Scalability - Part One: The Five Phases of Business Growth

Introduction

By my estimation over 80% of established business owners do little more than survive. Many earn less than they could at a paid job, work longer hours and have fewer holidays than their employed counterparts, and they enjoy zero sick leave or funded retirement plans. These are the Survivalists.

I divide the remaining 20% into those Solopreneurs who enjoy a personal income of hundreds of thousands and Entrepreneurs whose revenue and potential knows no bounds.

Every single barrier that separates a Survivalist from being a successful
Solopreneur or Entrepreneur can be overcome by mastering the skill of Scalability.

The term “Scalable” came into the business world from the computer industry. There are two online dictionary definitions for Scalability, both of them coming from the computer world.

The first is from the World English Dictionary which defines Scalability as “the ability of something, especially a computer system, to adapt to increased demands.”

The Computing Dictionary (yes, there is such a thing!) defines it as “how well a solution to some problem will work when the size of the problem increases.”

For example, a computer server with ten workstations all accessing files may perform adequately but with a thousand workstations it might fail to meet response time requirements.

Now think about this as it applies to you and your business: you may perform well with ten clients but if you can’t perform well with a hundred clients then you have very little Scalable capacity. More specifically, your “value delivery” is not scalable and therefore neither is your earnings.

Which brings me to my definition of Scalability as it applies to the world of business.

“In business Scalability is the ability to systematically and continually increase
 your revenue, independently of your available time”

There are two parts to this report. This rest of this article, Part One, follows Pat, a graphic designer as she moves through the Five Phases of Scalability and Article #8 walks you through the 8 ways to create Scalable results.


When I started out with my first business at age 24 I hit the problem of lack of Scalability very quickly. I was only two years into my first business when I realized that I was stuck on a time = money treadmill; trapped in what I now call Phase 1 of the 5 Phases of Business Growth which are as follows:

Phase 1: The Dream
Phase 2: The Nightmare
Phase 3: The Breakthrough
Phase 4: Scalable Value Delivery
Phase 5: Scalable Marketing

Let’s walk through the 5 Phases with Pat, a young and ambitious entrepreneur. See if you can relate to Pat’s story.

Phase 1 is where Pat starts her own graphic design business.

At the start Pat’s got more time than money as evidenced by an empty bank account and a lack of scheduled forward work i.e. her diary is as empty as her bank account.


But Pat notices with delight that as her diary fills up, so too does the bank account.

And that’s when she begins to dream of being booked solid.

Phase One is also where Pat buys into the belief that time = money. And because she wants more money, Pat spends more time until the point comes where she’s used up all of her business time.

The Phase 1 chart above shows how Pat’s time is spent in her business and “5F” stands for five figure revenue. “Marketing DDD” stands for the three aspects of Marketing: Discovery, Development and Doing.

At this point Pat graduates into Phase 2 – she’s fully booked. But even though she’s now booked solid, Pat still doesn’t have enough money. And she’s run out of business hours.

So in an effort to get more money flowing into her bank account she works late and begins emailing work to her private email address at home so she can work weekends.


Pat steals time from her partner and kids and from her own need for free time to balance her life and nurture herself by relaxing (she’s forgotten how) and enjoying a healthy amount of self-indulgence.

As her stress levels increase and as her personal needs are not being met she finds herself drinking more in order to escape and unwind. And home begins to be the place she retreats to when she’s tired of being nice to people.

But Pat says to herself “I know I’m not balanced and I know that I need to spend more quality time with my family and I know I’m stressed … BUT … I’m only going to do this until I have enough money.”

Which turns out to be never. For two reasons. Firstly, Pat’s run out of time and that’s pretty much all she has to trade more money for. Secondly, human nature being what it is, enough is never enough. And that’s when Phase 2, which was Pat’s dream, begins to turn into a nightmare. To put it in simple terms: in Phase 1 Pat had plenty of time but not the money. Now in Phase 2 she has more money (but not enough) but she’s out of time. She makes a tough decision that moves her swiftly into the next Phase.

Phase 3 is where Pat discovers the Law of Supply and Demand as it applies to prices. She figures that being fully booked is the market place’s signal to her that it’s time to put her prices up. Which she does.


She loses a couple of smaller clients but the rest are happy to stay and pay more and suddenly she’s living the dream: she has the money and she has the time to enjoy it. However even though she’s made a significant breakthrough Pat senses that she wants to play the game at a higher level and she realizes that in order to do that she needs to be able to take on more clients than she can personally handle and give the extra graphic design work to well-trained contractors. Thus Pat’s journey continues to evolve.

Phase 4 is where Pat really begins to face some heavy duty challenges including getting the most out of her contractors.


Fortunately however she’s been keeping simple checklists of all repetitive tasks such as prospecting, lead conversion, new client orientation and pre-delivery quality control and now she fine tunes them all so she can train her new graphic design contractors.

And every time she recruits a new contractor she also creates checklists and guides for her selection processes including questions to ask and the characteristics that make up a quality contractor.

