Aword you hear all the time in business–particularly in regard to the future, investment and growth–is scalability. This term has something of a dual application, but regardless of which one you look at, it’s essential to any business.
Scalability is the ability of something to adapt over time to changes.
An increasingly global world means there is more competition than ever, and commoditization is a growing threat. Businesses that scale the right way, are going to be positioned to increase market share as weaker players are sifted out.
Scalability when referring to a company is also very multifaceted.
Often, the scalability of one area will tie in to the scalability of another, so you must be aware of the interrelationships between your workers and resources and have a big picture of what’s happening operationally.
Whether you’re growing to your first million in revenue, are well past that and are looking to make your business more automated so that you can profitably scale up, or have hopes of an exit in the near future, it’s imperative that you avoid the mistakes that I’ll be discussing in this post.
Hiring The Wrong People
Adding extra people to the company is the most visible way of scaling up, but hiring impulsively can create chronic operational problems for your business.
It’s easy to simply accept the help and staff that come along naturally, without thinking about how they fit into your bigger plan.
But remember that these people represent long-term relationships, so carefully consider how they will work with your company and culture.
New companies that begin trying to scale can also wind up hiring the wrong people, since there’s usually little in the way of a proven hiring process in place. The fact is you can’t rely on gut feeling alone if you’re looking to make a successful hire.
warningNevertheless, be careful to not be too people-focused.
Most business owners are too focused on finding the perfect staff, and not focused enough on developing their own perfect client solution and then plugging staff into defined roles as they scale their own methodology.
When your business is built around an employee’s skill sets, what happens when they leave? You need to start all over again recruiting, training, and developing this next ‘perfect’ person.
Even if they seem well-qualified, new hires have to also be a good cultural fit or they’ll end up draining time and energy away from the rest of your team.
Instead, focus on how to scale a proven methodology and put the right people in place within your framework.
Competing on Price
As you begin to scale your business, it can be tempting to compete on price. As told by the famous Peter Thiel, competitors are losers.
You may think that if you can ramp up production, you can cut your price and still be profitable. While this works occasionally, competing on price more often results in a “race to the bottom,” both in terms of profit and quality.
It’s far better to compete on quality, ingenuity and customer service than to position yourself as your industry’s low-cost provider.
If you can sell your customers on the value you provide, you can keep prices reasonable without having to stress about eventual competition.
warningMaybe you’re not solving a big enough problem. If the problem is too small, you cannot charge enough.
It’s nearly impossible to sell results and offer some guarantee…if you are selling everything to everyone.
Clients are demanding better. Are you ready to be part of the change that elevates the industry?
Not Listening to Your Customers
Not listening to your customers or users will kill off your business with deadly effectiveness. The first set of customers you need to listen to are the early users.
These beta-testers may have gotten the product for free, and they’ll give you feedback on what you can improve while also spreading the word to people who will become your actual customers.
The next set of feedback comes from the early adopters. In his book, Crossing The Chasm, Geoffrey Moore says these types of consumers typically have a pain-point, and they’re willing to pay the retail price in order to find a way to solve it.
warningThe markets for most new products typically have three different types of users—the first users, the early adopters, and the real or scaling users.
Only after hearing back from this second group and incorporating their suggestions and feedback should you roll out your product to the general pool of potential customers.
Not Settling for Change
The management and leadership structures that work well with a company of 50 people may not work at all with 250.
Remember that scaling brings its own changes and challenges, and your leadership team has to be ready to adapt. A flat structure that worked well when you were small may have to give way to a more defined leadership tree over time as your startup grows.
warningNever lose the habit of turning a sharp, critical eye on your business.
You need a new strategy, a new process, and a new organizational chart. Recognizing what doesn’t work any longer—and getting rid of it—is difficult yet vital for any startup trying to scale.
Trimming back things that aren’t working is part of building towards things that are. As you scale your business, don’t be afraid to trim fat so that your company can grow effectively.
Most business owners are reactive. They fight fires, rather than prevent them. They tread water hoping to stay afloat when the next wave hits.
Being proactive is looking for ways to innovate within your company and increase profits. It’s staying ahead of the industry trends. It’s being intentional about the staff you want in your company and developing the kind of culture you want to create.
warningIt’s about actually having a plan and working that plan every day.
This seems basic, but most service business owners lack a clear plan to scale their business, so they spend years reaching their goals (that’s if they don’t burn out first).
You must get clear on your endgame. You need to understand your desired destination before you can craft the scale strategy that will get you there.
Scaling a business is an important part of growth, but it’s easy to make mistakes. Avoiding these pitfalls will help your business scale successfully, bringing you the increased profits, growth and longevity you desire.
It is natural for a business to want to make as many areas scalable as possible, and business leaders should work toward this goal. Still, you should recognize that not everything might be scalable.
warningScalability is essential in that it contributes to competitiveness, efficiency, reputation and quality.
Scalability also matters because growth in business means you are working with more customers, data and resources. If you do not have a way to handle these increases, you can lose efficiency, or the quality of your service or products can suffer. That can lead to poor customer relations and a lowered business reputation.
What mistakes are you making? What will you do this week to take the path to increased profitability and freedom in your business?
If you enjoyed the article or have any comments, recommendations, or tips for improvement please do comment below.
Digital Dandy. Hacker From Heart. Workaholic. Coding Artist. Self-made.