Michael A. Mobley Managing Partner, Impetus Solutions, LLC
Entrepreneurs that successfully evolve from the start-up phase of their business should be proud. Managing through the maze and barriers confronting start-ups is no small feat, and business owners and their teams have likely used a combination of preparation, skill and luck to avoid becoming a negative statistic. These characteristics should be helpful as the business enters early stage status. However, early stage businesses fail at a rate similar to that of start-ups, so it is incumbent upon entrepreneurs to scale the business to realize growth and profitability.
Scaling a business involves leveraging existing and future resources of the business such that, on a net basis, revenues grow at a faster rate than expenses. The greater the positive disparity between revenue and expense growth, the greater the opportunity for higher business profits. Entrepreneurs who lead their businesses during the scaling process must focus on three broad areas: purpose, people and process.
Fundamental to the success of any business is its purpose. The initial answers to the purpose of a business concern customers the business serves, the rationale for the choice of those customers and the products/services offered. In addition to answering the question of the business’ reason for being, entrepreneurs must also identify the values and culture of the organization. Businesses have several tipping points during its life cycle and the question of business purpose should be addressed at each point. The reaffirmation or redefinition of business purpose creates focus for the business, its leaders, employees and other stakeholders that facilitates a more effective opportunity to scale the business.
Organizations succeed or fail because of the performance of its people. Talented and experienced employees can improve the productivity of the business and reduce the cost of revenue generation. The challenge for business leadership is to ensure that the right people are in the right positions at the right time. Just as the economy and businesses have cycles, the human resource needs of businesses are also cyclical. Consequently, successfully scaling a business is often a function of leaders’ motivation and ability to position the right people in terms of cultural fit and talent, and not fall prey to loyalties that can limit business success.
The purpose and people of a business must be supported by effective processes that become tools of discipline to scale the business. These processes include, but are not necessarily limited to, strategic planning, operating planning, budget development, actual versus budget analysis, profitability analysis and return measurement. Most small businesses are limited in the availability of its human and financial resources; thus, the utilization of those resources must be subjected to disciplined analyses of their impact on growth and profitability, preferably at rates higher than the cost of those resources.
I have yet to meet an entrepreneur who did not aspire to have a growing and profitable enterprise. The ability to scale a business and increase profitability by leveraging its resources requires reaffirming/redefining the purpose of the business, having the right people appropriately placed in the organization and developing processes that provide structure and discipline for the realization of business objectives.