Grow wider not taller: a simple alternative to growing your business TOO BIG

I started my first business – a flying school – seven years ago in 2010. In the first three years of my business I grew the business from one flight school and two aircraft up to three flight schools with a total of seven aircraft and numerous staff members. I enjoyed good growth thanks to a powering economy and a lack of other business competition at the time.

I was training a very high net-worth individual at the time (he was worth around $80 million) and he asked to see my business structure and financials, so that he could give me advice in a mentoring role.

I happily agreed as I thought he would be super-impressed by my business acumen and ability to build and grow a business out of thin air in such a short amount of time. However, what he said shocked me! He said my business would fail within three years if I didn’t make some changes.

My business would fail within three years if I didn’t change my business model

That’s right, he bluntly told me that my current success was based on a very precarious, risky business model and that bigger was not always better in certain business industries, particularly if one did not have outside funding. His recommendation was to diversify into other related business that were not as high risk as a flight training business (which has to contend with weather, maintenance and a precarious economic environment).

Unfortunately I didn’t really listen or comprehend what he was trying to teach me at the time.

To his credit, one year later I did almost lose my business when the economy took a nose-dive during the GFC and the fixed-costs of operating three flight schools kept increasing due to factors outside my control.

Bigger is not always better in certain industries and businesses

I wish I had watched the movie ‘The Founder’ (the story about how McDonalds was created) when I first started the flight school. The lesson from the movie is very clear, if you are going to own more than one service business, invite the managers to become owners or stakeholders in that business.

Trying to manage three flying schools in three separate locations proved to be very difficult. The main issue was that most of my competitors were owned and managed by their owners who were present at their business every day, offering the excellent customer service which of course customers expect when paying almost $300 an hour to learn to fly.

Even if you find fantastic staff to manage such a business, they are not going to focus the same love and attention into the business as you would, unless they are being rewarded with some of the profits or they are a part-owner. The margins are so thin for a flight school it’s almost impossible to fairly share profits with staff and still turn a decent profit.

Complexity creep

I often have discussed with would-be and experienced pilots, the myth that a light twin-engine plane is safer than flying a single-engine plane. While I agree that if one engine fails you have a backup engine, what most people fail to understand is that having two engines increases your chances of having an engine failure by a factor of two. Plus, flying a twin-engine aircraft with only one engine working, can end catastrophically if not handled correctly by the pilot.

The same increase in risk happens when you grow a complex business such as a flight school. The odds of having mechanical issues, delays with weather, impact from economic events are all compounded when your business grows. You now have all your eggs in a bigger basket.

Also your costs  (such as leases and wages) increase to a point where your profit can actually start to diminish, the more complex and bigger your business becomes.

Experienced business advisers would probably tell me that if your business systems are in place this should not be an issue, however with complex machines such as aircraft and a variable such as weather, it doesn’t  matter how great your business systems are, complexity will grow exponentially the bigger you get.

Beware the valley of death

I then had the CEO of a large corporation who I was teaching to fly, advise that most businesses fail when entering ‘the valley of death’.

The valley of death refers to either:

  1. New startup businesses which run our of available cash before they turn enough profit, or
  2. Mature business that try to grow using their own profits and run out of cash flow to maintain the business on a day-to-day basis.

When my three flying schools almost collapsed overnight due to a senior staff member resigning without notice, I was suffering from both complexity creep and not enough cash on hand to both grow the business and maintain the day-to-day cashflow requirements at the same time.

The solution-focus and going sideways.

It finally dawned on me that I had been foolish by not listening the first time to my mentors. I decided to take their advice and over a period of eighteen months implemented some new measures to keep my business alive and thriving once again.

  1. I closed down two of the flying schools and concentrated on my most profitable flight school which was located closest to where I wanted to live
  2. I created a learn-to-fly DVD to sell online to supplement my flight school income
  3. I decided to let go of any staff members who were not performing and did not share my vision for the business and I only kept on the like-minded stakeholders and staff who were as passionate about the business vision as I was

Deciding to focus on the one flight school was the right choice. While my income reduced, so did my fixed expenses.

Being able to focus on just one physical business means I can interact with my staff, customers and stakeholders on a daily basis and put the love and attention into the business that it deserves.

It also allowed me to simplify my business model substantially and the result is that I actually have more time available to work on the business and other projects.

Better but not bigger

The question you should really be asking yourself is ‘how can I make my current business better?’ Rarely does the answer involve the business getting ‘bigger’. Innovation is the vehicle to manage most businesses better, and a better business which is then communicated effectively to your customers will usually result in more profits.

I continually ask myself ‘if I was learning to fly, what would make one school stand out from the rest so much that I HAD to learn to fly at that school?’

Going Sideways

Growing an online business was one of the best pieces of advice I took from my wealthy mentor. Firstly, it enhances your physical business and does not require an increase in staff or physical premises. All it takes is your time to create a quality product that adds value for your customers. It’s basically all upside and very little downside.

