Mike McMullen is the CEO of Prominence Homes and the author of Build. Rent. Sell. Repeat!
Scaling a business challenges many founders. The process is difficult, confusing and tedious, and it requires a unique skill set. The benefits are obvious (more revenue, more opportunities, etc.) but the risks are sizable as well.
Perhaps so many founders fail because founding and scaling require different skill sets. Unlike founding, scaling involves detailed financial math, marketing know-how and critical thinking skills. In short, it’s more “right-brained” than founding a company, and it is a risky proposition for someone with little experience (a fact that the creators of Etsy had to learn the hard way).
With all the challenges, founders often succumb to the fear of risk, but they shouldn’t. Risk forms the foundation of all enterprises, and thoughtful entrepreneurs can plan for the worst to achieve the best. If there is market demand for a product or service, then scaling is well worth the risk. Instead of caving, founders should carefully consider how they will scale before they begin the process.
Articulate The Strategy
A founder should begin by articulating their strategy. When I say articulate I mean specifics: facts and numbers, not big ideas and buzzwords. Dreams are vital, but without some idea of how to get there, dreams can veer wildly off course.
In articulating a strategy, try to be succinct and factual. Klaus Schauser, CEO of the successful AppFolio says it best: “Simpler is better.” A strategy must be simple, comprehensive and detailed. Such traits inspire employees and force everyone to bring their best to the table.
Practically speaking, I don’t bring ideas to meetings until I have ironed them out. I know that I need a team behind me in order to succeed and messy thoughts don’t win converts, they seed doubt.
Find The Funding
After planning comes funding. Money is the gas that fuels growth. Believe it or not, it is very easy to look at the market demand for a product and grow reckless, letting growth outpace means.
Cash flow is vital, especially in the world of large-scale growth. There is no “one-size-fits-all” approach to obtaining capital. In a 2019 Bloomberg interview on the topic, experts from various industries listed the ways they’d gone about raising cash for growth. Among the sources of cash were loans, private equity investments and even crowdfunding.
As for me, I usually bring my own investments into my businesses, moving finances around to make the most of cash flow at any given time. While CEOs have many options for acquiring capital, few know how or where to obtain it. My advice? Find someone that has been down the road before to assist in getting the best capital for your particular situation. Capital is the spoke around which the wheel of progress turns.
Roll With The Punches
After a plan is made and funding is acquired, a founder can begin scaling responsibly. They can implement their vision and expand their business. This is the fun part! Things are bound to get crazy, exciting and (sometimes) frantic.
Inevitably, the strategy will need to change. Employees may stretch themselves thin filling all the new roles, in which case consider automating some of the workload, or, if product quality begins to deteriorate due to increased demand, consider putting more humans on the job. Balance without overstaffing is key to growth.
Finally, don’t lose hope if the process takes longer than expected. It took me 20 years to successfully scale my companies. The trick to scaling isn’t to “do it right the first time.” It is to learn from mistakes and continue pressing forward.