How To Start A Business With Scalability In Mind
First things first, if you’re not a part of our free Facebook group: The Scalable Service Provider, I’d hop in there and check out all the goodness going on…
...because today I’m answering a question from one of our members who asked the question around building a business with scalability in mind.
So today, I’m going to cover three main areas that are universal in order to set up any business to be more scalable and systems-oriented.
The problem I see often is that business owners want to add more scalability by adding online training or a course to their existing services BUT, they are playing the addition game when they should be playing the multiplication game.
Here’s what we’ll cover:
- What does it mean to be scalable?
- Why focus is the foundation and catalyst for scalability
- To scale, you need to simplify
- How to increase capacity on demand
- The main SCALE FACTOR for agencies and service providers
- Capacity vs. throughput
- What parts of your business need to be systemized to free you from the day-to-day
- Identifying 3-5 numbers that will drive your decision making.
Transcript / MP3
What's good, everybody.In this episode, I want to break down how you can actually start a business with scalability in mind. ...
Let's get it going.
For three years, my agency built funnels and automation systems for the biggest names in marketing today since then have transformed that agency into a hyper profitable training and consulting business. While everyone is out there talking about scale like it's some sort of destination, we'll be asking the real question. How do you transform your business into a more scalable model using the knowledge, skills, and expertise that you already have? This podcast is here to give you the answer. Join me and follow along as I learn, apply and share the strategies I'm using to build my multimillion-dollar business. My name is Greg Hickman and welcome to scalable.
Welcome back to the scalable podcast guys, and in this episode, we're actually going to be answering a question that came from one of the members of our free Facebook group called a scalable service provider. If you are not in that group, you should totally be in there. We talk about all things, systemizing your agency, creating a more scalable business through automation, through systems, through people, through structuring Your Business in a more leveraged model than done for you services. Now, if you're obviously listening to this at the moment, um, I actually recorded this, uh, live in the group. So if you are again, are not in the group and you're, you want to kind of get access to the recordings of some of these episodes where I'm answering your questions, be sure to one, join the group, participate. We'll leave links in the, in the descriptions and the show notes and everything for you to get access into the group so that you can participate.
Get your questions answered in upcoming live episodes just like this. So the other week I reached out to the community and said, hey, if I went live here in a few minutes, what are we going to, what would you like me to talk about? And we got some really amazing questions. We recorded a couple of episodes already, but John uh, dropped an amazing question and I actually asked him to go a little bit deeper on that question. So I'm going to share his question and kind of his backstory on the question with you. So you kind of has context for what we're going to be talking about in the rest of this episode. I've got some book recommendations and we're going to be jumping onto the iPad and sketching some things out if you're listening on iTunes or stitcher or anything like that, just listen along. All right, so John Essentially asked the question around building a business from the outset with scalability in mind, like what are the three main areas that are universal in order to set up any business to be more quote-unquote scalable and systems-oriented.
And so I said, that's an amazing question. Can you give me a little bit more context so that I can make sure that we dive into, you know, something that's going to be helpful for you? So he came back and said, what are three things that are saved at kings, so to speak? And everything else is the royal subjects. Obviously, revenue and profit is the main driver that needs to be some systemic, but there, what are the three big ones that can be universally implemented regardless of industry or are they more specific to the industry? Example, I have added a guitar training and guitar building course to my custom woodworking and furniture-making business. I'm essentially selling knowledge and experience instead of just physical products. So the systems I'm looking to implement are more intangible, intangible than building a hard product and selling it. Are there universal scalable components that can be baked in from the outset?
I know you can bake out the ability to be scalable, but can you bake it in? So hopefully that provides context for the question. Uh, and I have a decent amount of stuff I can cover on this, but I wanted to kind of boil down a few things. First of all, uh, in this particular example, John Sane, I've added a guitar training and guitar building course to my custom woodworking in furniture-making business. Now the first thing that catches my eye in this question is, well, he said he's added this to his business. Now his business is custom woodworking in furniture. Now, if his business, we're in the custom wood making, making guitars, I would say that these are, this is an addition to your business. You, my friend John, are starting a completely separate business. We need to be clear about that. I think this is a, a common issue with service providers when adding new services.
