Skip to content

Scaling your business – the 3 Fundamental Barriers to Scaling any company

by on February 19, 2015

ScalingBuilding your business can be extremely rewarding and fulfilling.

For many it can be extremely lucrative.

For others it can be a nightmare.

Does every employee you hire, every customer you acquire, and every expansion you drive actually make you tired?

Are you working longer hours, although you thought there would be economies of scale as your business grew?

Does it feel like everyone is just piling onto an increasingly heavier anchor that you alone are dragging through the sand?

This isn’t what you expected.  It’s supposed to get easier as you scale!

So what happened?

The common belief is that as you scale the company, and increase your dream team, prospects, and resources, things get easier, but they don’t.  They actually get harder and more complicated.

Companies grow and scale until they hit the growth wall.  Many get stuck there for a long time.  Some never get out. Others reach “escape velocity” that allows the company to emerge into a new, higher growth trajectory.

When you’re in those growth walls everything seems to take longer to complete.  Problems you thought you had solved earlier start creeping up again.  And you’re feeling this “big, but not big enough” syndrome – even in making minor decisions.

So why do some companies continue to grow while others fail to scale?

It’s about managing complexity.  The bigger the company gets, the more complex everything gets.  And this creates 3 fundamental barriers to scaling any company:

  1. Leadership: the ability to staff/grow enough leaders throughout the organization who have the capabilities to delegate and predict
  2. Scalable Infrastructure: the lack of systems and structures (physical and organizational) to handle the complexities in communication and decisions that come with growth
  3. Market dynamics: the failure to address the increased competitive pressures that build (and erode margins) as you scale the business

When you remove these barriers, the anchor you’ve been dragging turns into the wind at your back.  You can reach escape velocity.  And work can be fun again.

Jack is the CEO of a high-tech company that found himself “in the wall.”  Work wasn’t fun anymore and growth had stalled despite the fact the company had grown 50% year over year just a little while ago.  He dreaded what he called his “3:00 am walk.”  He dreaded that walk to the bathroom in the middle of the night, saying to himself over and over, “Just don’t think.  Just don’t think.”  Ultimately he would think about work and be up for a long time, unable to go back to sleep.

Jack was able to get over that wall to a place where work is fun again, and not surprisingly, the company is growing again and the valuation of the company has increased because he and his team followed a blueprint for growth designed to overcome those barriers and create greater value in the company.

The blueprint contained a prioritized project plan with milestones and timeframes that identified foundation blocks necessary to create and sustain long-term growth like developing the management team, enhancing the marketing strategy, and the development of a financial strategy.

It also identified mid-term opportunities to improve the value of the company’s existing operations.  Projects undertaken included improving the system of communication by the management team, expanding the company’s geographic sales reach, and strengthening the company’s finance team.

The blueprint also laid out longer term initiatives designed to leverage the company’s strategic assets, differentiating itself from its peers.  This included recalibrating the organizational structure to support growth, engaging in M&A activity to fill product gaps and expand its market reach, and to enhance the company’s sales team.

With this blueprint, Jack and his team had the confidence to undertake the changes necessary to turn his good company into a great company.  He knew what projects needed to be done and in what order.  He also knew what the impact of successfully completing each project would be on the value of the company.

Now work is fun again.  The management team is focused and aligned because the company’s direction is clear with agreed upon goals and targets.

The wind is at his back – he’s overcome the 3 Fundamental Barriers to scaling his company.

p.s.

If you’re wondering how you create a blueprint for growth and break free of the growth wall, contact me to discuss the Valuation Amplification Process.

I also invite you to download the white paper and learn How to Quickly Increase Your Valuation – A Proven 5 Step Process.  http://www.therevenuegroup.net/free-offer.html

Advertisements

From → M&A, Strategy, Valuation

One Comment
  1. iThinker permalink

    Reblogged this on INVEST-O-MONEY.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: