In the initial stages of a start-up, the primary goals are around defining the market problem, defining the value proposition and coming up with the disruptive innovation that creates a defensible basis around which to build a business. Eventually, and often very quickly, the objective then turns to a start-up’s ability to execute the business plan and having the right tools to scale.
An injection of growth capital is crucial for a start-up and venture capital investors’ eyes light up when they see start-ups with clear scaling potential. If you are looking to take on equity funding then at some point you are going to have to make a mind shift and be able to show your potential investors that you can scale fast and effectively.
It is the great start-ups of the world that know when and how to scale. Being the first to market with a new innovative product or business model just won’t cut it anymore. It is those start-ups who master the art of rapid scaling that outlast the mediocre ones.
Okay, so you know you should look at scaling your business; but how do you know when and how to scale? Timing is very important. Too early and too fast could hurt your business’ cashflow and create unmanageable liquidity problems. Leaving it too late, could open the door for competitors to gain that hard-to-recover market share
A reputed website geared towards entrepreneurs, Start-up Secrets, developed a framework they call the “Deliberator’s Dozen”. The framework is a questionnaire to help take out some of the guesswork, and I think it’s really effective.
According to Startup Secrets, a business that is ready to scale can be characterised by the following:
- You can package your product or service and sell it repeatedly without major modification.
- Your marginal cost of customer acquisition is reducing.
- Time and cost for customers to adopt and deploy your product or service is lessening, and the engagement from your customers is increasing toward a long life-cycle value.
- The servicing costs for your customers are reducing.
- The upgrade cycle for your customer is shortening and the money generated from upselling is increasing.
- Your ability to meet market needs, innovate and create differentiated IP is validated by customers and partners who are themselves building on your products and services and investing in your ecosystem.
- You can develop disruptive and defensible business capabilities in things such as your go-to-market model.
- Your business model is showing real leverage and a potential path to profitability that will attract the funding necessary for continual growth.
- The time and cost involved to attract and get people on board in all major areas of the company to support productivity and growth (e.g. sales, services, R&D etc.) is coming down.
- Your management team is successfully developing and promoting people, resulting in a cohesive culture. They have the ability to effectively manage both obstacles and successes, and is respected as such inside and outside the company.
- Your market opportunity is continuously validated as large enough and is considered to be growing at such a rate that you will be able to meet stakeholders’ expectations for years to come, as you scale successfully.
- Even if you are “changing the world for the better”, you have learned not to “drink your own Kool-Aid” and instead validate your metrics from the outside in. Furthermore, you’re still excited to get up every morning and do it all again – faster, better, cheaper!
Once you have established that you’re ready to scale and have the funds available to launch your big market attack, you need to start thinking about exactly how you will do it.
Here are a few pointers to help you on your way:
Specialisation: hire and appoint experts
Typically, start-up founders are “jack-of-all-trade” entrepreneurs and usually try to do everything themselves at the start. This is fine for the beginning stages, however as the company develops and matures, the new levels of complexity require the founders to define and assign tasks more formally.
Founders need to be able to trust the individuals they delegate and cede tasks to, and employ and appoint specialist agents and employees to ensure effective scaling of the business.
It is pivotal to cultivate a healthy, formalised relationship between the company and its employees and agents (i.e. sales agents, franchisees, resellers and distributors). This entails the proper negotiating and signing of employment agreements and the appropriate SLAs (Service Level Agreements). As these agreements generally also protects the company’s IP, you can’t afford to not have them in place.
Effective management structures
Again, start-up founders cannot possibly run every aspect of every department within a growing company. Founders need to carefully balance their desire to maintain control with the risk of being a bottleneck for effective information flow, decision making and execution.
A couple of people at top management can’t effectively supervise everyone’s increasingly specialized and complex day-to-day work; in such a system, accountability around specific goals become a challenge and employees find it hard to remain focused and engaged when they don’t have managerial guidance and processes in place.
Having the appropriate management structures and reporting lines in place, will relieve pressure from the founders and allow them to focus on more important high-level issues.
Company culture is key
The culture of a start-up is what keeps the employees motivated and on course. Company culture is not just about the game room in your building, free snacks or casual Friday. It is the unique way in which your team works together. It’s what your team believes in and what they value the most.
Make sure you have clearly defined your culture and that you regularly drip-feed it into everyday conversations and team moments.
A strong, growing company culture is especially important in the area of effective collaboration between departments, as well as the relationship with your agents.