In this case, you have your woodworking business where you are doing, you know, you're doing the labor. Maybe you have some help and you're creating furniture and you're selling it, right? I'm sitting at a, uh, a desk that I bought from a local woodworker. Uh, he makes custom furniture and I wanted him to make a custom desktop that I could put on these, you know, automatic desk legs. He builds furniture. He could have built this shelf behind me. I did. We've skipped, we've scoped out a bunch of different things, but he builds furniture. If you went and started creating an online course around, you know, design, those are separate businesses, right? So I just want you to again be clear, you are not adding onto your current business. You are starting a separate business. If you're going to be talking about guitar training and guitar building now, yes, there's some overlap in the guitar building.
If, if in your woodworking business you are actually building guitars. But to me those sound like separate businesses and this is going to lead into the first thing that I think is applicable to all businesses when building a business that is able to be systemized and scalable from the beginning. But I want to go into some definitions because I think we all need to be on the same language, speaking the same language when it comes to scalability in this conversation. So first and foremost, something that plagues many service providers is, you know, if you're over here serving and you're doing Facebook ads, but then you also have clients where you're doing funnels and you're working with coaches. Theoretically those are two different businesses, right? And they can be. And so that brings us to kind of the first thing that I think is universal is focus, right?
So, uh, before I go into diving deeper onto focus, I want to actually look at the definitions of scalable and scalability because I just did a training that we're going to be releasing here as soon. Um, where I actually kind of break down some of this language. So I'm going to share my screen here. And, um, first scalable. What does it mean to be scalable? Right? Right now everybody's talking about scale. Like it is some sort of destination, but a lot of the things that we look at in business is around the ability to write those ables. We want to be profitable, we want to be scalable. Those are the able part, right? Able to be scaled. So what does scalable mean? Capable of being easily expanded or upgraded profitably on demand. So whatever business you're in, John, whether it's your woodworking business or the guitar training, um, you know, guitar lessons and or even how to build a guitar, you need to ask yourself what's the capability of being easily expanded or upgraded profitably on demand.
We're going to dive into what areas you need to be able to do that in right now. Diving deeper in that, looking at scalability, scalability, when you literally look this up in the dictionary, I kind of combined some of the different, you know, whether it's a verb or a noun and how it relates to business. Obviously when you look at scalability, they talk about a lot of things that are not just business-related, but I wanted to kind of apply some general concepts of scalability into kind of the business element because that's what we're obviously talking about here. So scalability, an attribute that describes the ability of a business to grow and manage. Increase demand. Okay. So the ability of a business to grow and manage increased demand. A scalable business has an advantage because it's adaptable to the changing needs and demands of its clients.
I think that's something that's really interesting and we're going to be diving into scalability is often a sign of stability and competitiveness as it can handle an influx of demand while remaining profitable. So John, in your original question, you know, you had asked, um, you know, obviously profitability is one, I think profitability is a byproduct of the things that you need to be doing. Obviously, any business that is scalable, we by definition should be profitable if we're working off that. So I'm not going to say that one of the three things is profitability because in order to be scalable, by definition, profitability is a key part of that. Okay. So for the sake of definitions, that's what we're working with, uh, in, in this context. So let's jump in here a little bit. So some things that come to mind for me, right? Um, I said focus, right?
And this is a major area that we discuss with a lot of our clients because again, we work with a lot of agencies that are more generalist service providers and they're doing a lot of different things often for a lot of different types of people. So in this case, John, you have your woodworking business slash furniture and maybe in here it sounds like every once in awhile you're making a guitar. That's what I'm Lee, I'm making that assumption, but then also you want to start a guitar training and the guitar building course. Okay, so I'm not sure if you're training people on how to build or if you're actually training people on like how to play the guitar and then also how to build a guitar if those are, if you're really just focused on the building. I think there's a little bit more alignment between these two ideas, but the reality is these are two separate business models, right?
You have a service and you have information, right? You're showing people how and so how each of these scales and becomes scalable is going to kind of, I guess sequentially rely on some different things. But really the first one is focus, right? If you're doing both of these things at the exact same time, the ability that you're going to, your ability to grow each, each of them profitably is going to be diluted, right? Because they're two separate things. You know, if you went all in on how do I make my service more scalable, you're going to put all of your energy and effort to one thing. So I think the first thing that we have to look at is from the onset of a business, you know, whether this is early stage or you're just getting started, the more things you are doing becomes a disadvantage to your scalability. And so that's why focus is really important because you're essentially running two businesses, if that's making sense. Same for an agency that maybe has like 10 different types of clients and they have a service menu of 20 different things that they could do. Scaling any one of those is like could be it's own business, right? So this is why we often talk a lot about, you know, this notion of productization.
