The first few years of starting a business are a high-octane rollercoaster ride for most business owners. But once you’ve got through the scary highs and lows, your company will start to stabilize and become a more established business.
So what happens next?
It’s at this point that you’re ready to ask a very important question:
‘Are we ready to scale up and get ready for the next level of business?’
What does it mean to scale up?
So, what does ‘scaling up’ mean?
One of our all time favorite business books (and business principles) is the very concept of scaling up, represented so well in Verne Harnish’s book by the same name.
You can read more about this approach here and why it matters that we’re Gazelle certified, but we wanted to begin by explaining what scaling up is, and how it matters to you the business owner.
People – having the right team and management
If you’re going to aim for hyper-growth, you need a team that’s up to the job.
And the key question to ask yourself is:
“Are all my employees, customers, and shareholders happy and engaged in the business: and would you rehire all of them?”
Dealing with the relational and emotional issues of the people within and without your business may feel like a burst of energy that you can’t afford right now: but trust us when we say that avoiding it will continue to drain your emotional energy – and then you won’t have that absolutely necessary energy to expend on the other three elements of your business, which are:
…And cash .
Most business owners work backwards into these areas. Start by sorting out the cash, then action a few items in the business, then re-strategize the whole thing.
Then, if you have time or energy, deal with the people.
We recommend starting with the people first: and we’ll be sharing more about that in our next blog post.
Once you’ve addressed this area, the next one is….
Strategy – defining your goals
As we’ve just seen, the problem with organic growth is that it usually happens without a plan.
The business may expand naturally, you may get a few more customers through referrals… but there’s no driving strategy behind your growth.
And by the time you realize this, and discover the time-consuming work required for what Verne Harnish calls an “industry-dominating, competitor-crushing strategy”, you don’t know where to begin.
There are “7 Strata” defined in Scaling Up which we highly recommend you address (and remember, if you’re feeling confused at all, we’re here to help):
- Words that you own
- Your brand promise
- The brand promise guarantee
- Your one-phrase strategy
- Differentiating activities
- Underlying advantage
- Your Big, Hairy, Audacious Goal (BHAG)
There’s a lot of terminology there, but that’s because each of these 7 areas are tried and tested. As you can see, each one is simple and straightforward, and doesn’t require a 60,000 word strategic analysis or executive report.
All of these 7 areas are built for business owners like yourself: and they work, too.
But how do they work?
That leads us very nicely into….
Execution – the right systems, software and processes
Based on the 7 strata and a little help from your Gazelles coach, you have a BHAG and a one page strategic plan.
But that’s just the starting point – it’s an aspiration, rather than a reality, until you execute on that plan.
The next question is, “Are all processes running without drama and driving industry-leading profitability?”
Profitability. True profitability, measured accurately and using your financial numbers to do so. (As an example, our clients who are using Xero find that addressing profitability is so much simpler when you have the most accurate numbers, up to date and in real time, available instantly.)
The best place we can direct you when it comes to Execution is to the Rockefeller Habits Checklist, which you can download here.
A few of the items you’ll review are:
- Alignment of the executive team
- Collecting ongoing employee input
- Reporting and analysing customer feedback data
- Making the company’s plans and performance visible
- ….and many more!
All of these areas – people, strategy, and execution – are now beginning to work seamlessly together.
The net result, of course, and the final area to consider, is…..
Cash – a focus on positive cash flow and investment
None of your growth plan can happen if there’s no cash in the business to fund your strategy.
Cash becomes even more critical as your scaling up begins to happen. As Verne Harnish points, our “Growth sucks cash”. Rather than turning to the banks or lenders for funding, you want to look for ways to innovate so that you are generating profit and cash flow internally.
The cash conversion cycle (CCC) is the most important element you need to understand, and you can download a free cash flow mindmap here.
In order to properly measure your CCC, you want to look at how long it takes for a dollar you spend to make it back through the business and into your pocket.
If that dollar is taking many days, weeks, months, or years to return to you, then it’s time to review your CCC and how to improve this. Many of our clients have improved this cycle and funded themselves from within the business without having to go to outside bankers or lenders – which puts them in a much more powerful position.
Are you ready to scale up?
So, having looked at our four key areas for scaling up your business, are you ready to kick-start the process and begin the next chapter of your business story?
If you’ve considered any of these areas and found yourself thinking ‘Hmmm, we’re not quite there…yet’, then there’s still time to focus on any warning signs. Every business will have its strengths and weaknesses, and knowing where you need to improve is actually a highly important skill.
And, conversely, if you think it’s ‘all systems go!’ for your growth, we can help you begin in the right place, and get where you need to be quickly.
Talk to us about scaling up your business
At Holden Moss, we have the perfect next step for ambitious businesses.
Our Awesome 8 approach to growth takes the mystery out of running your company and allows you to focus on the eight elements of the business that will guarantee success for your scalable business.
How does Awesome 8 help to streamline your scaling-up process?
You’ll get a half-day session where we’ll review your recent financial statements and cash flow to highlight the Awesome 8 areas where you can add genuine progression and value.
We’re also certified coaches for the Gazelles education, coaching and technology training program. Find out more about the program and get up to speed with Vern Harnish’s great guide to growth, ‘Scaling Up’ .