Diversifying your income stream reduces your business risk. For instance, just after I created the online ‘Learn to fly’ DVD, my flight school was affected by six weeks of rain. If I had not received the income from the DVDs during that time my flight school would have also gone down the drain.

Partnerships and a good team

The biggest benefit of deciding to grow your business sideways and not grow it in size alone, means you can spend more time fostering your business relationships and growing your team. The benefit of an online business which supports your physical business is that it is easy to partner with other individuals in creating something unique, as all it takes is their time plus you are not bound to any physical location.

Online products – particularly information products – also have large profit margins so sharing the profits with team members is possible.

I have a an absolutely fantastic team who work hard to grow and operate the businesses I am involved with. I have also partnered with some incredible businesses to create new side businesses which support my main business.

An online product

The easiest way to complement your existing business is with an online product – preferably an information product. For instance let’s say you’re a counsellor who owns your own counselling business. You might decide to make a video to help individuals improve their relationships. You could also write a book to supplement your business and offer a free blog through your counselling website. This is just one idea on how you can grow your business sideways with products created by you that will support your existing business. The magic of this type of sideways growth is that the income can be coming in 24 hours per day seven days a week once you have created an appropriate product and marketing strategy. There are hundreds of ways you can complement your business with online products and they could also be physical products that your physical business sells which can also be sold online.

The Better Business

Instead of aiming to make your business bigger, make your main aim to keep improving your business and making it better than it was the previous week. The best way to outsmart your competitor and attract new customers is to keep innovating and improving your business daily. This can be hard to do when you first start out in business and your day to day challenges are to survive another week. However it’s the small consistent improvements that actually get noticed in the long term. For instance, having a memorable or funny email signature might be enough to differentiate you from your competitors and make your customers remember you. It does not have to be a big or expensive improvement to make a difference.

All businesses are different and what is your ‘why’?

You need to ask yourself the question of why you are wanting to grow your business and why you are in business in the first place?

I previously thought bigger was better, and that it would mean more freedom (insane, I know!!).

My ‘why’ for starting a business was firstly to do what I love every day and have excess time to spend with my family and secondly  to have time to work on other projects that I am passionate about. Operating multiple flight schools was clearly not going to accomplish this.

What my sideways business model looks like

My business is always evolving, and currently this is what my sideways business model looks like:

The Main Meal

My main business is still my flight school. It produces regular cash flow week in, week out to cover my basic living expenses.

Side dish 1

GoFly 360, a new venture to replace my old ‘Learn to fly’ DVDs, and which is in 360 degree immersive video. (Check out a free sample lesson here). Income is derived through through a one year subscription. This business has another two trusted shareholders who helped create the product and business model (filming me and editing the footage and sorting out all the IT work behind the scenes).

Side dish 2

Taking Flight TV. This is a reality web-based TV show that depicts a day in the life of a busy flight school. Income comes through sponsorship advertising and the business model has four shareholders that created the product and business model.

Side dish 3

My website, which is an online personal development site that helps individuals and businesses become who they are meant to become, through free blogs and books. Income comes (slowly!) from selling ebooks online.

While the three side dishes are fairly new and could still be considered to be in the startup stage, they all have the huge benefit of creating more awareness of my main business through social media and any one of them has the potential to become a stand out business.

When your side dish becomes your main meal

Hopefully eventfully one of the side dishes will take off and then you have the choice of turning the new venture into your main meal and your current main meal business into a side dish but until this happens you cannot afford to lose focus on my current main meal.

Eighty twenty rule

Once your main meal, or first business, is operating profitably I would suggest you only spend twenty percent of your time creating your sideways or support business that complements your main business. Even if you’re really excited about your new product or venture, limit the work you do to only twenty percent of your time. The reason is simple, if you divert too much of your attention from your main business it will go off course. Lack of focus can kill your business very quickly. Keep focused on your main business for 80 per cent of the time.

What online products can support your physical business and what excites you?

You need to ask these specific questions above, before you start your sideways business. I love filmmaking and flying and knew there was a need for online learning through the use of video so making a learn to fly video was an easy choice.

Be patient and keep creating and innovating

You need to be patient with your sideways plan and keep creating and innovating at the same time. Giving up too early is why most new products or ideas fail. The online 360 lessons have taken almost 12 months to create with my business partners and we have just started to market them. If you’re not willing to invest at least 12 to 18 months on your new product or online business then forget starting.

The time is now

Now is the time to start, not tomorrow, next week or when you have enough resources. Your business may be headed towards a cliff, and branching out to create multiple streams of income is a sure way to ease your cash flow anxieties and an excellent way to grow and protect your business from external forces,

Sideways and better

What I am suggesting is very simple. Creating an online or sideline business that complements your existing business, makes a lot of sense and doesn’t require a lot of risk. Big is NOT always better for your business, while innovating and improving your business IS ultimately what will keep your business surviving and thriving!

My informative blogs are made available to you for free.  To show your support please consider purchasing one of my very reasonably priced online books: How to Discover Your Life’s Purpose or my new one How to Escape the Job You Hate and Create a Business That You Love.

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