Stage 3: The Sweet Spot
This stage provides one of your two opportunities to enter cruising speed, a status in which the business is humming and you’re spinning off so much money so steadily that you can build a nest egg sufficient to shut down the business one day and retire comfortably. But if you have bigger ambitions or want to leave a thriving business after you retire, you’re not done yet.
Characteristics:
- If you’re successful in this stage, you will be working about 35 hours a week, give or take depending on your personality.
- Selling (and maybe estimating) is the only major function that you’re responsible for.
- All other company functions have been delegated to the right employees, with the right training and skills.
- All employees are trained using company-developed, standardized systems.
- The owner manages customer and employee relations, with high levels of satisfaction in both.
- The owner and company enjoy consistent 60% markups and 35% profits. The firm produces a great product and generates lots of continuing sales through word-of-mouth and a professional marketing campaign.
- In general, every person you add will require tweaking your org chart and systems. By the time you get to six employees, the business has become far more complicated.
- The bigger you get, the more detailed each job’s skill sets become, and thus the more exacting you have to be about duties. The fact that your wonderful bookkeeper works in the office all day doesn’t mean you should count on that person to also serve as receptionist.
Take Note: I think you can hang for the rest of your life in Stage 3 if you get all the functions working properly; if the marketing and sales and production are working well; if you have low employee turnover and consistent jobs and the economy is stable; and if everything is calm and you don’t spend all your money on junk.
That said, and provided you work with a financial planner, you probably can put your kids through college and retire between 70 and 75. A well-run Stage 3 company is a very sustainable practice. It’s not easy to achieve, though. As a consultant, I tend to see the crème de la crème of remodeling firms, and even in that group, only 20% get to and successfully stay in that sweet spot.