The Roadmap to Balance

I’ve introduced the beta, 1.0, 2.0, and 3.0 models of a scalable business before. In short:

• Beta: Proof of Concept. You have a great business idea and are in the right place at the right time. You do some initial business.
• 1.0: Business Fundamentals. You’ve mastered financial statements. You have standardized pricing, defined workflow, and basic marketing in place (a website, a logo, business cards, etc.).
• 2.0: Intentional Outcomes. Budgeting, planning, and strategy — oh, my! You have an annual budget that you manage as you go. You forecast sales, adjust expenses, and execute an intentional business strategy the whole team understands.
• 3.0: Institutional Success. You control your trajectory, deciding where and when to act next. You add lines of business and make acquisitions.

Before scalability, we all (myself included) judged a company’s success and sophistication by its size. I’m walking that back.

A scalable organization needs half the employees to be twice as good. This is a key point in my book, Balance: How to Build a Scalable Business with Less Stress and More Profit. The difference between a 1.0 business and a 3.0 business isn’t the number of employees; it’s how good those employees are.

I’ve worked with extremely successful, very scalable 3.0 companies with fewer than 10 employees. I’ve also worked with companies hundreds-strong that have barely mastered the fundamentals. How well-balanced your company is isn’t dependent on the number of people you have. It’s dependent on how effective your people are.

Let’s follow a company that understands scalability, starting from its startup phase.

Beta

The owner-operator has talent and a great idea. To conduct business, they need to know who their target customer is, how to get work done with a supply chain, and how to price effectively. As work grows, they may add staff to help plan it.

1.0

The perfect team to handle $1 million in revenue is made up of around five people. This same group can probably also handle $3 million.

At least one person becomes an expert in finance, another in selling, and another in workflow. Everyone understands their primary role and brings in business consistently. Annual mastery of fundamentals allows the team to take on more sophisticated processes.

Once every team member masters a critical function, they move to 2.0.

2.0

The team gets better at budgeting, planning, and strategy. They become more effective in the marketplace through continual improvement and outsourcing.

Mastery makes business easier, allowing more bandwidth to take on complex tasks or to use the added capacity to grow without extra hires. It’s about working smarter.

However, as volume grows, the core team might add employees to increase throughput and accuracy.

Once they’re comfortable operating at a 2.0 level, this company is ready to master Intentional Success — figuring out where to apply their expertise next.

3.0

The team of five decides what’s next, given their mastery. Do they expand or optimize existing efforts? Add services, channels, or new businesses? The core team uses its experience to make these ideas a reality.

Most companies at the 3.0 level expand through hiring. However, thanks to that core team’s expertise and efficiency, hiring is a choice, not a necessity. As the company becomes more sophisticated and adds staff, the core team of five takes on more strategic planning and less tactical work.

The Key Takeaway

If you want to become a 3.0 enterprise one day, invest in the best five people you can afford. Scalability depends more on quality than quantity. Small groups with commitment and know-how can rival complacent giants resting on their size.