Do you want to scale?
Before we dive into where to start when scaling a company, let’s have a closer look at a very foundational question: Do you actually want to scale? In today’s business world, you often hear that growth – ideally, rapid growth – is the only way forward. Well, that’s not true. Many business owners are perfectly fine in the spot they are in and enjoy the time they have with their families. Check out our article about the things you need to stop doing if you want to scale your company. If you are willing to do (or better: not do) all those things, you are ready to scale.
Set strategic direction
MISSION
First of all, if you want to scale, you have to know how you want to do that. Start with writing down the mission statement of your company if you haven’t done that already. The mission statement will give yourself and your team clarity over what it is you want to achieve.
MARKET AND CUSTOMER
Secondly, you want to define the markets which you are aiming for: Who is your target customer, what are their attributes, where are they et cetera. There is a great variety of tools out there. Just google “strategy tools” and you’ll find the evergreens like SWOT, Porter and many more.
HOW YOU PLAN TO WIN
Thirdly, and this is where it gets even more interesting, define how you want to win. Why will the target customer in the target market buy from you and not your competitor? What set’s you apart?
YOUR GROWTH TARGET
The fourth step is to define a growth target. How much do you want to grow? What is a challenging but realistic number, considering the above? No matter if you define it in % or $, be sure to make it as specific as can be.
OBJECTIVES AND KEY RESULTS
With these four things (mission, market, competitive advantage, growth target) in mind, I recommend setting a maximum of three objectives per quarter. This is what you focus your energy on; this is what gives your team direction. Leave it at three; everything more will dilute your focus. The objectives should aim at closing the gaps you have to accomplish your mission in the defined market. An objective should be measurable. It could read like: “Sign four new clients from the health-tech industry with a contract volume of at least $10,000.” Whatever would bring you closer to achieving your mission is a good objective. Make them challenging.Next up, you can break these objectives down into Key Results. Key Results will tell whether you’re on track to reaching your objectives or not. They should be even more measurable and should be clear steps towards achieving your objectives. The above objective’s key result could read: “Cold-call at least 10 potential clients per week” or “Acquire at least 100 qualified leads by building a sales funnel for health-tech”.A great resource for using this model of Objectives and Key Results (OKR for short) is this video (a bit lengthy, but well invested time if you’re really interested in the topic).
People
For sure, the most critical aspect of your company to embark on the scaling journey. Why? Because a great team will be able to fix a broken business model or complicated processes as you grow – a not so great team will be able to perform badly with the best tools and procedures in place.
THE RIGHT PEOPLE
The first question is, do you have the right people to scale your company? Well, who are the right people? There are some general and some specific attributes. In general, you are looking for hunger for success, the ability to navigate in uncertain environments and the willingness to continually question the status quo. Specifically, you will need certain funtions and capabilities to support your “How will we win” dimension of the strategy. This is unique for your strategy: If you plan on doing a lot of sales call, you need world-class callers. If you plan on increasing existing client accounts, you want to make sure to have an excellent account manager or relationship builder.
THE RIGHT RESOURCES
No matter how good your people are, they might not have all capabilities yet needed when you start to scale. Share your plans early, discuss your strategic approach, and ask your team what they need to support and drive that effort with full energy. Things that might come up are specific pieces of training, certifications or tools (see below) that you can provide to facilitate their adapting to the changing environment.
THE RIGHT PEOPLE MANAGEMENT AND RECRUITING
As you grow, your HR processes must become more sophisticated. Today, you are probably doing most people and recruiting tasks yourself, or someone in your company does them with a few hours of their time. This won’t work as you scale – you want to build a system that can still function even if you have to hire 5 or 10 people at a time. Give these processes a proper thought. Also, lay out potential job profiles you might need during your growth period. If you, let’s say, are already at the maximum capacity of what your purchasing team can handle, be prepared to hire new purchasing managers.
ALIGN YOUR TEAM BEHIND THE MISSION
The most important thing you can do before starting to scale is to make sure your team is on board. What does that mean? If your team makes your mission their own and takes ownership of your growth targets, this will be a huge boost for your scaling efforts. Try to convey the purpose and a ton of emotion when swearing your team in on the growth spurt!
Processes
The way you run your business ideally is tailored to your current sales volume. Now that you are about to scale, you need to assess your processes regarding their capacity.
Can they handle 10 times the throughput?
The result might be “no”; it might also be a “yes but”. Identify the bottlenecks (hint: it’s often approvals, manual intervention or no clear responsibilities that cause bottlenecks).
AUTOMATION VS ACCOUNTABILITY
We mentioned this in several blog posts: Try to resist the reflex to blindly try and automate everything. This will, in many cases, not be the solution. When you scale, you instead want to make sure that you have crystal-clear responsibilities for each and every process and process step. This will make sure that all important areas of your operation are taken care of as you grow. Nothing wrong with automation, but it won’t save you from building a proper organizational structure.
Tools
The starting point here is the same as for the processes: Are your tools able to handle 10x the volume of tasks?
SOFTWARE
For many spreadsheet-based workflows, the answer to the above question might be no. Think about your critical processes, which tools they use and consider investing in software solutions to replace instable spreadsheet- or email-based workflows. While doing that, try to keep complexity in check.
MEETINGS & COMMUNICATION
Even more important than your technology stack is your meeting and communication structure. Why? Because when you scale, there will be much dynamic change within the company. The task-related maturity of your team decreases as the tasks change. Naturally, the demand for exchange, coaching and consulting in your organization will grow—schedule 1-to-1 meetings with your team members (or direct-reports) at least weekly. You might not need that now, but you will when things start moving. Also, ensure that each part of your company has weekly team meetings in place. You might also want to consider daily standups. Lastly, review your strategic decisions consistently every three months with your leadership team.
Finances
Before your start scaling, you probably will have thought already about your finances. Can you pay additional employees until the revenue comes in? Can you afford to buy more inventory to increase sales? Can you buy more outsourcing capacity to satisfy customer demand?
CASH DEMAND
Take your growth targets and multiply them with your current cost structure as a baseline. Don’t incorporate any economies of scale yet – it will take time to clean up your processes and cost structure during or after scaling.Build a cashflow planning covering at least the next three months to make sure you’re not running out of cash while you scale. Update it regularly.
ADDITIONAL RESOURCES
Growing will cost you money, there are different ways where that money can come from. You might consider selling equity or taking on a loan. A more operational approach is to decrease the time it takes until you get paid and, on the other side, increase the amount of time you have before you need to pay your vendors. In B2B, both those things might require negotiation. In B2C you can consider changing payment options for your product or service to speed up cash-in.
Now, get those clients
Having considered all those factors, go get these additional sales. There’s enough info out there on how to do that. Just don’t forget to prep your company for additional revenue. The above is a great starting point.
Happy Scaling!
Best
Benjamin