I wanted to talk about a question that’s come up a couple of times in conversations I’ve had with entrepreneurs. Or, at least stories that people have been talking about with other entrepreneurs. The question is can you grow too fast?
What does it mean when an entrepreneur says they grew too fast? You hear this all the time, right? Entrepreneurs tell their stories, they grew a company and they’re like, “Oh, we were doing really well but we grew too fast and crashed it.”
I think a lot of times people say they grew too fast because it’s a nice way to basically talk about how they failed but in a good way.
“We were too successful. We were too good, so we grew too fast.”
But let’s actually think about that.
You can, in fact, grow too fast. That is true. I don’t want to say that you can’t, but what is it a sign of? When you grow too fast, what does that actually mean?
It comes down to scalability and service delivery.
So, I want to focus specifically on service businesses because there’s a lot of complexity in product-oriented businesses that are complex. When you grow too fast in a product business, there are all sorts of things about supply chain and your supply lines being run out etc. I don’t want to get into that because most of the people here in the group are not product-oriented businesses, they’re service businesses. So, let’s focus on that.
We’re talking about service delivery.
If you grow too fast, fundamentally, what that means is that you are not able to deliver to your customers. You have too many customers and you can’t deliver. So, it comes down to a question of scale.
What is scale?
We talk about scaling all the time, so let’s, first of all, get a fundamental definition of what scaling means. When you scale, you are able to, when a new customer comes in, not do any additional work. If you’re perfectly scalable, a new customer does not cause you any additional work.
Now, that doesn’t mean you’re not doing any work. You’re doing work, but you’re doing a base amount of work and if you add one more customer, it doesn’t lift the burden at all.
Now, it’s really difficult to get to perfect scalability. But the worst case scenario is when the amount of work that you do increases with each new customer.
Example: If you have one more customer come in, who you do a certain amount of work for, and then when another customer comes in, you have to do that again, that same amount of work over again. So that every new customer you gain, you don’t gain any efficiency, you just keep doing the same amount of work for every new customer.
That’s called linear scaling, and it’s bad.
Here are examples of linear scaling.
One on one coaching is linear scaling! If I spend an hour with you every week in one on one coaching and I bring a new customer in, it costs me another hour. And so that’s linear scaling.
There are companies that actually do worse than linear scaling. You would think this was impossible, but you can actually have exponential scaling or you can have hyper linear scaling. What that means is that with every new customer, it’s actually harder and harder to service them. And although that’s difficult to figure out, you can actually do it sometimes.
Either your processes break down or your systems break down, and so it actually gets harder and harder to service people. And of course your company will crash if that’s the case.
So, what we’re shooting for is not linear growth, or linear scaling of work.
We’re shooting for sublinear scaling, that means something lower than that.
Something where you’re gaining efficiencies every time you bring a new customer in. Perfectly scalable would be a flat line, right? No new work. I keep bringing customers in, it’s no new work. But that’s actually difficult to achieve in a lot of service businesses, so we shoot for sublinear instead. That means every customer that comes in, we gain some efficiency with it. So, how do you do that?
The three major components
In a service business, it comes down to three major components of service delivery.
Sales and marketing
So, lead generation and lead conversion. Those processes need to scale. I’ll give you an example of non-scalable. If you have to get on the phone every single time you sell a new customer, that is a non-scalable lead generation and lead conversion process. So, a scalable one is using a webinar to sell or outsourcing to sales agencies so that you don’t have to do the work. That’s scalable. This is the first process, lead generation and lead conversion.
Once someone becomes a customer, the work that it takes to actually deliver that product or service to them becomes our service delivery processes. So, that might be onboarding, graduation, customer success processes, coaching etc. That’s going to be whatever it is that it takes to deliver your service.
Now, in order to scale that, it comes down to scalable program design, and back end customer success. Because if you don’t have customer success, you’re not going to scale. If your program does not deliver results, if you are don’t worry or focus on customer success, then the problem is you’re going to be spending a lot of your time in actually dealing with customer problems. And that’s not going to be helpful at all, that’s actually not going to allow you to even linearly scale. That’s going to hyper linearly scale. Because every new customer brings in more and more problems with them and that’s bad. So, you’ve got to get program design and customer success right.
If you were a product company, you would be manufacturing a physical product. If you’re in the service business, manufacturing is IP and content. So, any time that you create content for your customers, any time that you create content for your marketing, this process also needs to be scalable. And if you’re literally sitting down and writing from scratch every single post, and every single thing you do, and recording every single video, you’re not scalable. You need to start to figure out ways to achieve a scale in the manufacturing of your intellectual property.
What that means is finding out a process where you can take one piece of content and leverage it over multiple channels. It means finding other people to contribute content for you. It means figuring out a way to align your time so that your time in ideation and IP development doesn’t block customer delivery. So, the three processes you need to focus on and scale are lead generation and conversion, customer delivery, and manufacturing. It’s essentially customer content creation, IP or content creation, or, as I like to call it, manufacturing.
If you can nail those three, then this whole “grew too fast” problem becomes no issue because you’re able to gain efficiencies and acceleration every time you bring on a new customer.
Grow the right way!
So, we’re trying to bend the curve from this linear growth into sublinear growth, that the amount of work that it takes for you to bring on a new customer gets easier and easier. It’s called marginal improvement, and that’s how you get out of the grow too fast mode. What happens if you ignore all this stuff and you just continue to do what you’re doing? You grow too fast. Then what do you say? “Oh, well I don’t want to grow too fast, so guess what I’m going to do? I’m going to grow slowly.” Well, that’s silly, because that’s a horrible, horrible way to end that discussion and that shouldn’t be your option. It shouldn’t be, “Well, I don’t want to grow too fast so I’m going to grow slowly.”
Don’t grow slowly, grow according to your scaling curve.
As you get better in implementing scalable processes on the backend for customer delivery, for lead generation and conversion, and for content manufacturing, you will be able to accelerate the number of customers that you can bring in. That’s my take on what it means to grow too fast and how to avoid that. I think a lot of people say they grew too fast as a way of masking their other business problems. But it’s hard to dig into those details, so when someone really does grow too fast, it’s because they don’t have scalable processes for customer delivery, for lead generation and conversion, and for content manufacturing.
Hopefully, that’s been helpful. Leave me a comment below and tell me about some of the processes you’re trying to scale right now in your program, either the delivery or the design. And maybe we can get into a little bit of a discussion about how I can help you push that forward.