Building businesses (th)at scale

Once an idea has taken root, we have to begin getting traction for the idea and growing the team as necessary.

At each level of scale, things will look and feel different inside of the business and it’s also good to know that this is what it feels like as a business goes through its natural lifecycle.

One example of this is the Reddit IPO last week where it started as this obscure corner of the web and once the major proponents of indecent speech on the platform were challenged, Reddit was able to clean up its act over the course of many years and become the Reddit we know and love today.

Now, it still has its challenges of course, but it was all the rage with investors at it’s IPO.

Interestingly enough, the morning bell was handled by someone dressed as the Reddit mascot!

Keeping this in mind, understand that the plan for getting to $1M is different than the plan for getting to $10M and $30M.

What you’ll need is systems appropriate to the level you are at and build out as appropriate when you receive the feedback.

Going 0 to $1M

What does this stage look like?

This is often the hardest part of the journey as you are trying to figure out the company’s identity and how it can be useful in the marketplace.

You will be doing everything from verifying your business model and need in the marketplace, to building sales scripts and content calendars that will begin to attract the attention of clients in a positive way.

Folks who come in this early must feel comfortable acting as sales people and speaking with clients as that’s mostly what you do when not executing projects at this stage. Over time, you’ll begin to get a feel for everything going on and eventually settle into a proper cycle.

Integrating technology at this stage

From a technology perspective, this is more about just focusing on the basics at this point and kick starting the engine with recurring revenue. I don’t recommend too much adventure at this stage so you have the money to focus on scaling the business instead of doing something like getting an office.

Keep in mind that all money is likely to only cross your hands once and early on you need to plan as appropriate.

Tax-wise, it isn’t always the most efficient to save money since businesses are taxed on unspent profits, but not everything is tax deductible.

Consult your tax expert on what your personal plan should look like.

Going $1M to $10M

What’s it like operating at this stage?

At this point, you’ve handled the hardest part of business and solidified the core offerings about what you should be selling, how you should talk to clients, what their pain points are etc.

Now’s where you need to focus on expanding the team and replicating processes that you didn’t have in the works before.

With more people introduced, we’ll begin to get some level of operational drag in the business from a technical and human perspective.

As we grow though, this is really about just continuing to make the core offering available to as many people as possible and see how they react to it.

Two key examples are establishing multiple sales and marketing channels.

At some point, there’s only going to be so much pipeline in a single place and the bigger you get, the more channels you will want to target.

Of course though, I’d work with someone who is an expert in this stuff and identify which channel will have the highest ROI for your time.

Integrating technology at this stage

Each business will be different in its needs as it grows through this stage.

For some, simple off-the-shelf tooling might be sufficient for where you want to go, but for other businesses, this is where you might begin needing some level of custom development work done in order to maximize the potential of the business.

Earlier on closer to the $1M, I’m going to try to use as much existing software as possible to maintain a low cost for clients.

As we inch closer to $5M, we’ll start to see some challenges from the scale of the company and number of employees needed to close that amount of revenue.

Different businesses have different amounts of leverage, but having 10 or so people per $1M in revenue seems to be the average I’m seeing so far.

Growing from $5-10M, this is where we see the number of people skyrocket and really begin to see a need for custom development kick in as the business hits troubles they probably wouldn’t at a smaller scale.

Going $10-20M

What’s it like operating at this stage?

Once you get past $10M, it’s darn near inevitable that you hit $100M if you handle the business correctly and you’re in the correct markets.

Reason being, it is actively harder to run a business smaller because you have to continue doing things as inefficiently as possible and spend more time on the business than it being as turnkey as it should be.

Getting through this stage will be different for different companies based on products, services, & markets we want to consider and how valuable clients think the products or services are.

For businesses who have reached this without majorly expanded offerings, congratulations as you are in a high yield environment that is more prone to printing money than if you worked on other problems.

That said, others may have reached this area through more of a struggle and that’s ok too.

For those who struggled, I recommend a competitive analysis to see how upmarket, horizontal in the market, and downmarket handle their own business and this can help orient you in a proper series of plays that you need to do to continue growing.

For as long as possible, I recommend growing on a single product or service so you can really hone the delivery of those offerings and continue to expand core teams as you make a push for the $20-50M range.

Integrating technology at this stage

We’ve reached the point in the business lifecycle where the cracks will begin to show in the armor and we’ll really need to start bringing people in to work on fundamental aspects of the business rather than just focusing on products alone.

Right now, these are likely to just be one-off projects we can bring outsourced folks to help with and stabilize, but long-term, we need to bring in folks who can really sit as part of the business and offer unparalleled levels of growth relative to the value they bring to the table.

If we don’t begin to handle the cracks now, it is truly going to show as we head into the next stage of the business life cycle and cause issues that while not fatal, will only serve to slow the business down.

From startup to scale

Today was all about taking an idea and growing it into a sustainable business structure.

At first, this can be challenging because you don't have processes in place, but it gets easier over time as the building continues.

When you get past $1M, it's more about doing the same core processes with more people and is overall very easy to adjust to as you continue growing.

Growing past $10M shows the inevitability point of hitting $100M typically, if you play your cards right.

From a conceptual point of view, it truly isn't too bad and is more just about building a true enterprise!

More on that next week!