Five Steps To Scaling Your Business
We will focus on the big-picture concepts of scaling your business beyond yourself. We’ll ask some critical questions that we hope will let you re-define the way you think about your business and yourself now and long into the future.
The steps we’ll discuss are:
Step 1: Create a Focus
Step 2: Lead Your Way Out Of Your Business
Step 3: Define Your Values and Vision
Step 4: Understand Your Metrics and Financials
Step 5: Right People, Right Position, Right Culture
Bridget will be coming at the topic from someone who has experienced these steps from the inside, where Heidi will be commenting on how Moyer Group has used similar techniques to scale.
Ok -so we've actually realized there are some interesting contrasts between Heidi and Chris's organization and ours. We will definitely be discussing these and why we've made the decisions we have.
My hope is that we'll get a mix of people;
- who are thinking about how to scale.
- who are in the process of scaling.
- who have decided NOT to scale - or only to grow so far.
The starting point for almost every scaling methodology I've learned is "Good To Great" by Jim Collins. It's dated now, but the concepts are still spot on. Others since then have been "Scaling Up" by Verne Harnish and "Traction" by Gino Wickman.
One concept to bring to the conversation - what are you "Great" at ? I used to say I was a "FileMaker Generalist" which meant I could consult with any business and build a FileMaker solution for them but I wasn't great at any one thing and often went into a new client blind regarding what they did and how we would build a system for them. Sometimes this was a good thing and lead to new insights based on my previous experience. However from a marketing and sales perspective, this makes it almost impossible to differentiate yourself in any marketplace. We've learned this lesson and we've made changes based on this with more to come.
What's your vision for your future in 10 years... ? In 3 years ? In 1 year ?
Many books have been written on creating a reality by having a vision - a "vivid vision" of what it looks like and then making it happen.
The original came from professors at University of Michigan, then from Ari Weinzweig of Zingerman's Deli fame and more recently by Cameron Herold. I encourage you to take a look at Cameron Herold's book if you have time and consider coming up with a vision of your future with scaling in mind.
Why is "Culture" so important ? What does it mean to even have one ? Would you fire someone who was doing a good job but wasn't a cultural fit ?
When we talk about "Right Person THEN Right Seat" we'll discuss why a cultural fit is so important and provide examples of how bad it can be when someone isn't a fit vs. when you have everyone in alignment with your culture.
This presenation will NOT focus on getting from "You" to "You +1." Others are far more expert at that than I (@MollyConnolly for more on this) . Instead the goal is once you've done that - how do you scale beyond this. Specifically what does it take to get you outside being "in" the business so you can work "on" the business.
Financials... yuck!
When we started our growth plan, I couldn't tell you the difference between a P&L and a Balance Sheet. Heck, I didn't even use an accounting package ("why should I? - I can invoice out of FileMaker!"). What a difference a couple of years have made. We'll review - briefly - what the point of having good financials are and spend more time on how this lets you define your most important metrics and -critically - your profitability.
Financial Risk — Too much, too little, just right?
Risk, from a business dictionary: A probability or threat of damage, injury, liability, loss, or any other negative occurrence that is caused by external or internal vulnerabilities.
Consider how much financial risk are you willing to take in order to scale your business? By purchasing new businesses? By partnering? By hiring?
Some quotes to consider:
"I have a perverse attraction to risk. Not physical risk but emotional, financial risk - anything than can't kill you immediately." Scott Adams
"The most important word related to risk in my mind is "discernment."" Anonymous
"Optimistic people play a disproportionate role in shaping our lives. Their decisions make a difference; they are inventors, entrepreneurs, political and military leaders - not average people. They got to where they are by seeking challenges and taking risks.”
Daniel Kahneman
Leading your way out of your business is in some way the biggest risk we'll discuss. It's hard to teach someone to do something instead of just getting in the trenches and doing it yourself. Hard to give up the customers you've had a relationship with to someone else in your team. Hard to transition out of what you know you're good at into something - leading others - you haven't done before.
We'll discuss why "getting out of working IN your business so you can work ON your business" is one of the first steps involved in scaling.
Many small business owners, dare I say most, own a job rather than owning a business.
Dan mentioned the book Good to Great, which is, well, a great book, but probably would not be the first you should read. I recommend small business owners on their journey to working on their business, rather than owning a job is E-Myth by Michael Gerber. (Link below)
With much trepidation, in December 2009, after a few years of procrastination, I removed myself from the day to day operation of my business. Certainly, I thought, it would probably destroy what I had built. But to achieve other goals in my life, it was the only choice.
Instead of realizing my fears, the company has become immensely more profitable.
How could this be? We were forced to become metric driven. We also implemented a monthly bonus system that keeps key staff members rowing the boat in same the direction I wanted the business to go. Some months their bonus equals their base pay. A good book to read on employee motivation is Maverick by Ricardo Semler.
Reading list (Note that I find both books as relevant today as they were when they were written in 1995)
E-Myth
https://www.amazon.com/Myth-Revisited-Small-Businesses-About/dp/0887307280
Maverick
https://www.amazon.com/Maverick-Success-Behind-Unusual-Workplace/dp/0446670553/
When speaking to Dan, he mentioned he saw a TED talk by Ricardo Semler. I watched it today. Well worth the 21 minutes spent watching it. The book, though is a better starting point for designing your company.
Our company does the "test drive" interview - before you are hired, we have you come in for a day or two and try out the job.
https://www.ted.com/talks/ricardo_semler_how_to_run_a_company_with_almost_no_rules
Just to summarize my points:
Step 1: Create a Focus
Lots of differing opinions on this.
Step 2: Lead Your Way Out Of Your Business
Agreement on this, but being "out of your business" to work on the business can look different for different owners.
Step 3: Define Your Values and Vision
Defining values and vision means knowing yourself and what you want (similar to knowing your strengths). Others or the prevaling wisdom should not determine the values, vision for and size of your company. You may want 3 people, 10 people, 20 people, 50 people. Or 1 person.
IMO, you may think you only want 3 people, but if a growth opportunity comes along that meets your focus and values, even if it was not your vision, you might want to take it. You can also sell the larger company and get back to a 3 person operation with a new company started with the proceeds of your sale.
Step 4: Understand Your Metrics and Financials
Before you scale, know your numbers and the legalities. Plenty of books/talks/classes on P&L/balance sheets and legalities.
Before you scale, know what you want to gain, and your comfort with financial risk.
An invaluable (and also timeless) book first published in 1992: Your Money or Your Life.
https://en.wikipedia.org/wiki/Your_Money_or_Your_Life
I read this book in my early 20s and it has informed much of life. Especially with regard to how much risk I needed or wanted to take--based on how I want to exchange my money/energy.
Chris Moyer had a near-fatal car accident 10 years ago--and this informs his perspective on risk.
Step 5: Right People, Right Position, Right Culture
To me, this is the most important thing for a happy productive/trusting company. Get the person on the bus, and then see what seat/seats are the best fit.