreneur
The transition from Manager to Entrepreneur is subtle but so necessary to grow your business. An entrepreneur has created a repeatable value-production machine. If you offer your customers a service, entrepreneurs create systems that allow anyone to fit into their system to give their customer’s quality service. If you manufacture products, you create supply-lines and distribution networks for your products to wholesalers and retailers.
This systemization of your business will allow you to step out of the business at some point in the future when you want to become an investor.
The point of resistance for this transition is being unaware that you don’t have appropriate processes and systems. Ask yourself this question. If you took a 6-month vacation from your business, would your business continue as it did with you actively managing your business? If the answer is NO, then you have work to do in this transition point.
In Brooke's situation, she was able to duplicate the success of one interior designer firm in another city. This demonstrated that she had accomplished the transition from Manager to Entrepreneur.
Entrepreneur to Investor
The final transition is to move from Entrepreneur to Investor. Just like moving from Technician to Manager, some business owners look at this transition as “ending” a part of their life that has brought them joy. Most business brokers deal with this resistance constantly. A business-broker is in the profession of finding a buyer for a business. The selling business owner over-values their business and is resistant to selling for what the business broker tells the business-seller what their business is worth. If the business owner breaks down and sells, they are often disappointed with the price.
The best way to avoid this awful experience as you try to sell your business, is to better understand how the value of your business is determined early in your business ownership experience. When you look at your business as a creation instead of some job that you hope to quit someday, you’ll start understanding what actions add value to your business and which ones set you up for the disappointing offer when you try to sell your business one day.
Becoming an investor doesn’t necessarily mean that you will retire. In my case, after I sold my business, I became a business coach. And… now I’m a Technician all over again 😊
That’s it for our story and lesson today. I hope you’ve learned a few things from Brooke’s story and our brief discussion. If you’d like to learn more about me or my business coaching practice, I invite you to check us out at www.mmbizcoach.com.