To scale or not to scale? After surviving the pitch, fundraise and launch phases, entrepreneurs eventually come to a fork in the road on whether or not to scale their companies. But what does scaling really mean? It’s a buzzword that gets thrown around in the founder community but not truly understanding what it means to scale can lead to deadly business decisions.
“Very few companies make the leap from start-up to scale-up,” says Mark O’Donnell, Visionary at EOS Worldwide, LLC, and a four-time Inc. 500|5000 entrepreneur. “They hit the ceiling and never break through.” In fact, 90% of start-ups fail and 75% of scale-ups never return cash to their investors.
This is why every entrepreneur should ask themselves a specific set of preliminary questions before taking the plunge. Maggie Sprenger, cofounder and managing director of Green Cow Venture Capital, outlines the most fundamental question: “Is your sales process scalable, or repeatable and profitable?” In other words: Can you acquire customers for a small percentage of their Customer Life-Time Value? A good goal should be able to repay that expense in 6 – 9 months.
If you feel confident about powering through, here are 7 points about scaling to keep in mind. Whether you’re a deep tech company hoping to expand global reach or a vegan bake shop hoping to ramp up production and deliver to new neighborhoods, preview the roadmap below as outlined by O’Donnell, a Certified EOS (Entrepreneurial Operating System) Implementer.
- What is your Vision? You must be crystal clear on your vision and believe that it’s possible. It’s not good enough for just the entrepreneur to believe in the vision for the organization. They have to enroll every employee in the vision. “Everyone must see it and believe it,” says O’Donnell. “You have to get all the human energy in the organization pointing in the same direction.”
Sprenger adds that, in this digital age, every startup should consider its website as a living, breathing member of the company. She always asks entrepreneurs “Is your website part of your sales team? Is your website compelling, easy to navigate, beautiful, and going to sell your product? Are there clear calls-to-action? Is pricing easily found?” Most importantly, make sure your website is a reflection of your company Vision.
- Who are your People? If you want to go from startup to scale-up you need to build a culture that endures for a hundred years. Once you define your culture through your Core Values, you need to hire, fire, review, reward, and recognize all your employees around those Core Values. You have to make sure that every employee is the right person in the right seat.
In addition to the right hires, every entrepreneur needs the right circle of peers and mentors around them. Says O’Donnell: “They must have a peer group because it’s a lonely journey. They must have a coach as all the best have a coach.”
- How do you get your Data? Scaling your organization requires you to focus on a handful of activity-based numbers that drive your business forward.
“Never rely on subjectives and opinions,” says O’Donnell. In addition, every employee in the organization must be clear on the numbers they deliver to the business each week.
- What are your core Issues? If you want to grow and grow fast, you have to solve issues at the root. Otherwise, you and your people will spend a ton of time on the same issues over and over again. O’Donnell advises leaders to create a discipline throughout the organization where people are open and honest and solve problems, so they go away forever.
Sprenger poses another crucial point that falls under the Issues umbrella: Is your UI (User Interface) frictionless? Is your website, sign-up system, on-boarding, product use, etc frictionless? Any of these will kill your conversion rate if they are sloppy, she says.
- How do you build your Processes? Document all your Core Processes using the 20/80 rule. Don’t make them too complex or no one will follow them. Once you document your handful of Core Processes, you need to get them followed by everyone in the organization.
- How will you build Traction? Set quarterly goals, we call rocks, where everyone in the organization is focused on just 3-7 things that move the business forward. Then have great weekly meetings where people are making sure their numbers are on track, their priorities are on track, their people are happy and they are solving their issues.
Finally, entrepreneurs need an operating system, which is a common language for running their company.
- What is your Leadership style? “Master great leadership and great management, and your people will be accountable for executing on the vision,” says O’Donnell.
Hone in on five leadership abilities to simplify, delegate, predict, systemize, and structure your organization, and you’ll break through each time you get stuck. Obsess about building open, honest, and healthy teams throughout the organization. Many organizations spend too much time talking about their people vs. with their people.
If you get these seven disciplines in place and clear, you will be able to scale up your business and get what you want from it.