Have you ever watched the television show This Old House?
Imagine you’re on it, working on a 75-year-old house with its original electrical wiring and plumbing.
What would happen if you plugged in a full complement of modern electrical appliances? You’d blow your fuses, not to mention create the potential for an electrical fire to break out.
And what would happen to your plumbing if you went from a well-water system to tapping into the higher pressure of city water? (Can you say rain gear!)
Likewise, too much growth that makes increasing demands on old, outdated systems is what causes most growing businesses to fail.
The systems that worked for a $500,000-a-year business are no longer sufficient to cope with a $5 million business, and not even close to being adequate for a $50 million business.
At first, the additional sales will cause a few “leaks,” but before long, your business will have burst pipes and water everywhere.
That’s why it’s critical that you don’t just settle for patch work solutions that help you solve an immediate challenge in your business, but rather, that over time you consistently upgrade your systems and solutions to increase your capacity and remove your barriers to scaling (i.e. that you find scalable solutions.)
For example, take Morgan Smith. Morgan was a young man in his late 20s when he started his mortgage brokerage company.
He built the company into a successful owner-reliant business for himself in Portland, Oregon.
After a few years operating in one office, Morgan took the scary step of opening a second office. It turned out to be profitable, and for a time, he settled back enjoying the results of his two offices.
If that were the end of Morgan’s ambitions, the story would have ended like it does for most small-business owners . . . with Morgan settling back into his 30- to 40-year role of running his two-office mortgage business as a self-employed business owner.
And for years, that’s the business he was satisfied with–two offices helping home buyers get mortgages. That was until he met a key mentor named Doug. About 10 years older than Morgan, Doug had built up several successful businesses. He provided the capital, confidence, and counsel that Morgan needed to scale his business to the next level.
Over the next eight years, Morgan went from two offices with a handful of staff to more than 200 offices and 1,000 team members in 23 states doing $1 billion of loans annually.
As you can imagine, this leap in scale required that they massively upgrade their internal systems and controls. The systems that worked for them with two offices were completely different from the systems they developed to help them scale to 200 offices.
Scaling your business requires building it in such a way that your model and systems can be rolled out and replicated on a much bigger playing field. This also means when you’re solving a business challenge, you look for solutions that can be scaled.
For example, imagine you’re an online retailer who sells physical products online. One choice for shipping customer orders is for you to hire your cousin Vinny to come over each day to your garage and box and ship out your orders.
Vinny is an extreme example of an “unscalable” solution.
You could improve the situation by hiring a full-time person to set up and run a formal in-house shipping department. This solution would be slowed by your need to hire more people and secure more space as you grow. Plus, you’d have to invest in the technology and develop the systems to cost-effectively monitor your inventory and do your shipping.
A third–and scalable–solution would be to outsource your shipping to a professional fulfillment company that already has thousands of times the capacity and proven systems to reliably ship your orders.
Take another example. Imagine you’re building a web platform to process orders from your traveling sales force. When evaluating which platform to purchase, I hope you strongly factor in the end goal of your company and choose one that could handle the high transaction volume you eventually want to have, provided the cost for this greater capacity isn’t too high.
If the cost doesn’t make financial sense, consider a smart alternative. Choose a platform that can be easily upgraded later as your sales volume increases and you have the excess cash flow to warrant the upgrade. But you’d clearly say “no” to any platform that couldn’t handle your expected sales volume or be easily upgraded and expanded later.
So as you grow your company, make sure you regularly pause in your decision process to ask yourself, are the systems, team, and internal controls we’re choosing scalable? If not, how can we adapt, evolve, or replace them with scalable solutions that will aide us in our growth?
For more ideas on growing your business, including a free tool kit with 21 in-depth video trainings to help you scale your business and get your life back, click here.
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