A good entrepreneur won’t stop at the break-even point. He needs critical mass where his ratio of profit to revenue is highest. This is the confluence for all his resources, managed skillfully, meet at the point of maximised profit. In sports, it is called the sweet spot.
What’s next after the initial critical mass? There are two crucial points here i.e., the application of resources and skillful and wise management. A second critical mass can be achieved but it will be at the expense of losing some profit margins gain in the first critical mass.
This is due to new fixed and leveraging costs applied towards new capital expenditure and other resources linked to expanding facilities, recruiting, training and retaining talent, etc. Further, management wisdom and skill must go up a few notches to cope with the new business model, which may be an entirely different.
This will lead to the next point.
Contentment and Critical Mass
At each critical mass, the entrepreneur must evaluate whether his contentment is still there or is diminishing. This scaling-up process will exact a toll from the entrepreneur. Mitigating contentment’s diminishing returns will be paying careful attention to synergising the various parts of the business and reaping the benefits of economies of scale.
The ambition to take the business to a higher level is every entrepreneur’s dream. Beyond the dream, it may be the opportunities presented or the competition that are present. The question is how to make it the scaling up worthwhile. Or even asking the question, “Am I willing to pay the price?”
A few essential factors that need particular attention are what I call the four R’s of operating a successful enterprise.
- Human Resource (HR),
- Public Relations, Marketing Communications (PR and MARCOM),
- Back-Room Operations (OPR) and
- Strategic Initiatives (STR)
Detailed understanding and balanced application of these factors will create a symbiotic effect, thus releasing potent synergistic forces that will ensure that the venture will bear fruits and most importantly, contentment.