How do you sell and deliver your services like a product. In this case, we're not actually selling your services like a product. We are actually doing something completely different, okay. Versus say a, in our original instance we were building say Webinar funnels for people me webinars for people versus showing them how to build webinars. Like the outcome is still the same. They have a Webinar, but how we get there is different. So, um, that kind of brings me to the, well actually before we jump into that, a great book on this, which I want to give you a resource is essential ism. If you guys haven't read essential ism, you definitely should because you, we've all seen this graph, it's, or this image is pretty popular, right? Uh, this is the way that most people try to scale their business. So in focus essentially [inaudible] right?
We have all of your energy, right? And you're spreading yourself thin by putting your energy in. A lot of different places, right? So in this case, John, your energy is over here and you know, furniture, it's over here and guitar building business, right? And who else knows? Who knows where else your energy is? Is, is that right now? Right? So what sets most businesses apart that are actually scalable is if you have all of your energy and just like in the graph, you focus it all in one direction. So this could be either one of those businesses, right? Is Selling the Info on guitar train, um, or guitar building, or you go all in on the service, the service side, right? So from the onset, no matter what it is you're selling, I think no matter what business model, if you're trying to operate two different business models, if you're, the more avatars you're trying to serve, the more service offerings you have in your quiver, right?
All of those things lead you to the kind of dispersed energy where you know you're not going to be as likely to succeed. And or what from I think a profitability standpoint, but even more from a systems perspective, which we're going to be talking about in a minute. Right? So the goal out of the gates, if you want to be scalable, is being able to exert all of your energy towards one solution, one business. Okay? Again, back to why most of the clients that come to us want to focus on product position. How can they bundle up their services to sell a specific outcome so that they can start to benefit from having systems in place? So the first thing we'll say is, you know, focus and even more so is I believe is um, we'll say simplify. But to me that means simplifying through deliverables slash what's the outcome you're selling and the Avatar, right?
You can't serve everybody solving every single problem. So the first one is focus. Now, um, the second one, the second key, and I don't have three, I'm going to cover kind of four things that come to mind. Um, the second thing is I really think about capacity. Um, and this brings me to the book thinking in systems. The book thinking and systems by Danella h meadows, if you're a systems minded person, this book is a pretty intense, a lot of graphs and everything. But what I want to talk about with capacity and capacity in many cases, um, yeah, like I think of capacity and throughput, right? This book talks a lot about throughput and in your business, right? Like we talk about what is your scale factor because the scale factor of a service business is going to be different than the scale factor of a course business, okay? And so this is why, and this is going to lead into systems in a minute, but if you look at your business, right? If this is sales and, and this is onboarding, right? This is kind of the rest of your delivery.
That's how you write, deliver, not vertically deliver it, right? This is your marketing and this is your advertising, right? These are different areas that we're going to be creating systems across our business for a service business, their capacity is limited because of how many clients they can actually serve, right? This is why oftentimes I'll ask the question like if I give you five new clients right now, would you or your business break? What about 10 new clients? What about 15 new clients? If you are a service business AK done for you or you work one-on-one, five new clients, we'll either break you or your business just like 10 clients or 15 clients depending upon how much help you have, right? Your ability to take on more. Going back to that definition on demand is not a reality, right? I couldn't just throw you 15 new clients right now.
If in your woodworking business and you are, you'd be able to serve all of them effectively without seeing a decrease in results. I'm guessing especially if you're the one doing all of the work, right? You were, you would break. You couldn't even work enough hours in the day to make that happen without probably having tons of other sacrifice and issues in other areas of your life. I don't know if you're married or have kids, but like if you were working 24 hours a day, you're not. Your health is going to get jacked up, your relationships are going to get jacked up, you're going to be burnt out, right? So inherently, a service business scale factor is in the capacity in how many clients you can handle. How many clients can come through your delivery mechanism, right? Your fulfillment mechanism to get the result without sacrificing the client results, right?
Probably only a couple at a time. That's, that's the throughput part that you'll learn about in this book. Now, if you're selling courses right, and there is no real fulfillment, right? It's just them going through online videos. Typically your scale factor ends up being in the amount of leads that you can pump through your sales system, right? So can you control the demand? Right? And this is why a lot of online businesses talk about how to acquire people profitably using Facebook ads, right? Can you just turn up the dial and have an influx of new leads because fulfillment isn't going to be the issue, right? The back end isn't going to be an issue because it's just how many people can watch a video at the same time, like thousands, right? So your limit, your scale factor is going to be on how many leads. Okay. And clients can, in sales, can you actually push through your selling system, right? And depending upon how you sell, if you still sell one-on-one, if you sell a course one-on-one, your scale factor is going to need to change here. This is why you see a lot of people selling courses sell directly from say a Webinar or a video sales letter because they can sell to many people at the same time. If 50 people all buy at the same time and they all start watching the video, you can have 50 people watch it. They do at the same time. So what's going to make you more scalable as a info business is going to be how many leads and sales can come through the front end mechanism, right? The acquisition and sales system. Because again, we don't have that buildup on the capacity side or on the fulfillment side, right?
