The ONE reason 97% of entrepreneurs never reach 7 figures.
They focus on growth.
But don’t know how to scale.
What’s the difference?
Growth = revenue growth (while increasing expenses)
Scaling = exponential growth (at minimal additional cost per unit sold)
Let’s dive in:
Step 1: You open a business and do everything.
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Lead gen.
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Sales calls
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Client onboarding
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Products / Services
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Financials, Admin, Operations
Step 2: You outsource low-value & high-volume tasks.
You may hire someone to manage admin tasks, or with fulfillment of products or services while you focus on sales and getting more customers onboarded.
As you grow you build out your org. chart completely and remove yourself as a bottleneck to growth.
Step 3: Create systems and processes.
You now have a team, processes in place and your business can run without you. You are profitable. You created a sustainable and predictable model.
Congrats! But you are not done.
This is where it gets interesting.
(I talk more about ways to create unfair advantages in business here.)
Where can you find opportunity for SCALE?
Think exponential growth. How can you sell additional units without incurring additional expenses?
Here is an example.
Physical locations (salons/retail/gyms): Challenging to scale without adding new locations at high investment. Also difficult to increase services without adding more people to fulfill them.
Consider: Branded products for online sales, Digital products for e-learning or offering a subscription for recurring virtual consults.
Software and online distribution is the best way to scale.
But it’s not always possible.
In this case, focus on these steps below:
Remove any bottlenecks:
1. to increasing revenue.
2. to fulfillment of services/products.
Let’s discuss revenue first.
There are only 3 ways to Increase revenue:
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increase # of customers
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increase how often they buy
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increase average order amount
And now the expense side:
Remove bottlenecks from fulfillment by:
• Creating systems and processes.
But don’t forget. Focus on profitability.
You can’t scale a company that is not profitable without running out of cash.
Profit has 2 levers:
1. Gross margin (your cost of product or fulfillment of each unit)
2. Expenses (your operating expenses)
Sidenote: Track this metric to ensure you have a sustainable business model. LTV:CAC ratio.
To learn more about this visit this site.
Image credit:https://www.daasity.com/post/ltv-cac-ratio
LTV = Lifetime Value of Customers
CAC = Cost of Acquiring each customer
LTV should be 3x your CAC or higher.
Remember:
To scale means finding growth levers that only take incremental costs to grow profitably.
Thanks for reading.
As always come say hi to me on LinkedIn.
Till next week,
Noemi
P.S. I do have a book recommendation for you. It’s a classic and I tend to reread it every so often and I still get aha moments each time.
Zero to One: Notes on Startups, or How to Build the Future
by Peter Thiel
