Sure, you can grow – but can you scale?
A version of this article first appeared at Inc.com.
If you have a successful business, then you know how to grow – after all, that’s what initial success in business is: finding a profitable, sustainable market, and steadily increasing your share of that market.
But there comes a time in the evolution of every business when selling more isn’t enough. At some point, the mathematics of growth begin to break down, and simply doing more of what you’ve done before brings increasingly diminishing returns.
The reason for this is straightforward: Growth brings complexity (more products, more locations, more people, more everything…), and for a smaller, growing business, complexity drains profitability. At this point, the answer to every problem up to now – simply selling more – makes the problem worse: more sales brings even more complexity, which drives down profitability even further. Call it organizational growing pains.
The answer is as simple as the problem is obvious: put systems and processes in place that allow the organization to scale. In order to scale – to deliver consistent, profitable products and services in the face of complexity, the organization must learn how to do grown-up things like hiring and firing professionally, make team-based decisions, and work cross-functionally.
Sounds obvious, and relatively straightforward, right? And yet many businesses never make the transition from being small and growth-oriented, to becoming larger and able to scale. Here are the three main reasons owner-managed businesses get caught in a state of perpetual adolescence, and never reach maturity:
1. Addicted to selling.
There’s something beguilingly addictive about selling. And many founders and business owners find it close to impossible to relinquish the dopamine rush that comes from making a sale.
As a consequence two things happen: The founder/owners try to overcome the whitewater of growing complexity by doing the very thing that will make the situation worse: generating more sales; and secondly, they balk at making the time available to engage in actually managing the business.
2. Inability to say ‘No’.
Early stage growth – growing by selling – is all about saying ‘Yes’. Yes, we can deliver that product to you by next Wednesday. Yes, we can translate the user guide into Chinese for you. Yes, we can paint the widgets green if you’d like.
It’s this flexibility and can-do approach that enables us to grab market share early on. By performing superhuman feats of customer responsiveness, we grab business that should rightly go to competitors 10, 20, 50 times our size. It’s an exhilarating time, and one during which the myths and legends of the business are born.
Problem is, scaling – building the infrastructure of the business so that it can grow to whatever size your industry will allow – requires the frequent, disciplined use of the word ‘No’. For the first time, the business is faced with the situation that simply because it can do a thing, doesn’t mean it should.
Strategic scaling means taking a disciplined approach to growth – saying ‘No’ if that Chinese translation is merely a distraction from our strategic goals, for example – something that is hard to do when you’re hard-wired to say ‘Yes’.
3. Fear of failure.
Managing a mature business – one that has the systems and processes to overcome complexity, and the discipline to adhere to them – is entirely different from managing a smaller, growth-oriented business. Many business owners sense this as they begin to grapple with the consequences of success, and instinctively shy away from a challenge they feel may be beyond their capability.
And who can blame them? There’s absolutely nothing wrong with sticking to what you’re good at, and protecting an already successful business by capping growth. Better to stay small, happy and successful than strive for scale, only to be miserable.