Welcome to the Owner Institute Newsletter where we talk about getting owners working on and not in their businesses.

In this week’s issue:

• What are business black holes and how to navigate them.

• Entrepreneur’s plans to spend it all.

• Revenue is up but earnings are down

Quick Hits

1. 💸A discussion that many owners need to have:

2. 🗿 63% of small businesses rely heavily on word-of-mouth marketing to attract new customers, according to a recent PYMNTS report.

3. 😨Despite optimism, small businesses are experiencing pressure from rising costs and inflation, leading to lower earnings. Although revenue is up 29% year-over-year, earnings are down nearly 58% compared to January 2024.

Deep Dive: Small Business Black Holes

I spent three miserable years stuck at $4 million in revenue in my first business. Well, ok. The first year was good. The second was ok but the third was miserable.

I’d been working harder than ever and I was making decent money on paper but the cash never seemed to materialize in my bank account. I was wondering what the hell I was doing wrong.

Don’t get me wrong a $4m business is a great achievement but I’d been at it for 7 or 8 years. I’d been focused on growth and growth wasn’t happening any more.

Now I see owners hit the same wall all the time. Some at $1M, others at $3-4M, and again at $7-10M.

I call them black holes - revenue levels where businesses get stuck, sometimes for years. The owner is working his or her ass off, but the business just won't grow.

Why These Black Holes Are Predictable

Here's what I've learned after working with dozens of business owners: these black holes aren't random.

They happen at predictable stages when what got you here won't get you there.

When they happen, your role as an owner needs to fundamentally change, but nobody tells you how.

The First Black Hole: $1M

This is where you realize that being really good at your work isn't enough anymore. You've hired a few people, but you're still doing everything important yourself. You're trapped between being a doer and being a business owner.

At this stage, your only real shot at independence is selling more. Period.

That means getting free from anything that doesn’t involve selling.

Offload any administrative task you can. Stop preparing each invoice for the customer. Stop scheduling your own meetings. Get a Virtual Assistant and offload everything possible.

The Chaos Zone: $3-4M

This is where I got stuck, and it's brutal. Here's what it looks like:

• You're selling more work than ever

• You're hiring people to deliver it

• But you have zero systems to support them

• Everything depends on you fixing problems

• Your back office is a mess

• You have no idea where your cash is going

Here's what happened to me: Our accountants came in all excited one day. "Congratulations! You just made $600,000 on $4 million in revenue!"

Great news, right?

Except I had no idea where that money was. Turns out we were burning through cash so fast we were about to start losing money.

The Growth Paradox

Here's the thing nobody tells you: At each stage, you have to give up the very things that made you successful to get to the next level.

The control that helped you succeed at $1M will kill you at $4M.

The hands-on approach that worked at $4M will strangle you at $10M.

The Sweet Spots

Between the black holes are what I call "sweet spots" - revenue levels where you can actually breathe.

Around $5M is a good one. You can make solid money, work reasonable hours, and have some real freedom if you set it up right.

But here's the trap: Most owners hit these sweet spots and immediately try to grow past them.

That plunges them right back into chaos as growth outstrips their systems and people.

I’m not saying don’t grow. Just be aware that it’ll stress everything and the quality of your life will most likely go down.

You need to be honest about whether you want to take on the next challenge and prepared for it.

How to Know If You're in a Black Hole

Ask yourself:

• Has your revenue been stuck at the same level for more than 18 months?

• Are you working harder than ever but not seeing growth?

• Does every problem still need your personal attention?

• Are you constantly putting out fires instead of planning ahead?

• Do you have a nagging feeling that something fundamental needs to change, but you're not sure what?

If you're nodding your head, congratulations - you're in a black hole.

Getting Out

The first step is accepting that your role needs to change. At each level, you need different:

• Systems

• People

• Skills

• Ways of spending your time

• Levels of control

In my case, we had to:

• Get professional help with our finances

• Hire more experienced managers

• Build actual systems instead of just working harder. I call this, “process over heroics”

• Make some really tough decisions about who could grow with us and who couldn't

Was it comfortable? Hell no. But it beat spending another three years stuck in that black hole.

The Good News

These black holes are normal. Every growing business hits them. The owners who break through are the ones who realize they need to change how they run their business, not just run faster on the same hamster wheel.

That's why I'm sharing this. Because I wish someone had mapped this out for me before I spent three years figuring it out the hard way.

Keep growing,
Alan

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