Finding Business Isn’t the Problem: Is Scalability Holding You Back?
The reward for a job well done is more sales. Sounds good, right? But, what if that sudden increase in sales means you can no longer deliver the quality that leads to that increase? What if the increase means you can no longer have the cash flow to finance operations? What if the sudden growth jeopardizes your company?
Rapid growth, especially unexpected and unplanned, poses a unique set of challenges. Failure to address these challenges means your company won’t be able to capitalize on the opportunity for rapid growth. Often, it means the company ends up shrinking back down to the original size.
The notion of scaling a business is often thought as equivalent to growing a business. However, they are two different concepts. Sometimes rapid growth pushes a company beyond the brink, compromising resources, reputation and sustainability. It creates vulnerability to problems by not having a strong foundation to support the rapid development. Instead of shrinking back down, the company is forced to cease operations. It becomes a situation of scale or fail.
A significant key to handling growth is to maintain or improve your profit margin, which is harder than it sounds. In simpler terms, improving your profit margin means improving the key points and processes that might be holding you back. You need to take a thorough look at your spending habits, and how you are producing your product or service. As well, you need to examine your acquisition and retention strategies, and any other factors that could impact your production costs. Typically, margins decrease as sales increase rapidly, but you make up for it with volume. The reason comes down to the number of moving parts such as more people, more complexity and more communication. As well as more spending on new equipment, band-aid solutions, and more room for error.
Life was definitely a lot easier back when everyone could fit around one table to discuss the business management in a few hours. Now that your business is larger than what you can comfortably wrap your arm around, you need to take a different approach. Ignore it and you will start a vicious cycle of growing and shrinking as both customers and employees become frustrated and leave. The alternative is to identify your key growth risks and develop a plan to overcome them.
- High marginal costs relative to your fixed costs.
- The ability to grow revenue faster than your increasing costs.
- Reliance on continually adding highly skilled people to sustain growth.
While growth and scalability always seem like the ideal problems to have, they can be as challenging and dangerous as any other phase. In addition, negative cashflow, skyrocketing costs, failing systems and customer satisfaction all require weekly and even daily reporting and monitoring. All of this is new for most companies, let alone the ones suddenly being forced to grow rapidly.
The Keys to Handling Rapid Growth
Right People – Build a team of the right people, who can flawlessly develop and execute a growth-focused business plan.
Right Processes – Set up strong and robust systems, product development plans and business processes. Solution Focused Culture – New issues and challenges come up daily with big growth. That means everyone in the company needs to be willing to look for short term fixes, and also long term solutions.
Make it Simple – Keep the systems as simple and straightforward as possible. Less complexity means less room for error.
Stick to the Plan – Growing rapidly is hard work that will stress people, tools and systems. Don’t make it harder by constantly changing directions. Grit your teeth and keep everyone focused on the finish line.
Clear Communication – Make sure that everyone on the team understands the overall objectives, their specific role in achieving those objectives, and how they are to coordinate with each other.
Clear Leadership – Share the plans and critical business information with your employees regularly (even daily). If they don’t understand and believe in what you are trying to achieve, it won’t happen.
Find Ways to Measure Growth – Openly defining your goals will help you properly direct your efforts toward the things that matter to you and your business. Common metrics leaders use to set growth goals include gross margin, premium accounts, customer lifetime value, and monthly recurring revenue.
Learning how to manage scalability and growth is a sure way for your business to find success. You must have a deep understanding of the inner workings of your business in order to be aware of how much change it can take in a short manner of time. Furthermore, the development of your company is about finding a larger vision and shared purpose, and then executing a pragmatic plan to make those goals a reality for the benefit of all stakeholders. During the season of rapid growth the goal is for you and your team to thrive, not to feel like you’re drowning.
At Evolve Business Group, we are a business coaching, advising and training company focused on the growth and performance for driven entrepreneurs. We work with business owners to help them find how to utilize their period of rapid growth to their advantage. To get started, contact [email protected] for a free consultation today.
