Two business owners.
The first hasn’t had their first customer yet. He has spent countless hours and dollars on market research, developing and re-developing his website and logo, projecting revenues and costs, and developing procedures for future employees. He wants everything to go perfectly.
The second is a seasoned business owner. He has been in business for years, but over time his workload has increased and his revenue has leveled off. He is great at closing a sale and great at what he does, however he is the one who does it all. He’s never bothered to hire staff to do any critical tasks, nor has he ever tried to use technology to help automate or eliminate.
Everyone knows businesses like these. It’s clear that both are not reaching their potential, in large part because of how they approach scaling. The first is so obsessed on their business processes and their plan to scale to their first $1 million, that they haven’t figured out how to make their first $1. The second is so integral to his business, that there would be no business if he wasn’t around (many lawyers and accountants fit into this boat) . He is the classic business owner working in his business and not on his business (as Michael Gerber defined in The E-Myth).
So what’s the right way to approach scaling? I will always maintain that you should do the least amount of work possible to get your first customer. Fail quickly and cheaply so that you can recover and bounce back, and if you happen to succeed you can then make the necessary adjustments to scale. The first business owner was obsessed with scaling before proving their concept, the second has never considered scaling despite their success.
Example – you have an idea for an e-commerce company. Once you’ve got your products in stock (or have set up a dropshipping account), make it a goal to get your website up in a week. My new preference would be to start with a hosted solution like Shopify, spend a few hours on a logo and a template, and work on getting your first sale. Test some PPC marketing, try sponsoring a few forums or blogs, do a few other low-cost marketing tactics to test the waters. Which tactics created sales and which didn’t? Which products sold the most? What types of questions did you get from your customers? How difficult was the order processing (accounting, packing, shipping)? Total cost: a few hundred dollars and a few weeks of time.
At this point, assuming you’ve decided to move on and pursue the idea, you can start to scale for the next few months. Put some money into the marketing tactics that have shown promise. Experiment a little more with other techniques. Fix things on your site that create a lot of customer questions and create a FAQ. Create simple processes to speed up your order processing (things like utilizing existing import/export systems in your software).
Now, if all that works out, that’s when you really start to plan to scale. At this point you’ve shown the potential for a profitable business over the course of several months. You’ve also “lived” each part of the process for long enough that you know the shortcomings of it. You understand what needs to be fixed and what doesn’t, what takes up too much time and what doesn’t, and it’s a good chance that this is different than what you would have thought a few months ago. Instead of wasting your time over-planning, you’ve proven a business concept! This was the point we were at back in 2007 with Detailed Image, and it was the reason we developed our current e-commerce platform, which has been a large part of why we’ve grown almost 10x since then.
But now we’re at the next phase of scaling. We know what we are and who we are. We know what works (right now at least) and what doesn’t. It’s time to pour some resources into developing a platform that can help us dominate our niche. Our differentiating factors – customer service, strong marketing (particularly sponsoring forums), and efficient business processes – are what we’re going to be growing on. So we’re revamping the e-commerce platform to help us do those things better. To improve and modernize the front-end shopping experience, but to also tie together everything else we do in anticipation of the growth of the next few years (both in terms of sales and potential employees).
I’d anticipate that 2-4 years from now we’ll be having the same discussions about how to grow. With the way that the web (and the world in general) changes, it’s impossible to see past that point. We aren’t thinking about when we’re doing $100 million in sales or when we have 500 employees, because those things are pipe dreams and totally unrealistic at this point. Even if we did put things in place to accommodate that type of growth, things would be so drastically different when that happened that it wouldn’t even matter (plus, someone way smarter than me would likely be making the tech growth decisions at that point).
And that’s the absolute most important thing to remember: plan to scale only to what’s within reason. If you’re just starting, your first sale is all that’s reasonable. If you’re at a stage like we’re at where things are starting to mature a bit, you still can only plan out a few years at best. Spend time doing any more or any less and you’ll end up like one of those two business owners above.