The Tip of the Iceberg

We deal with lots of entrepreneurs and start-up businesses, every day. Out of all of those interactions we notice one common challenge they all face at some point. All businesses experience problems and sometimes they are just ordinary everyday problems. At other times, they are like the tip of the iceberg and signal a need for significant and dynamic change. The trick is spotting the tip of the iceberg and understanding which is which.

We’ve noticed that every business has a natural limit up to which things operate comfortably. The limit is particularly noticeable in start-ups which usually involve a significant investment of either time, capital or both. Those needs tend to stabilize once things get up and running and the business settles into a rhythm. There are always problems along the way but in this phase, things are generally going well and the business is humming.

Some businesses grow faster than others and the faster the growth, the more quickly the natural limit of what the business can achieve is reached. At the limit, the rhythm becomes less predictable, cracks begin to appear and problems arise. The question is, are these the ordinary every day type problems or do they signal the need for more radical change?

From the entrepreneur’s perspective, the ‘problems’ in this phase often seem inextricably tangled and circular. For example, there may be cash flow issues but the business may not be able to generate more cash without first increasing sales volume. In order to increase sales volume, it must first increase costs thereby placing a heavier load on business cash flow. It’s chicken and egg, what to do first? And the business owner feels like they just can’t do it all themselves.

The temptation is to view these individual ‘problems’ in isolation and the natural reaction is to simply try and fix each individual ‘problem’. However, these ‘problems’ are often actually symptoms. Like the tip of the iceberg, they signal what is beneath the water. The business has reached maximum potential and to go beyond that, exponential change will be required before it can leap forward to progress to the next stage of development. There is often also a change in perspective required from the owner. The key point is that the degree of change required is often bigger than the sum of the resolution of the individual ‘problems’, and this can be cause for apprehension.

In our experience, those businesses which identify the need for change and make this leap of faith invariably move on to a new phase of exponentially greater growth than before. In contrast, those entrepreneurs that fail to confront the need for change and make the required leap often find their businesses stagnate and plateau. Some may even fail to identify the tip of the iceberg at all, far less negotiate a path around it, which often leads to inevitable consequences….

Separating every day ‘problems’ from the tip of the iceberg can be difficult and challenging. Our role as business advisors is to help you move forward.

Dean Johnson. Partner WLF Accounting & Advisory