What does your business take from startup to large company? Of course, an attractive offer and a sufficient market are required. But that is not enough and if you really want to become unstoppable, the organization must be optimized for growth; the company needs to be scalable. At Ageras, we want to help all entrepreneurs to develop, which is why we have put together this guide to scalability, aimed at you who want to start a growth company, or develop your current business model.
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What is scalability?
A system is scalable if it is designed to continue delivering when the workload increases. The fact that a business model is scalable means that it can handle 10,000 customers as easily as it was previously able to handle 10 customers.
Robert Sutton and Huggy Rao, who wrote the book ” Scaling Up Excellence: Getting to More Without Settling for Less” , believe that many entrepreneurs are mixing scaling up and growing. Growing means increasing sales and workforce, while scaling up incorporates more. This means that the business model and organizational structures improve before and in line with growth. The authors use a human metaphor to explain what they mean. They compare growing the company with an arm that gets bigger, a change we can easily see. Scaling up is more subtle and means not only that the arm gets bigger, but that the heart that pumps the blood becomes stronger and that the arteries find their way, so that we can continue to use the arm without losing functionality.
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In other words, the entrepreneur who wants to create a scalable company should look inward from a holistic perspective and ensure that the organization has support functions that stand out when the pressure increases. Harvard Business Review writes that companies that actively work from a scalability perspective succeed 65% better than companies that only focus on growing. Not all companies will face the same challenges as they grow, but there are some aspects that all entrepreneurs can take into account when optimizing for success. Read on to see who they are.
Streamlined shape with technology
Technological development means opportunities to become more efficient by applying new solutions to old problems at lower costs. Digitization has revolutionized the possibilities for entrepreneurs who want to create scalable business models, which has meant that sharing and networking services such as Uber, Airbnb and Facebook have grown exponentially in a short time. The key is that they take advantage of network effects that make them more efficient with more users. Companies do not need to invest in more assets, as they only mediate contacts and create opportunities for people to find each other.
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Digitization and other new technology obviously mean opportunities to create sustainable growth in companies based on more traditional business models. When developing scalability in your business, technology is your best friend, especially if you work proactively to implement scalable processes. Look around and identify what tasks you and your employees do on a daily basis. Then imagine that your company is ten times larger and see if you have the capacity to handle the workload for each specific task. Then you know where the technology can be implemented. Do not be afraid to standardize processes through business systems , it frees up time for creativity and development.
Find your place in the network
A classic trap that many entrepreneurs get caught up in is that they take on too broad areas of responsibility and find it difficult to let go of work processes for employees and outsiders. For a business idea to be effective and flourish, it must work smart. Each actor is part of a network and with the communicative revolution, several researchers argue that it is constructive to see companies as interacting nodes in a larger context, where each part has its specific function.
To gain an understanding of your network, you can take a step back and analyze where in the machinery your company has its unique place and which other actors can help you as you grow. Then it becomes clear which processes are superfluous and which you can outsource to someone else in the network and thereby streamline your company to develop in its specific function.
Maintain the vision in the culture
One aspect that risks deteriorating when the numbers improve is the corporate culture. It is central that new employees understand the vision for them to become independent and pull in the right direction. An example of a success story that went awry when culture slipped is Starbucks. The café chain originates from a small cozy café in Seattle. The café had a unique feeling that was initially managed to convey when the concept spread around the world. But after a while, when there was suddenly a Starbucks in every street corner and mall, they got into trouble. The feeling disappeared when the culture only revolved around improving the result and not the quality of the experience. Those who worked did not strive to convey Starbucks’ unique experience. Founder Howard Schultz talked about the dilution of Starbucks, which was costing the company everything.
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Starbucks managed to reverse the trend and there are several lessons to be learned from history. Rising sales are not a direct measure of quality. To grow and maintain quality, one must measure quality so as not to lose direction. Develop standardized measurement systems that are designed to show that the basic concept still exists, even in new parts of the organization.
Let all employees take part and learn to work according to the vision. It must guide all actions, and thereby drive the company forward. Facebook is known for its almost indoctrinating strategy where it lets new employees go through a six-week initiation process where staff work on a variety of projects at a high pace. The idea is to create a culture based on a positive attitude to changing work; a mindset for growth. It contributes to scalability, as it fosters the flexibility needed to meet new challenges and facilitate organizational change as the business grows.
Facebook’s strategy may seem somewhat extreme and there are several ways to teach the culture. The important thing is to ensure that new employees can take part in it directly, and not just be thrown into the work without some form of introduction. It is also important to hire smart. In an interview with Ageras , media entrepreneur Tor Martin Olsen told about how he was forced to slow down the growth of his production company when the workforce grew too fast. The problem was that he did not have time to train the staff and get them to pull in the same direction, which led to dissatisfaction and high staff turnover. Now he has changed strategy and makes sure to hire at a pace that allows everyone to integrate into the company and start working towards a common goal.
Growing fast costs money, especially if you produce or sell products, but even service companies can see their investments disappear quickly when the workforce and marketing take up more space. In fact, the most common reason companies go bankrupt is because they do not have enough cash to pay their bills. Include a cash flow analysis in the business plan to ensure that you can pay all invoices .
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If you are busy with the operation of the business, it is of course worth outsourcing the financial part to an external expert, so you can focus on developing the company’s core business. Through Ageras, you can find an accounting consultant that suits your needs free of charge and easily