Creative Budgeting to Scale Your Business
You can’t afford 10x customer growth unless you find ways to scale the resulting operational expenses
Death by success. It sounds a bit crazy, but it’s entirely possible to kill your company because the demand for your product or service exceeds capacity. It’s why I advise my clients that scaling up requires an operating system – like a roadmap with guardrails - for managing the company growth.
Understand and accept the consequences
Of course, you want to grow your business. Doesn’t everyone? Careful what you wish for, I tell people. You just might get it. You own this business; will it be something you still want to run after this growth?
Entrepreneurs with startups tend to look at the early times and remember them as fun. The first few spurts of growth provide confidence to hire more people, and there’s time to spend searching for people who share your aspirations for the company. That’s an incremental approach that won’t work if you want to scale. You won’t be able to afford it.
Hiring isn’t the only process that won’t be scalable. Going from 10 customers to 10,000 customers means you won’t be able to pick up the phone and contact each one to ask what they think of the latest upgrade you’ve made.
These two examples show why the type of growth that comes from scaling must be systematized, codified, and standardized. Understand, too, that an unlimited budget wouldn’t solve the problem — that would be falling back into the mode of incremental growth. Scaling up requires you to understand that automating and outsourcing business operations beyond your core competencies is the only way you can afford more customers.
Budget for what does NOT scale
Efficient spending on high-impact operational areas is the best approach to budgeting for scale. Areas such as human resources, legal, and finance — these can’t show you a direct and measurable return on investment. Even so, you can’t afford to ignore these areas or trust them to under-qualified personnel.
One of the most cost-efficient approaches you can take with day-to-day back-office tasks is to outsource them. You’ll get results that would otherwise be taking a big bite out of your operational budget while still retaining operational control. And you want that money for something else.
The money you save should be spent doing the things you cannot scale.
Often, customers sing a company’s praises because of something their competitors are incapable of doing. It’s your unique value proposition, and it’s probably something that has to do with personalization or customization — something that may not easily be scaled up. If you want that unique value proposition to remain defensible, you’ll have to budget for it. The money you save elsewhere is better spent here.
Focus only on things that do scale
One of the exercises I ask my clients to undertake is to spend some time envisioning what 10x growth really might look like. Scaling business results in massive change. The pace quickens and specialized employees operate autonomously. All the while, you, as a leader, will find yourself distanced from daily operations. You can’t be tangled in tactics; you’re clearing the way with a focus on purpose.
To accomplish this, you’ll have to understand and make peace with the difference between leadership and responsibility. A successful business owner knows that scale requires every member of the organization to act like an owner. Learning to delegate will save you money. Consider what your time is worth, then calculate the savings to your company if you spend less time on operational tasks and more on strategic thinking. True to the concept of creative budgeting and spending, you’ll be doing more with less.
Pay attention to what’s working for you
You may have noticed that I haven’t grabbed you by the hand and directed you to do five specific things that will wisely use a finite amount of business funding to move your company into a growth mode leading to scale.
If you take a bootstrap mentality about scaling, you’ll be critical of outgoing expenses. You’ll already be ahead of the game because the foundational thinking behind scale is that it’s the achievement of massive customer growth without incurring similar operational expenses. But let’s be realistic: Even growth at scale will require some level of funding. What’s likely, not true is that you’ll have to double your operating costs if you want to double your revenue.
Are you struggling with ways to generate profitable, drama-free growth? Find out how you can remove the complexity.