The seven myths of scaling-up

I know from experience just how tough it is to scale a business. But I also know from studying it, writing about it, and talking to endless numbers of entrepreneurs about it that it is not only hard to do but a concept absolutely filled with myth and nonsense.  

Freelance writer and author, Jan Cavelle shares some of the biggest myths around scaling your business:

Every company can do it:

People often confuse scaling with increasing a bit in size. Scaling sustainably in a way that will keep you on growing is a whole different ballgame. In reality, a pretty small percentage of companies make the jump successfully.

You may know some entrepreneurs who have got to a certain size, somewhere between 1-10m, and got stuck.  ou see them seesaw between bullish excitement of the success they are about to hit with their new plan, or their Eeyore levels of gloom, how they have their company and want to get out.

The other group is full of newbies. They might have done a brilliant pitch, had a lucky run to that point. But essentially, neither they nor their management team has the experience it needs to build a scalable business.

Either group may simply not have the market to scale or a scalable product. When we start, we are so keen on pleasing our customers, we constantly change and adapt what we do to suit them. A scalable product or service needs to be replicable thousands of times over and satisfy a majority of customers. And not only do there have to be vast numbers of potential customers, but they all also have to have a problem that desperately needs solving to make your market sustainable.

Running a big company is just more of the same.

Not yet, it isn't.  I have heard many entrepreneurs agree that if you can run a company of 50m turnover, you can do one at 200m. However, running even a 2-3m turnover is entirely different from one under 1m.  

You have to systemise, you have to be sure of your market, stopped that habit of selling anything to anyone, and you have to have nailed your finances. Communication becomes key. It can't be a case of everyone knowing everything that is going on anymore. But perhaps the most colossal change has to happen with you.

A very successful serial entrepreneur told me recently that at one stage, he said he had 27 direct hires till he realised it was impossible. No one can successfully and fully manage that number of people. That means you need a structure of some sort and lines of communication.  

And if you are a solo entrepreneur, you need other key people. You can no longer double up the 18-hour days you are doing to cope with more work. You need to let other people head up teams and take on responsibilities. And that means (sorry, scarry words) – letting go.

That your original team will be excited by the growth

Especially if you have drifted into scaling, your initial team suddenly be in a very different place to the one they signed up for. Just because you have seen what you perceive as a fantastic opportunity does not mean they will see it in the same way.

They will have signed up for a relatively easy-going job in a small company. Hard work to a point, but still fun and relatively free of too much responsibility.

For growth, your original people will (rightly) hear "change." And they almost certainly won't want to. If they had wanted more responsibility, they would have already left.  If they had relished more pressure, they wouldn't have chosen your job in the first place. Growth is, therefore, a change they don't want, at a risk to what they see as their comfy, safe, and familiar jobs.

Double up sales means twice the profits.

It is so, so easy to be seduced by this one. You have a solid little business, giving you a good if not glamorous income. And you think to yourself, but if it were twice as big, that income would double.  

You calculate that you might need double the space and or double the people. Perhaps double the advertising and other overheads.   

And you will be wrong.

The reason comes back to that structure, to your 18 (free) hour days, the need for management that are as good as not better than you. Add in too that your people to date have been acquired and settled in over time. Suddenly attempting to double means carrying a whole lot of people, assuming you can even find them, that will not pay for themselves for some considerable time. 

Meanwhile, everyone is telling you that you should be working on, not in the business. But how? And who will pay the bills, work for free as you did?

All that nice profit all too quickly turns into a nightmare loss.  

If the sales are strong, the rest is easy.

This myth is one I am incredibly familiar with. While for many companies, the battle is to increase sales in line with growth plans, others are inspired by the seemingly unstoppable demand for their products or services.

It is the same illusion as doubling profits. Unless you are entirely automated, and I mean entirely, you cannot assume that you can provide the same standards of supply in ever-increasing amounts. And this is especially true when other humans are involved.

It takes time, training, planning. Meanwhile, you are firefighting to meet demand. When you fail to meet demand, or what you do supply fails to meet standards, your enthusiastic and previously loyal customers are getting restive and starting to re-assess the competition.

You want to solve the problem, but all your time is spent dealing with upset customers and doing your best to meet their demands.

You are the founder, and so, obviously, you will be CEO

So, so many founders make themselves CEO now. And it is pretty damn crazy. They might get away with it, if:

• they have previous experience in a CEO role; they will know what they are doing

• or while the business is still tiny.

If the business is still small, the role is, despite the title, still that of a founder. You are the ideas person, the energizer, the leader, but the leader of a group who has bought in from the start. It is all-new, shiny, and exciting.

However, to be a CEO of a continually fast scaling company takes an entirely different skill set. The founder is no longer central to the company. Experience becomes an enormous asset. Your job as the ideas person behind the company is virtually obsolete.

The irony is that many VCs encourage founders to stay on as CEO because they can be rolled out on occasions, and it looks good on paper. Then it gets to the point they need a real CEO, and the founder finds themselves eased out. Assuming they haven’t got screamingly bored and miserable in the CEO role before then.

You will stay in love with your company:

"They will have to carry me out of here" is a familiar founders' cry. We start our companies, and we love them with the passion only a parent can.

Time goes by, and they scale, and not only are we no longer the needed parent, the teenager is indeed leaving home, but also, they are changing into something very different.  

Other influences are coming into play and changing them, we hope, for the better. That tight group of people that were there at the start have dissipated. Meetings are more formalised. Things have become more of a struggle, either because we are knocking on that heaven's door of scale and it isn't opening fully or because our role has become so unfamiliar.

Small wonder, for many people, deep down in our heart of hearts, we don’t love our little companies as much as we used to. Life moves on, and often it is overdue for the founders to move on too.  

And go back to what they do best: founding companies.