Scaling a business is not just growing a business. Growth is about size; if you have a group of five people working on a task and you add another five people you increase the size of the company. However, if all ten people are working pretty much as they were before then, you haven't achieved any scale benefits. To scale a business, you must get more growth from everythign you put into it. So you do the work of ten people, but with seven people. Scaling goes beyond size and gets to efficiency.
What building scale means
This is the garage phase.
Think of Apple with Jobs and Wozniak in a garage building their first Apple prototypes. Or Bill Gates writing code for the first operating system (the one he sold before he completed). They worked hard; they worked all out.
If you look at Apple and Microsoft today, they are well beyond all hands on deck building prototype computers. They have divided tasks created teams and developed a business that does more together than the sum of what the individuals could do apart.
Jobs and Gates, in particular, moved from focusing on coding and computer building to managing and inspiring teams of people. Their spark of an idea cascaded through an entire organization and made something more significant.
That is what scaling a business is.
Why is scaling a business difficult
The challenge with scale is that as the business grows, the founders or leaders must adjust their role. They have to move from the coder, computer builder in the garage to the person who is managing the systems and setting the strategy so that others can work on building the computers.
Also, this is not easy. It requires shifts and changes in the way you think and the way you communicate.
There are four key phases to scaling a business:
The first step in scaling a business is to capture the opportunity
Most entrepreneurs start their business with an idea of an opportunity and a concept that they believe they can sell. If they do well, they begin to get customers, and they confirm the opportunity. They work more and hard adding clients or products and start making money.
The challenge here is to identify the opportunity, create the product, figure out how to market it and get the word out - this is nitty-gritty business work. However, when you get this right, demand increases and you start to grow.
The second step is to delegate to others
Many businesses stop at exploiting an opportunity. It becomes much work, and the founders work on all aspects of the company all the time. Statistically, entrepreneurs work 63% more than those who are employed and earn 35% less.
Which is why it is important to think about the second step: delegation.
To continue to grow the founders will need to add capacity, so they will need to hire people, teach others to do their jobs and execute in line with what the company needs. The managerial challenge is to manage performance rather than do the tasks.
This is a massive challenge for people who are good at finding and exploiting opportunities and requires an entirely different skill set.
Even though this requires a different skill set, many founders are good at delegation and can manage this first transition, reasonably well.
Key here is to ensure that your vision, mission, and values are crystal clear because this is what keeps the team together and producing in the same direction.
Step three systematize the business
Here is where almost all companies get stuck. They end up growing and hiring people to the point where they can't manage. Things start to fall apart, sales slow down a little, or they lose a client, and they are forced to let the team go. Then they build again, to let go again and the end up cycling here, never able to get to the next scale stage: Systems.
Breaking out of this cycle requires adding not just capacity, in terms of people, but capability in terms of management and the systems to support management. One of the biggest challenges is to enable the systems to start doing the work and letting go as an entrepreneur.
At Red Sapiens we advocate thinking about systems from day one. Think of what you want your business to be and build from that future perspective that will help force you to put relevant systems in place.
The final stage is to become strategic
Instead of managing tasks today, you manage the systems. What systems do you require? How must they change? How are your systems delivering for you? All of these are crucial areas of management that must be your focus.
This is a tough transition for founders to make because they are essentially leaving the business concept they love and created entirely to others. In some cases, they may even need to think about disruptors and how they should change or cannibalize the business that they build. Here the skills are to look forward and develop the foresight to manage external disruptions that inevitably appear.
At Red Sapiens we bring even this strategic thinking up front. As a new founder or new entrepreneurs, you can quickly get stuck in the day to day, but real growth and scalable opportunity comes from thinking in the future. At first, this may be a small amount of your time - in 5 years it is all you do.
Those founders, companies or teams that can manage their systems strategically can stay ahead of the market, developing new tools, services, and products to profit from a changing market and create a scaled business that works for them. Which, should be everybody's goal.