So, you know, in this book, um, in thinking and systems again by Danella h Neto is like they, they break down simple systems and complex systems. And one of the, you know, the diagrams is, you know, is this, I'm going to kind of draw this out. Imagine a box with a pipe coming out of each side and kind of like a cloud on the ends of each end of that. Now in, in art and our example, this is going to be kind of your capacity, right? How many clients can you serve in this delivery mechanism where they still get the result that they're looking for? Right? Again, if you are doing the one, if you're the one doing the, the woodworking, right, there's probably a certain level of, um, like the result kind of meets a certain standard, right? But as you start removing yourself, does that standard uphold, if you add 20 clients to your plate at the same time, will all of them come out to be perfect based on your standards or better yet the client's standards, right?
So what does success look like and and the business sense, this is going to be kind of the, the opportunity volume, right? So the number of leads coming through the system. So this is kind of the, the general pieces of a system. But what we're really talking about here is where scalability comes in is guys, first of all, bear with me, cause I'm like not the greatest artist. This is a lever, right? Or a lever depending upon where you live in the world or a valve. And so there's two valves, right? Okay. Can you open the valve, open the open the valve, open a valve, right? And let an inflow increase the inflow of new leads into your world. If this machine works and can convert them into new clients, then we can control the valve of how many we can handle at the same time without sacrificing results, then we have control.
Right? And so I think a big part of this whole definition of scalability is the ability to handle the increase and influx on demand. And the on demand part is, well, can you control each of these valves? Can I, can I open up the dial and say, look, we can go from serving 10 clients to a thousand and there's no issue. That's the fulfillment valve. And then on the leads and sales side, can I just open up the valve and can I control the influx of people coming into my world? Right? Again, if you're selling courses, you can probably sell a handful of courses each and every month through your organic activity. But at some point the marketing and advertising behavior is going to need to be able to attract enough leads to hit the numbers you want, right? And so we need to be able to open that valve and taken, you know, thousands, thousands of leads, right?
It depends upon what numbers you're trying to hit. That is going to be an issue, right? And so we're gonna get into that piece too. So I think your capacity to one, handle the advertising and marketing side, like bring in enough leads to be scalable or to scale. Then the ability to actually serve all of them, uh, without sacrificing results, no matter what type of business you're in is an indicator of scalability, right? If you get a team of woodworkers and you could go from five clients a month to 25 clients a month, okay. Without sacrificing results, like you've just been able to like really probably close to 10 x your business depending upon what you're charging, right? Because now you can handle 25 clients month instead of five, but can you get 25 clients each month? Right? So you might be able to serve 25 clients each month, but can you consistently bring in 25 clients each month?
That's going to be another factor in how, how far you can scale, no matter whether you're a service business or you sell courses, doesn't matter how many clients can you bring in each and every month on demand in a controllable way, profitable as well, right? All of these things. So capacity is going to be an issue. The, the next thing is systems, which obviously kind of piggybacks off this, but when I think of systems, when I think of systems, um, you know, we look at the different areas of your business. We look at advertising. Let me look at, um, marketing.
You look at sales. When we look at fulfillment, we look at, you know, legal, we'll throw a finance in, right? What happens when you take a thousand transactions a month? Can your financial systems take that? Right? Um, not just fulfillment, right? What about operations? These are different functions of your business and we need to apply systems to all of them. Right? Okay. Okay. Okay. Okay. Well, what, what does systems mean? Right? I mean, in this business sense that we talk about with a lot of our clients, we have, you know, automation. We have people, right? Which is really a part of delegation. Although you can delegate to software, you can delegate to a person, you can delegate to a process. Um, we have sequencing, you know, doing things in the right order. Okay? So all of these things are kind of, sis are our systems, right?
