I once worked at a “boutique” consulting business with a focus on work rather than creating a scalable business. The owner worked continuously, days, nights, weekends, holidays, and next to the pool while his daughter competed in swim meets. He was “free” from corporate life and chained to his business’s constant effort and the roller-coaster of rewards it delivered.
Owning a business does not mean that you will be able to live the life you want to live. If you want your business to power your extraordinary life it must be a scalable business. So in this post, I take you through the five keys to scalability and how you can use them to create a scalable business that works for you.
According to the Pew Research Center, about 30% of the US workforce, or 16 million people, work for themselves.
Of those, only about a quarter have employees working for them.
In my experience, in 80% of those companies with employees, the employees make work harder, not easier.
Most entrepreneurs create independent jobs for themselves. And not just any job but a particularly unpredictable one that puts them on a roller coaster of good and bad months (or years) with no security and no feeling of control.
The difference between a job and a business that powers an extraordinary life is creating a scalable business.
If you run a business ask yourself why.
What do you want that business to do for YOU. Before you even think about how to scale your business define your impact, freedom, and wealth goals so that you know what you are creating and why.
Maybe you want to grow a business. Perhaps your vision for yourself is to create a billion-dollar empire.
Or maybe you want to stay small, earn a living, and have confidence in the future.
Either way, scalability is the answer.
A scalable business doesn’t rely on a single individual.
It operates consistently, and you can work on the business to keep up with a changing market and ensure you have a strong pipeline of new work.
The conditions for a scalable business
For a business to be scalable, it must be: systematized, measurable, replicable, and automated:
A scalable business is systematized.
Most small businesses are not systematized. They are individuals, or groups of people, doing stuff.
What direction there is comes from the leader/owner/manager who either gives no direction and hopes for the best (abdication) or micro-manages every action in the business (might as well do it yourself).
A systematized business has processes in place. People know what they need to do. They know where to find the answers. The business is like a machine with all of the pieces working together. The people are executing but also tuning and improving the machine.
The challenge with systematizing a business is to have processes defined. Everybody knows what their role is and knows what comes next.
Another way to think about this is: all businesses produce products. Successful service businesses deliver service products, not service work.
You have a systematized business if you:
- Have a defined process to attract and convert your clients/customers.
- Have a defined process to deliver to and complete your sale/transaction.
- Can hire someone new and explain to them exactly how to do their job.
A scalable business is measurable.
In a scalable business, you can measure performance. You know how well the business is doing; you know how well you deliver your product.
Most businesses have some metrics, but way too often, they focus on input.
I had one professional tell me, “I am a professional, I have education, an hour of my time is worth something.”
But it isn’t. Your effort is worthless if it does not deliver transformation.
A scalable business is not about you; it is about the transformation you offer. So, you need metrics that tell you how effectively you are delivering that transformation.
Efficiency and cost metrics matter, but you can’t run a scalable business by optimizing cost. Cost is easier to measure; it is where most businesses focus, and it is less critical. (In fact, in the start phase, I recommend not paying attention to cost at all; you don’t have a business at all if you can’t deliver transformation).
So, you have a measurable business if you know:
- How happy your clients/customers are with the product/service you deliver.
- The capacity of your business to deliver.
- The value of your pipeline – you can forecast sales.
- The cost of acquisition of a client/customer.
- The cost of delivering the transformation.
- How satisfied your clients are with the transformation.
A scalable business is replicable
The next component of scalability is how well you can replicate the results. The business should attract the same people that you convert the same way into a delivery system that creates the same results.
Your business delivers a product, even as a service business, and it should be like a machine repeating the same delivery process continuously.
The problem is that most small businesses don’t work this way. They treat anyone who walks through the door as their next client.
They solve any problem that anybody has as long as it falls within their universe of knowledge. Think here of marketers who do marketing or accountants who do accounting.
And they often sell themselves, or differentiate, based on responsiveness or hard work. The buyer, though, is much more interested in results.
(I get a lot of push back on responsiveness. Yes, clients care about responsiveness; if they have a question, they want a quick answer. But they would rather have their problem solved without having to ask any questions. Responsiveness implies work; you want to sell transformation.)
A scalable business repeats the same actions and gets the improving results every time (since the process is systematized and measurable, you can adjust the process to enhance the results).
Your business is replicable if you:
- Have a specific client you deliver a specific result to.
- Know the problem you solve for that client.
- Can repeatedly attract that client.
- Have a process to deliver results to that client.
A scalable business is automated.
The last component is automation. The more systematized, measurable, and replicable your business is, the more you can automate it.
The goal is complete automation, but you will never get there. There will always be thinking work that people will have to do, situations that you haven’t perfectly accounted for, and innovations to incorporate.
You should always be looking for ways to automate, however. Automatic reminders, workflows, updates, changes – they all create capacity in the people so that they can focus on human work.
If you are copying information from one system to another, or have people do routine work, you are taking away from your ability to improve your business. This type of work should be truly automatic.
Human work can be automated, as well. When people know what they need to do, understand their role and can deliver their results repeatedly this is a type of automation. They don’t come to you every five minutes with questions, and, importantly, they can put some of their mental energy to improving the process, not just delivering.
Levels of automation:
- Parts of your business operate with no human intervention.
- Routine work is templated, and humans spend their time on less routine work.
- You increasingly add tools to help humans operate more efficiently and effectively.