All young businesses are defined by an insatiable desire for growth. But there’s a right way and wrong way when it comes to scaling up.
The most dominant companies to emerge from the past decade’s tech boom have proven that healthy growth is all about scaling. By adopting a scalable business model, these firms have generated huge profits without all the budgetary strains that plague traditional growth models.
A replicable system for delivering goods and services allows businesses to increase their customer base without having to increase their overhead at the same pace. By contrast, the traditional growth model has fostered a vicious cycle of inefficiency–a company gains a few new clients, so they hire more people to service those clients, adding costs at nearly the same rate that they’re adding revenue.
Scalable growth is all about pairing exponential revenue growth with incrementally increasing costs. Software companies offer a strong example: once the development stage is complete, they can infinitely replicate their end product and sell to the customer at little or no additional cost to the business.
In short, the more efficient the mechanism for mass production, the more scalable your company will be.
1) Be Proactive, Not Reactive
A business leader’s desire or need to scale a business shouldn’t be entirely based on demand for their product or service. Yes, demand will certainly play a large role in how or when a business decides to scale, but having a competent growth strategy in place from the get-go means that scalability was baked into the company’s business plan long before your customer base really started expanding.
When it comes to scale, an outstanding entrepreneur would think:
I don’t want a lifestyle business–I want a business that has a product or service that’s replicable and could run itself at a very large scale without me being there. And whether there is currently high demand for what I’m selling today versus next week or next year, I need to structure this business in a way that’s highly systematic and not overly dependent on any particular individuals.
Scaling effectively means anticipating demand, not reacting to it. If a company acquires two or three new clients and then realizes it can’t fulfill their demands, their scaling efforts are likely too little and too late.
2) Strengthen Your Foundation
Nothing makes scaling more manageable than a simplified business model. By consistently offering a limited, familiar set of commodities to their customers from the onset, companies can deliver those products or services more effectively, allowing for stable, controlled growth.
Another key component of successful scaling is to ensure that goods and services are delivered systemically. If someone goes to McDonald’s to order a cheeseburger, they can expect an almost identical experience from any McDonald’s, anywhere on the planet. This is a major achievement in scale–keep in mind that Ray Kroc conceived of his assembly line-inspired production system long before there was enough demand to warrant 35,000 restaurants. Kroc exacted the process down to the most minor specifications, including fat content, weight, diameter, and even the number of pickles in every Big Mac.
By emphasizing a universal experience and product consistency at the onset, Kroc was able to strengthen customer loyalty to the brand as he gradually expanded his business. Ultimately, the goal was to encourage and even ensure repeat business based on his system’s reputation, rather than the quality of a single store or person. It was this simple yet infinitely scalable model that allowed the chain to grow into the global behemoth it is today.
3) It’s Okay to Be a Cog
Interestingly enough, one of the best indicators of a successful scalability platform is the de-emphasis of the individual. It may sound a little cold or heartless, but a good measure of a company’s ability to grow indefinitely is how independent it is of any one individual’s input.
This is not to say that hiring and retaining talented employees is irrelevant, but if your business is truly offering systemic services or products, the absence or replacement of any individual team member should theoretically have almost zero impact on the company’s success. Practically every Fortune 500 Company is structured in such a way that even CEOs can come and go without making any difference whatsoever.
People today often have an intrinsic aversion to being just another “cog in the machine,” but any successful company operating on a systemic business platform is going to be set up this way. And if someone is working at an exciting company where they’re a part of something much bigger than any one individual, maybe being a cog isn’t really such a bad thing after all.
4) Embrace the Zen of Business
An aspect of the business world that’s often overlooked is the importance of perspective. People get caught up in specific projects or campaigns, as they should–it makes for good work and happy clients. But sometimes, it’s helpful to take a step back and look at the bigger picture.
Consider, for example, how much a single consulting job moves the needle for a corporation with $48 billion in annual sales. Not that much, right? How about the significant turnover that big, successful companies experience on a regular basis? Success at scaling your business can be a difficult thing to judge and measure.To truly embrace the notion of scalable growth, an ability to see beyond the “self” is a minimum requirement.
Once a company’s systems reach a certain level of sophistication, there are enough built-in redundancies and fail-safes that the company’s collapse is is far less of a possibility. A highly successful business entity can eventually sustain itself, regardless of who is in charge.