Here are the keys to achieving sustainable growth.
By Charlene Clark, IFM
The concept of scaling a business is not interchangeable with growing a business.
Consider this scenario: You are experiencing exponential growth, revenues are up, work is pouring in the door and you decide to hire more people. You and your team work longer hours, but it is still not enough. Deadlines are missed, quality decreases, customers are upset, your employees are stressed out and they start to quit. The reality is that your business may be growing, but it is not prepared to scale.
Scalability means having both the capacity and the capability to grow your business in a reasonable and sustainable manner. It means having a long-term strategic growth plan as well as the foundation, systems, infrastructure and human resources in place to support scaling your business.
There is no magic bullet for scaling. The still-relevant 2002 Harvard Business Review article “Why Entrepreneurs Don’t Scale” identifies four management tendencies that make it difficult for entrepreneurs to grow their company:
- Excessive loyalty can prevent you from making staffing changes necessary to grow. Make sure you have the right people in the right seats on your bus.
- Emphasis on short-term task orientation can cause you to lose sight of your long-term goals. Staying focused on creating and executing a well-developed strategic plan will move your business forward.
- Single-mindedness can limit your company’s potential as it grows. Seek out the opinions and ideas of employees, colleagues and peers, both in and out of your industry, to enhance and broaden your perspective.
- Working in isolation can stifle growth. Establish symbiotic partnerships and relationships that will empower you to dig deeper and think bigger.
- Scaling your business requires dedicating more time working “on” your business than working “in” your business. It takes time and it takes effort. Consider that time an investment in your future.
A strategic plan ensures that your business is headed in the right direction and can support long-term, measured growth. It is your road map to success. Begin by assessing where your business is today. Be honest and realistic about your strengths, weaknesses and areas of opportunity. Determine where you want your business to be next year, two years out and three years out. What will your business look like? How will you get there? What resources do you need? What are the potential roadblocks to achieving your goals?
Start with a vision
Your vision is what you aspire to become and where you want your business to be. Your vision should clearly define your company and, most importantly, its future. Do you want a successful business or just an expensive hobby? Your vision should clearly lay out your purpose and what you want your business to look like three years from now. Brainstorm ideas on how you will reach this vision. High-level ideas are fine at this point, such as “upgrade website” or “delegate more”—don’t filter out too much in this stage. Next, look at these high-level ideas and begin to label the ideas as short- and long-term. Label each idea with Year 1, Year 2 or Year 3 depending on when it can have the most positive impact or is the most feasible.
Set SMART goals
Goals convert your vision into action. These are the steps you will need to take to achieve your vision. To be effective, goals must be SMART—specific, measurable, achievable, relevant and time-bound. For example, “I want to make more money” would become a SMART goal if it were stated as, “I want to make $500,000 in gross revenue with a 25 percent profit margin next year.” SMART goals will hold you and others involved accountable and should always be in writing. Goals should always lead back to your vision. For each goal include:
- The “measurement of success”—the benchmark to keep you on track.
- A realistic time frame for execution and completion along with milestones that may need to be built in along the way.
- Who is responsible?—Your name cannot be next to all the goals.
You will need to delegate to scale effectively.
- Financial impact, including the projected ROI in terms of revenue growth, expense reduction and/or net profit gain.
Scaling a business requires smart, calculated financial investment. Your strategic plan may call for hiring staff, adding new technology or equipment, or expanding your facilities. It is helpful to identify funds to accelerate growth such as a loan or a line of credit to draw on. When approaching potential lenders, show them your strategic plan and be prepared to explain how your business will be able to scale, including measurable goals tied to profit and revenue along the way.
In addition, a good cash flow analysis is perhaps the single most important piece of a strong plan. All strategy, tactics and ongoing business activities mean nothing if there is not enough money to pay the bills. Make no mistake: Profits are not the same as cash. Profitable companies can run out of cash if they don’t know their numbers and manage the cash as well as the profits.
A strong foundation
A building will not remain standing if it is set upon a weak foundation. Effective scaling requires the existence of strong internal processes and seamlessly functioning operations. Establishing a framework of processes, standards and systems that work when your business is small will provide a solid core as you grow. Admittedly, compiling all this data can be daunting.
Companies such as Trainual (www.trainual.com) provide easy-to-use templates and formatting to help you build a “PlayBook” for your business. At Signature CanvasMakers, we use Trainual products for onboarding new employees, training and testing, and for housing all processes, standards and checklists with written instructions, videos and pictures. This provides an adaptable, updatable and accessible location to house our corporate knowledge for our team to reference.
Build a team for the future
A prerequisite for scaling is having a strong team. Turnover is expensive, particularly for a small business, in terms of lost productivity, so hiring the right person in the first place will save you both time and money. The team that you are building, however, is not just about your employees. Align yourself with external suppliers, partners, colleagues and other outside organizations that will support you in your growth. The community that you build around you will strengthen your foundation and bolster your leverage.
Learn to delegate
If you have built a strong team, you should have enough trust in it to delegate many important tasks so that you can work “on” your business instead of “in” it. As a business owner, you may find it hard to let go of tasks, as you want to feel like you have a handle on every aspect of your company. To effectively scale, however, the business must be able to thrive without you “in” it. What are you doing that someone else on your team could handle?
Learning to scale is not impossible, but it may require you to change what you are doing and how you are doing it. When you strategically align your vision and goals and set the foundation for long-term, sustainable growth, scaling will become easier. Don’t just predict your future, create it.
Charlene Clark, IFM, is the CEO of Signature CanvasMakers in Hampton, Va.