Owners of businesses in the stable profit stage are in a good place as long as the owner and the key people that have worked in the business remain engaged in the business. Once these key people lose interest or leave the business, a stable business is at risk of falling into the stuck or survival stage because the people that kept the business stable are no longer doing what they always did.
The best way to protect a stable business is to hold onto the people that keep the business at a steady, fixed level through the groove of routine and habit.
Overview
Stable business owners like doing what has worked for them because it’s easy and comfortable.
The better an owner’s operational abilities are in doing the work of marketing, selling, producing, managing distribution, and cash, the more likely they are to remain stable if the business is as big as the owner wants it to be. Because they like how things are, they aren’t looking for things to change. Their time spent in the business is predictable because those working in it know what to do and when. The good news is that there are many things done in the business without the owner because the owner delegates supervision to a small number of long-term employees.
Stable business owners are good at generating enough cash inflows with a dependable cash reserve to cover their cash outflows without worry. The primary reason for this is that they carry very little debt. Their sales challenge lies in over-reliance on a steady base of customers who have bought for years. Lose a couple of these steady customers and business becomes more difficult overnight.
A stable business owner will look at their P&L Statement monthly to see how much net income was reported since the owner has a good feel for when the business is going well, and when it’s not, they aren’t likely to use metrics or have a scorecard. A look at the Balance Sheet will show Owners’ Equity is eroding as the owner takes more draws with very little debt and high accumulated depreciation.
Businesses in this stage will employ ten to thirty employees with a salesperson, operations manager, and accounting clerk. Management is centralized by the owner to a select few employees. Their accounting clerk is good with QuickBooks Premier, and the operations managers have some homegrown processes for tracking production orders.
Because the owner is comfortable doing what they do and isn’t looking for more headaches or hassles, they are likely to remain stable as long as those who work for and buy from them remains consistent. Lose a key employee or a few key customers, and a stable business can become unstable.