3 Key Factors To Scale A Business

Business Scaling Principals:  Sail and Scale with Bruce Croxon

During a discussion with Bruce Croxon of Round 13 Capital, Warren Patterson and Bruce reviewed the key factors that contribute to business growth and scaling success.  These factors are what investors typically look at when considering adding funding to accelerate scaling a business.

The term “Scaling” for business is often referenced in the technology industry, especially software companies.  “Growth” is typically referenced in traditional businesses.  But, there’s no reason why a traditional business can’t pivot to working on scaling vs growing their business in a similar manner as a software company.

To understand the statement above, let’s dig a bit deeper on the differences between these terms.

Growth:  This evolves on a linear trajectory.  If the company adds new resources such as people, money, or technology, the expected result will be increased revenue.  It’s a bit of an input/output effect and bullying your way into more revenue.  

The downfall is the increased responsibility and stress involved with keeping up with this model.  The results will almost always be increased revenue, and possibly predictable amounts of increased revenue, but you become dependent on the inputs to get the desired outputs.

Scale:  The act of scaling involves exponential revenue increase without a significant increase in resources or investment.  To get to the scaling stage of a business, it must first experience growth and determine what makes growth happen.  The benefit of scaling a business is the ability to decrease involvement in day-to-day business operations by adding efficiencies.  Getting more done in less time resulting in greater revenue is the critical piece to scaling.

Growth vs Scale

Graphic Credit: https://visible.vc/blog/scaling-growth/

Whether you are new in business, have a few years under your belt or are a seasoned business owner, these 3 factors are always the base of what’s necessary in order to consider scaling your business.

The 3 Key Factors To Scale A Business

1. People.
2. Predictability.
3. Process.

The People

When you consider people as a factor to scale a business, it’s important to understand it’s not about the quantity of people, it’s the quality of the people you have. Your primary question to ask yourself when considering scaling your business according to Bruce Croxon in the “Metrics That Matter” video below from the “Sail and Scale” series is:

“Do I have the team to go the distance?” 

What does this look like…

If you are a smaller business that still needs to be a bit scrappy to get the job done, do you have people in place that are able to think outside the box?  This type of “start-up” environment is where your people aren’t looking for a job description, instead, they’re asking “what can I do to help”, or better yet, they are observing what is going on around them and taking the initiative to mitigate the next challenge.

These are the types of people that can think at a higher level, see the vision, observe the data, and make strategic decisions on what needs to happen next to progress to the next level.

If you are a medium to large sized business, you will most likely have a leadership team built up which you rely on to ensure they have visibility into the performance and productivity of people.  Medium to large businesses have more challenges to the “People Factor” because there are increased dynamics in the workforce and less visibility into day to day activities.

As your organisation gets larger on the human resources side of things, you become less agile to fit into the scale model vs growth model.  This doesn’t mean it’s not possible, it’s just a bigger ship to steer and manage.

Predictability

Before reaching the point of scale, there is growth any size of company must go through.  This growth feeds the information needed to “know your numbers, understand the value of each customer, and forecast the future based on these.” as stated by Warren Patterson within the “Finding Clarity” video from the Sail and Scale series with Bruce Croxon.

Without known predictability of customers or value of a customer, it’s not possible to project into the future growth and determine what measures are needed in order to switch from the “growth model” to the “scale model”

Data should always be the driving factor behind all business decisions.  Without data, there isn’t a way to be sure what the cause and effect is of each action taken.

For example, customer acquisition.  How does this happen?  Can you say with a degree of certainty based on data that 1 out of every “x” prospects will become a customer?  If not, why?  What is the reason for one person to become a customer and not another?  Once you know that decision point, you can, with confidence, perform customer acquisition with intent and predictable results.  This example alone is just one example of being able to use predictability to scale a business.

When you are able to minimize or control your costs and have a high degree of predictability around customer acquisition, scaling is simplified...it just turns into following a formula.

The Processes

Processes are the connector between the people and the predictability that facilitates scaling.

Within the scope of processes, there are 4 steps required to scale your business.

1. Understanding the current processes in place
2. Identifying their success gaps
3. Automating the processes as much as possible
4. Iterating on the process

Most businesses will find they have some very loosely defined processes, but nothing that can be considered repeatable….this is very common for smaller businesses but is still surprisingly prevalent in medium to large businesses.

If you find you are in a position where there are not any real processes defined and being implemented, this is a place to start building and planning on how things should be done and flow.  By doing this you can predict how different areas of the business will interact with each other as well as understand how tasks within a business unit should flow.

When processes are defined, there is often room for improvement.  By objectively observing and walking through each process, you can ask why things are being done the way they are and if there’s a better way to do it.  By going through this exercise, you will start identifying redundancies and opportunities for automation.

By implementing automation for processes, you hit the key part of the definition of “Scale”...the ability to decrease involvement in day-to-day business operations by adding efficiencies.  Automation through technology can reduce the requirement for staff, reduce errors in work, improve customer service and customer experience which can then end up in increased customer retention and more sales.  This is just one scenario of the path automation can take, there are many other business paths this can impact and follow as well.

Interestingly enough, the core business of OrderEase is item #3 in the steps required to scale a business, which is automating the processes.  By reducing the manual effort required by retail customers, sales people, and order desk personnel, the process of placing orders to a wholesaler by a retailer is significantly reduced.  Some would say it can reduce this process by more than 90%!  All by simply creating a digital source for wholesalers to host their catalog information and pricing which can integrate into business systems for the wholesaler and POS / eCommerce systems for the retailer.

By solving the problem of automation, you position your business on a fast-track to scaling with a lower investment cost into your business vs just growth on a linear path requiring the “add more to get more” mentality.

And the last point of scaling within the processes is iteration.  When something is consistent and repeatable, you can expect the same results time and time again.  Output is as powerful as the input and it was best said by Albert Einstein:

To learn more about how OrderEase can help you automate your business processes and position you to scale your business, contact us today.