”Let us try.
To-morrow, how you shall be glad for this!”
Businesses want to scale. It is especially true for ambitious entrepreneurs. It should be easy, should it not? After all, the smart view is that it is ambition that scales, ’stuff’ does not. But the reality is not linear, not bi-modal, but nuanced. The road to hell is paved with a surfeit of ambition and a shortage of what it takes.
So what does it take to scale successfully?
Here is what.
Cardinal check: The core issues
Is the core of the business profitable? If it is not, then there may be a problem to solve already. There could be many reasons for unprofitability from bad strategy to poor execution. But one big outcome is that the business has little money to spend on dreams.
Is the business amenable to scaling? Not all businesses are. Some personality driven businesses and hourly chargeable careers may not always scale. The entrepreneur needs to take a dispassionate look – or ask someone else more dispassionate than she is to take a look – at the possibilities in and limitations of his business. That will also help think about strategic pathways to scaling. For instance, Nicky Clarke, who is a well-known hairdresser, can give only so many haircuts himself. Can he scale? Yes, possibly by personally training other stylists, or by launching haircare related products. But only he can decide if it is acceptable to him to scale that way.
Does the business have the capabilities required? A firm may be looking to open a new market. But it will be difficult to service a demand it actively creates if, for example, its manufacturing capabilities do not scale, or do not scale easily. For one of my clients in biologics manufacturing, we are doing our sums and readjusting our timetables because the manufacturing plants must obtain regulatory approval. In other cases, a firm may not have the capabilities but may be willing and able to source help from outside.
Above all, will the added scale enhance the value of the business? If the answer to that is ‘no’, the project may not be worth the hassle.
Capital: do your sums!
Does the business have the money it will take? Nearly all scaling activities require money. Lots of it. There are both monetary and opportunity costs associated with raising money. One could approach one’s bank, assuming it is willing to lend. One could go to investors who have expertise in one’s industry or bring other non-financial value-add. However with both these sources, tough questions regarding the profitability of the core business must be answered.
If one’s ambition really does scale and if there is confidence in other organisational capabilities, then one could bootstrap, as one of my clients – a serial biotechnology entrepreneur – is doing! He understands the risks and that if he must use leverage or raise money, timing is all important.
Regardless of how one raises capital, the balance sheet will change. So will the nature and scope of control as we see next.
Control: See, letting go of.
Can you let go? For ambitious entrepreneurs, one of the hardest things to do is letting go of absolute and full control: control of the company ownership and sometimes, of strategic pathways to propel the ambition forward. It is however a necessary risk, since the entrepreneur himself cannot scale.
Scaling also requires organisational and process redesign. And empowerment of people who buy into the vision of the business and have the capability to make the right decisions. If a robust core business and a basic but clear structure exist, letting go of control enables emergent structures that suit emergent needs. Sigue leyendo