There isn’t an entrepreneur alive who isn’t thinking about how to grow their business. I mean after all, entrepreneurs turn ideas into businesses and grow them, right? Growth is necessary to realizing a big vision. Besides, you need growth because otherwise your business is dying. Growth is good and growth is necessary, however exponential growth through scalability is better. Much better. Scalability is a characteristic of a business that’s not only growing, but evolving at the same time. The good thing is that positioning your business for the capacity to scale is something that’s never too late to start.
How are business growth and scaling a business different?
Business growth essentially means increasing revenue, which also includes an increase in costs associated with achieving that revenue. Gaining more clients, for example, means more revenue, but it quite possibly also means needing more staff to serve those clients and achieve deliverables. In the same vein, bigger events can mean increased revenue, but they also mean increased costs.
Scaling, on the other hand, means increasing revenue without increasing costs, or increasing costs incrementally. Developing software and selling it millions of times. Increasing plant to permanently increase production. Developing a virtual event platform that significantly reduces the cost of each event as well as the capacity to host more events … which all boils down to effectiveness and efficiencies.
Replicating what’s already working and doing it over and over again is a good strategy for growth, but scalability requires something more. Identifying and maximizing efficiencies within the business is an evolution from growth to exponential growth. Baking it in means thinking about your capabilities and resources for growth in a different way.
Effectiveness is knowing what to do
Knowing what to do is determined by understanding the needs, desires and problems to which your customers are looking for solutions.
When we think about effectiveness in terms of growth, we think about how many ways we can solve the problems of these people. That might mean thinking of different service offerings, different resources, different events etc to solve different presentations and stages of the same core problem.
The question, ‘How can I serve you?’ is at the core of achieving effectiveness for growth. If I can serve you well, there will be more like you and serving more means growth.
Thinking about effectiveness for scalability, therefore, could be asking …
- How can we reach more people like this, where the cost of doing so is significantly less than the lifetime value of that customer.
- How can we re-position the same offerings to different market segments, where the same product or service can be positioned to another market segment with little cost and change to the existing product or service.
Efficiency is is doing things better
If effectiveness is knowing what to do, then efficiency is working out how to do it really well.
Efficiency is where refining and replicating a process to achieve an outcome comes to the forefront. It’s when we decide that we’re happy with what we do, but we want to make it better. We focus on cutting out the fat, make that process sleek and repeat it again and again. That’s efficiency for growth. Efficiency for exponential growth however, asks how we can standardize these processes and apply them to other products and services. Scalability says, if we’ve achieved efficiencies here, how can we exploit those efficiencies in other areas of the business and for different products, different services?
Effectiveness and efficiency are ongoing pursuits – they form the foundation of anything worth scaling in the first place and are key to being able to scale effectively. Visionary business leaders and entrepreneurs become adept at thinking about how they can continue the growth of their business without ever-expanding costs and without becoming dependent on individuals, including themselves.
Simplicity is the friend of scalability
Although it may seem counter-intuitive, the most successfully scalable businesses are those with simple business models. By focusing on limited products and/or services and offering them well, your position is increased for both effectiveness and efficiency, and therefore scalability.
That doesn’t mean we can’t serve different market segments, or expand our customer base, but it does mean being able to do so without tandem cost increases. In other words, a simple business model allows revenue increases without the increased costs of offering completely different products and services.
Automation and standardization for scalability
Automation is about using technology to do things that aren’t required to be done manually. The goal of automation is to enable a company to do more with less, hence its contribution to efficiency, however cost reduction is not the only consideration. The reason automation contributes to scalability is because;
- Human resources can be better directed towards things that humans do best and which can’t be replicated by technology
- Speed – because technology can be faster than humans
- Accuracy – more precise than humans
- Consistency – less fickle than humans
Standardization is a precursor to automation. Establishing standardized processes means they become;
- repeatable and therefore improvable
- delegatable & not dependent on individuals
- may be automated in part or fully
Creating standardized processes for every aspect of your business from the beginning is critical to being able to scale sooner because they reveal the opportunities and the framework for efficiency.
The right team for scaling your business
A founder’s vision cannot be realized without a team to work toward that vision, so even if a founder started out flying solo, the sooner they are able to develop and delegate some of the standardized processes, the sooner they’ll gain traction to scale. And building the right team is critical in ensuring the business continues to grow and evolve.
Hiring people who can do the job is obvious, but equally, if not more important is hiring people who fit the culture and understand the vision. You need people you can trust and you need your people to trust each other. Connection within a team working toward a common goal is electric and is built on a diversity of backgrounds, shared values and competent skill sets.
It also stands to reason that when you’re scaling a business for growth, you not only need people capable in their role today, but in whatever their role will look like in 2-5 years time. Your vision, an ability to articulate that vision, and an understanding of how to get there will go a long way in being able to attract and hold onto the ones that will play a significant role in making your business scalable.
A leader that works on the business as opposed to in it
With the right team in place, a leader can step back from the detail and transaction of daily business and focus their talents on strategy and direction. That direction, no matter the type of business, who they serve, or the products and services they produce, should be geared toward developing a set of systems and processes, guided by strong values and company culture, that is not dependent on any individual for its long term sustainability.
Working on the business means tending the vision, refining the strategy, networking, researching, developing ideas, defining the who and why of the business rather than what it is, identifying new markets and new opportunities. When leaders focus on these things, they enable and empower their teams to do the work that they do best for the best result. Leadership is about guidance toward a vision and when that’s done well, everyone is empowered to contribute. Contribution toward a shared vision fuels scalability.
Community and scalability
While scaling requires efficiencies and effectiveness through standardization, sustainable scaling for the longevity of the company also requires the ability to identify, adapt to and harness new opportunities as the landscape changes. This is one of the reasons that developing a community around your business is critical. It’s through these communities that we can learn how the landscape we serve is changing and how we continue to understand the role we play in its future.
Through the community we build around our business we can understand who our company is and how we show up to the people that matter. In community we have a mechanism for understanding the needs and the problems they face and through relationships can develop the best solutions. Community is a portal for understanding how to adapt and stay relevant – key to the evolution of a scalable business.
If your vision includes leaving a legacy, of building something that is not dependent on you, or any other individual for that matter, then thinking about business growth in terms of scalability is the way to go. The really beautiful thing about it is that because it’s based in continual improvement and evolution, it’s never too early or too late to start. Small efficiencies today can mean scalable, exponential growth in the future.
About the Author
Kathy Rasmussen is the Cofounder and Artistic Director of Badassery Magazine and Cohost of Badassery Podcast. She’s passionate about giving entrepreneurs the tools they need to follow their dreams and live a life of happiness and purpose.