Pat follows the same simple documentations process for training and performance-managing her contractors, and every time she contracts someone new it gets easier to select the right person and she gets them productive faster.

She meets weekly with every contractor and reviews their agreed Key Strategic Indicators (a.k.a. KPIs) and learns how to get the best out of them by encouraging them, praising them and when necessary, correcting them.

Pat also gets clearer on work that she’ll keep herself; the high-end premium-priced jobs that she enjoys and that carry big profit margins.

Other than that, the only other jobs that she accepts from this point are projects that she’s confident that her contractors can produce at a level of high quality.

With her systems now well developed and her new business supply lines set up it’s time to go the big money.

Phase 5. Having Scaled Value Delivery by learning how to select, train and performance-manage quality contractors, Pat turns her attention to Scalable Marketing.

• Up until now she’s relied on personal networking, word of mouth, referrals.

• But Pat’s smart enough to know that she has to ramp up the marketing beyond the limitations of her time and so she turns her attention to Scalable Marketing.

• Pat discovers that having a web site is not enough; she needs a “web presence” if her prospects are going to find her on the internet. She hires more contractors to help with Search Engine Optimization.

• She also develops a very cool system that captures the contact details of visitors to her website. The system consists of a series of two minute videos that offer tips and advice in respect to branding and logos, including a series of client “before and after” case studies which not only offer valuable advice but also position her company as a proven expert.

• Having created a steady flow of new subscribers she continues to add value to them, as well as continuing to build her credibility, by emailing fortnightly videos containing more case studies, interviews and interesting examples of overseas trends. This keeps her prospects “warm” until they are ready to buy.

• Next she turns her attention to Distribution. She arranges special packages and discounted offers for industry associations and advertises them in the association journals.

• She targets online advertising websites such as LinkedIn but avoids Facebook because her Ideal Clients are organizations and not individuals.

• Pat also hires a special Marketing contractor, based in the Philippines, to research and compile lists of potential Ideal Clients through LinkedIn and organic web searches.

• Working together through a process of “trial and measure” she trains her contractor to identify quality prospects, establish a relationship with them by commenting on their blog, joining discussions in LinkedIn and other online forums and directing each prospect to helpful resources.

• After a period of two months the contactor then emails each prospect and asks permission to send a package of design ideas and a special offer.

• She arranges a time to Skype with the prospect one week after the package is due to arrive. At the meeting she presents her offer in more detail and 20% of people give her the go ahead immediately.

• A further 30% are deemed to be poor quality prospects and the Ideal Client Profile checklist is modified so that these people are not targeted in the future.

• The remaining 50% are not ready to buy and after consent is given they are entered into the database to receive the fortnightly video series to keep Pam’s brand “top of mind” until they are in need of her firm’s graphic design services.

• At this point Pam drops all personal client work because she wants and needs to focus her full attention on being the “Orchestra Conductor” by coordinating her Marketing Contractors and her Value Delivery Contractors.

• Additionally she is mindful of the wisdom of committing to her MDWs (Must Do Wells): those activities that she may not always enjoy, but that must be done well, including the monthly Financial Review of Cash Flow and Financial Position, weekly Performance Development Meetings with each contractor, planning her months, weeks, and days, plus meeting monthly with her Board of Advisors.

• For the first time Pat feels like she has a real business and that feels good.

• Key Points

• Make sure that your ambitions in respect to the 5 Phases of Scalability are aligned to your desired Personal Life Style and Business Life Style.

• At every single phase, you and your business will benefit from identifying key activity measures such as the number of quotes/proposals, number of sales, number of active customers and so on. There is no management without measurement.

• The creation of systems (checklists, templates, scripts etc.) also pays dividends in every phase and it’s never too early or too late to start developing them. In the earlier phases they help you get continually better results and they also help you become more efficient by saving time. In phases 4 and 5, systems help get employees or contractors more productive, faster. This saves you even more time and puts money into your bank account in ever increasing quantities.

• Action Items

• 1. Create a single page document, preferably using a physical sheet of paper. Write down which phase you are in and then write down which phase you want to get to.

• 2. On your sheet of paper identify the key actions that you need to commit to in order to get to the next phase (not necessarily your ultimate phase, just the next one). If you are in phases 1 – 3 start by setting just a few sales and marketing activity objectives and track and review how you do. If you are in phases 4 or 5, agree with employees and contractors on key activity measures and meet with them every week to review their reports and to guide and support them. Keep it simple.

• 3. Next, write down seven (no more) critical systems that you will develop or improve. By way of example, these may be in the form of a checklist for identifying Ideal Clients or perhaps a PowerPoint presentation for a new client orientation meeting.

• 4. If you are in Phases 1 – 3 then schedule sufficient time in your calendar to create the measuring system (spreadsheets are always effective) and then a series of weekly meetings with yourself or a buddy to review your results. If you are in phases 4 -5, schedule time to meet with each Team Member to figure out and agree on their key activity measures.