It’s every entrepreneur’s dream to scale his or her business, and for good reason. If you can scale effectively, you can tap into a vast amount of potential that would remain out of reach if you were limited to mere growth.
Scaling starts at the end. Once you envision the next decade or more and decide where you want your company to be, you can start to create a roadmap for getting there. Unlike growth, where increasing output requires a proportional increase in input, scaling is all about boosting efficiency. In order to scale, you’ll need an intimate knowledge of your processes so that you can spot opportunities for improvement.
At the same time, focus on working on your business instead of in it. That means connecting with the right people who can help, whether they’re providing funding or consulting. These people and your own research will help you come up with a plan tailored to your company’s specific circumstances.
You doubtless have plenty of items on your to-do list to help you achieve scale. But remember: What you don’t do can be just as important.
- Don’t water down your product or service.
It was 2007, and Starbucks had hit 13,000 stores — fantastic growth for the brand. So why was CEO Howard Schultz disappointed? According to Schultz, the company had made well-intentioned decisions to promote growth that nevertheless contributed to a “watering down of the Starbucks experience.” In other words, the laser focus on growth had caused quality to slip, and the brand’s differentiators became less pronounced as a result.
“Companies grow well and scale badly when they focus on running up the numbers but not the quality. They get bigger and start to look like just any organization. And there goes the value,” explains Stanford management professor and business author Robert Sutton. If you want to achieve scale, you need an uncompromising focus on quality.
One of the best benchmarks to measure? Your churn rate. A high churn rate is an indication that your product or service is optional to customers. Even if they like it, they quickly move on. A low churn rate means your customers can’t get along without you. To scale successfully, work on maintaining quality and keep an eye on your churn rate as you do.
- Don’t forget about people.
No matter how large your organization gets, you can’t lose sight of its most important building block: people. Cut complicated bureaucracy wherever possible. “You can also increase your company’s lifespan by streamlining organizational structure. That means creating and communicating clear connections between people across all levels of the organization,” says Kerry Stover, COO at management consulting firm Pariveda Solutions. From employees to executives, everyone should know whom they can turn to for help with problems or processes.
In addition, eliminate secrecy when it comes to promotions, creating distinct paths for junior employees to follow if they want to take on increased responsibility. When senior leaders retire or leave the company, there will less disruption with clear successors to take the reins.
As you scale, maintain this considered focus on organizational structure. According to Oxford University anthropologist Robin Dunbar, everyone has a magic number of people (about 150) that they can maintain meaningful contact with. Keep this guideline in mind as you plan out your growing teams and leadership structure.
- Don’t get ahead of yourself.
Scaling effectively takes the right combination of ingredients, and trying to scale without them all can have lasting consequences. Money, of course, is essential for acquiring new technologies, making new hires, and launching new marketing initiatives. When looking for investment, make sure the proposal is a good fit.
Ask yourself what your investors bring to the table besides their money. Without the check, would you be pursuing their expertise? For example, Cali’flour Foods, a business conducted primarily online, recently accepted investment from Sunrise Strategic Partners, which focuses on supporting healthy, active, and sustainable living brands, specifically to help spur sales in retail grocery stores.
It’s also vital to maintain a sustainable pace in terms of geographic expansion. LinkedIn started out with an emphasis on finding success in Silicon Valley. The first week after launching, the company had 12,500 users, but slow days early on saw as few as 20 new signups. Instead of panicking, company leaders stayed the course and focused on achieving critical mass among its tech community audience. One year later, LinkedIn had half a million users, and the company achieved profitability in another two years. Scaling is important, but don’t let outside factors dictate the pace.
There’s a reason achieving scale is on every entrepreneur’s list. Growth is great, but it also comes with an increase in work that may or may not be feasible in the long run. By keeping quality, your people, and a sustainable pace in mind, you increase your chances of scaling effectively — and unlocking a better profit margin as a result.
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