With the dawn of a new year, is it time to take your business to the next level? The term “scaling up” is commonly used to describe general business growth, such as when a business gets so busy they need to expand their operations or upgrade their technology to cope with demand. But business coach Rob Morris, of RBA partner RGM Consulting, says that scaling up can mean so much more.
“Quite naturally, it sounds like getting bigger and growing revenue, and that is often a part of it. But fundamentally, we’re talking about scaling up the value of the business — its enterprise value,” says Rob. “Trying to create a more valuable business for the owners. Often that goes hand in hand with growing revenue, but sometimes it doesn’t.”
Successful scaling up should not only to add value to your business, says Rob, but give you back the time and freedom you envisioned for yourself at the outset.
“When people start a business, they typically think, ‘It’s going to be great, I’m going to be my own boss, and it’s going to be fun and I’ll have a lot of free time.’ But as they become successful and start growing, the opposite normally happens: the business starts to become all-consuming. As you put the foundations in place to grow the value of the business, you free up time for the owner and business leaders to enjoy the ride.”
Rob came to business coaching after enjoying a decades-long career in the tech industry, working for 16 years at Ericsson in Sweden (the number one supplier of mobile networks globally) and then as CFO and head of the commercial and strategy team at Spark Digital. He’s now a certified Scaling Up coach, and works with businesses across New Zealand and overseas, including RBA members Accent Construction, Hardware Direct, Bon Accord, Madison Qualitex, and Total Property Solutions. He says that the way scaling up looks in reality can vary between businesses and industries.
“For one premium-quality food and beverage company, for example, with a strong position in the New Zealand market and massive export opportunities, it’s trying to help them figure out what markets to pursue, what not to do, and how to sequence it while growing their own capabilities.
“Another example is an IT company that has tripled their profit over three years, but increased revenue only about 50%. In that case, it’s been about growing the value of the business by simplifying things and getting very focused about what they’re doing.”
Rob says that common pitfalls occur when a business grows without a solid plan.
“Many business owners or leaders get stuck working in the business, and they never get around to working on the business and figuring out where they’re going to take it,” he says. “Perhaps they’ve been growing so rapidly that the wheels are starting to come off and they need tools and frameworks and structures to help them manage the growth. Or some of these businesses have been around for a long time, and they’ve running a good business, but it has stagnated and they want to push through to the next level.”
Rob notes that there are lots of opportunities for businesses once they reach the “mid-market” space (i.e. turning over between 20 and 200 million per year), but reaching that size also comes with some common growing pains. Having an abundance of opportunities itself can be a setback (“You end up going into spaces where probably you shouldn’t and make a couple of bad choices, then all of a sudden you’ve drained the business”) and there’s a risk of “growing yourself broke” by focusing so firmly on revenue and profit that you lose sight of what you’re investing into working capital.
Also common is the need for exit preparation when the owner(s) wants to phase themselves out and retire while still accelerating the business.
“If you’re in a big corporate, you can have whole teams work on this stuff all the time,” says Rob. “If you’re in a mid-sized company, you don’t have that luxury. Tools and frameworks need to be pragmatic and deliver value immediately.”
Rob says that the first step in scaling up is to review your business to determine what ducks need to be in a row — like having a leadership team in place — before making any changes. “You need to diagnose the business and say, ‘Okay, you have a model here which is good to scale right now,’ or ‘We need to put some foundations in place first, so that we’re not scaling a mess.’ That’s quite important. You also need to know whether the prize is big enough to make a material impact on the value of the business, because that’s what we’re after.”
Rob recommends reading Verne Harnish’s book Scaling Up, which he gives to each of his clients, and invites readers to check out the free tools on his website (rgmconsulting.co.nz).
“I recommend that you sequence and stage the work,” he adds. “You don’t want to try to change everything at once because it’s just too risky. One of the things we like to do is figure out the main constraint that’s holding the business back right now, and start there. It’s a question I ask often: What’s the biggest constraint holding the business back? You really want to be working on that main issue.”
If doing it all yourself seems a little overwhelming, Rob says that’s common, too. “Often people try it themselves, then realise they need some help and come to somebody like me. The model I mainly use is directly coaching the leadership team, so it’s quite intensive. You’re much more likely to succeed because it’s what I do every day, plus you’ve got that external voice and somebody to help hold the team and the leader accountable for the plan they’ve built.”
Done right, he says, scaling up can inject some passion and enthusiasm back into your experience running your business. The most important requirement, he adds, is the strong desire to make it happen.
“Whether to make changes is a matter of the ambition of the owner or leader of the business. It’s really, ‘Do you want it?’ and ‘Are you prepared to commit to the process?’ Because it’s hard work — it takes a lot of discipline and focus. That’s just honest — that’s how it is.
“But scaling up is fundamentally about improving the value of the business, so you’re building a better-quality business by putting foundations in place that are going to give you, the owner, more time — and more fun, really. It’s never a bad idea to do that.”
Special thanks to Rob Morris of RGM Consulting. For more information about the Scaling Up system, visit rgmconsulting.co.nz.