So what's the the advertising system? How are we automating lead acquisition and lead nurture for marketing out? How can we have enough sales conversations in any given month to to take on the capacity that allows us to grow, right? If you sell one-on-one on conversations, that means building a sales team. If it is just driving people to a sales page, your bow, your bottleneck is going to likely be in how many people you can get to that page, which brings it up to the next level. Back to what's our marketing, our nurture, our acquisition, all of those systems and how are we doing that? Okay, how are we fulfilling on those things? There's these are mechanisms to achieve specific results, right? A system is a combination of things that yields a specific result. So you have advertising systems, marketing systems, fulfillment systems, so that's a huge thing.
I don't care what business you're in, you need a way to choir leads, convert them into prospects, fulfill without, you know, sacrificing results at scale. You need to be able to have the systems for operations, for billing, for accounting, for all of those things. You need systems, right? And so I think the last piece of this is really know your numbers, right? I think not, not enough people know their numbers, right? To the point where, how, like what is the threshold in which I can open open each of these dials, right? How can I make sure that, um, when I'm serving 10 clients, my profit remains that are at a specific percentage. But when you learn that by adding 15 clients, that that number decreases to a point where maybe you're not happy anymore. You need to understand in your own business, how do you make that switch from 10 to 15 profitably?
Okay? So some of this is like the question that originated by John was how do we do this from the onset? Okay, well knowing your numbers, you can only do so much back of the Napkin math to get started, right? So as you start growing, this is more of the, you know, the next level of that conversation. For those of you that are listening in and for you specifically John, where it's like, all right, we know we need to have focus, we know we need to have the capacity and we know we need to have systems across all divisions of our business, advertising, sales, marketing, fulfillment, operations, et cetera. But as you start doing that, you need to really start understanding or understanding your numbers so that when you do open those valves, do all of those KPIs remain where they need to be for you to, to be profitable for you to be a healthy business, right?
Without losing money and going out of business or having enough bandwidth from a personnel perspective where you're not like killing your team or yourself because you're overworking and burning out. So you can only know your numbers so much in the beginning from a forecasting perspective. But as you start growing and you start opening those valves and you just start looking at those KPIs and in each business, again, depending upon your model, you're probably going to have three to five KPIs that you're tracking, right? Maybe cost per lead or cost to acquire a client. Um, you know, profitability per client, whatever your specific KPIs are for your business, fairly confident that some course creators will look at different numbers and say a service provider, right? You need to look at cost per employee, revenue per employee. In some cases it might be a metric you're looking at, but the knowing your numbers, the is the thing that allows you to know when and what to tweak when it comes to those valves, right?
Because even though I drew this simple example of two valves, as your business grows and becomes more complex, there's probably multiple valves that you're dealing with, right? Like this is just, you know, and you'll see that if you read this book called thinking in systems, you know, they break down the very simple system where there's two valves all the way into, you know, more complex system. So as things get more complex and more detailed where you're turning valves, when to be more scalable or just to scale in general is going to apply differently to different businesses. So to recap, hopefully this was helpful for you guys. Let me know if you're watching the replay of this. I'd love to know if this was helpful. I'd say the, no matter what business you're running, if you want to be scalable from the onset, you need to one, tackle a specific problem for a specific person and have that ability to put all of your energy in one focused area to to be able to focus on how do I increase my, my ability to take in more both more and more leads and both in more clients, like how do I constantly increase that capacity, right?
Opening the pipe, opening the pipe, and then how do I start creating the systems to remove myself as the bottleneck or remove people from the bottleneck within my advertising, my sales, my marketing, my fulfillment, my legal, my operations, right? That's, that's where I would start. I think that applies to any single business. And again, a lot of this is, you know, you can start by mapping it out, but you're gonna the subtle idiosyncrasies of your own business are going to present themselves as you're doing it, right? So you can map all of this stuff out on a Napkin as much as you'd like, but you kinda gotta just be thinking about my capacity and focusing. It's not going to be like one tactic that you can do from the beginning that applies to all businesses. So if you're getting ready to build a business or you're in the early stages and you want to think about how can I make sure that my business is more scalable, focus capacity and systems are the three things that I would, I would pay attention to and always be determining what my main KPIs are as I'm tweaking those valves as I'm building out those systems so that I can continue to grow profitably and get closer to the ability to grow on demand.
Right. And control that demand. Hopefully that helps.
If I gave you five to 10 new clients, would you or your agency break? If so, your current agency model is broken. I struggle with this too, until I found a better way. By adding online programs, training, and coaching to our agency, we've doubled profits without adding more hours. If you want to work directly with me and my team to transform your agency, visit myscalablebusiness.com to learn more.