In conclusion, the process of scaling a business is an art. Ben Horowits, well known venture capitalist, described it as ‘black art’, that needs a lot of challenging work and attention to get right. Scalability is not just implementing the right management tools and processes, but also having the right mind set. It is a shift from a short-term focus, to a long term, bigger-picture vision. Be clear on what you want to achieve and always think big. Set periodic goals, push towards meeting them and keep your employees motivated for the future you have envisioned them for.
Dr Greg Fisher’s 5 Key Principles For Executing Your Growth-Driven Strategy
Exceptional strategy is based on five key principles: A good plan, the choices and trade-offs you’re willing to make, differentiation, your profit equation and activity integration. Here’s how you can strengthen your business to drive higher growth and profits.
Your key implementation plan framework to get you started
Dr Greg Fisher is a professor in the Management and Entrepreneurship Department at the Kelley School of Business at Indiana University and a visiting lecturer at the Gordon Institute of Business Science (GIBS) in South Africa.
Over the past three years, GDP growth in South Africa has been small. Economists expect 2018 to see GDP growth at 1% or less. And yet the growth strategies of businesses are aiming much, much higher. How do you target 15% to 20% growth under such tight economic conditions?
According to Dr Greg Fisher, a professor in the Management and Entrepreneurship Department at the Kelley School of Business at Indiana University and a visiting lecturer at the Gordon Institute of Business Science (GIBS) in South Africa, you can’t just ride the momentum of the economy. You need to do something more to fill that gap. And therein lies the challenge, because there’s no silver bullet that can drive double digit growth.
“Ultimately, you need to be able to critically think through and formulate multiple ways to fill that gap,” explained Greg during his keynote strategy workshop at the 2017 ThinkSales Sales Leadership Convention. “Success in anything — sports, raising children, learning and business — is driven by fundamental principles that need to be applied with balance and moderation.
“A conceptual understanding of what to do isn’t enough. You need to take action — your ability to drive double digit growth lies in developing a strategy based on five key principles, and then executing it.”
Here are the five key principles you must unpack in order to formulate and execute a growth-driven strategy.
1. You need a good plan
Every successful business shift begins with a good theory. It doesn’t need to be sexy. It does need to be insightful, and give you a map of what to do next, what not to do next, and what value needs to be created through which channels going forward.
Leverage foresight, insight and hindsight to formulate a mental model and hypothesise (or develop a theory) that relates to your market.
Take Steve Jobs as an example. He hypothesised that people would pay a premium price for ease of use and an elegant design in computing. This would form the foundation that other digital products could be added to.
2. Strategy is about making choices and trade-offs
Strategists are constantly faced with choices and trade-offs that need to be made if you’re going to stick to the plan. Remember, true value is created when you make a choice, and don’t try to dabble in multiple things at once. You need a clear and manageable goal. Choices require decisions, often relating to where you will be channelling your resources. A trade-off is not doing something. What will you do and not do? This must align with what you’ve already theorised. It doesn’t serve you or the business to follow too many paths and options.
Which markets will you pursue vigorously and which will you leave alone? Which customers will you target, and which won’t you? Which products will you produce to enact your theory? Which activities will you engage in inside your organisation, what will you outsource and what won’t you do at all? Who will you hire? Who won’t you hire? And which assets will you choose to own?
Everything is a choice and a trade-off. Take Ikea, a retail brand that’s enjoyed 70 years of successful growth. Why? Because of fundamental and particular choices relating to product designs and style. Ikea isn’t everything to everyone — it has a very specific value proposition and delivers on it relentlessly.
This is fundamental. Even if you’re the low-cost provider in your space, you still need to be doing something different to drive those costs down; you still need to be differentiating yourself and the way you operate. The world is more competitive than it’s ever been, and buyers have more access to information and options than they’ve ever had. To be competitive, you need to really interrogate your differentiators.
The strategy conversation tends to happen early, the profit conversation happens late. You need to bring them together. When you’re having a strategy conversation, you need to understand how it will drive bottom line growth. The role of strategy is to bridge what customers are willing to pay for a product or service, and what it will cost you to deliver it. The strategies you adopt are determined by theories, choices, differentiation and costs.
The formula is the following:
Profit = the number of products you sell x price of product — expenses.
How does your strategy impact this equation? Which lever will your strategy pull? You ultimately want to drive profit, and to achieve that, your strategy must point to one or more of these three elements.
In other words, either you need to sell more products, or you need to increase the price you can charge, or you need to decrease the expenses you will incur to get that product to market (or a combination of all three).
The key question is therefore: What can you influence to drive the outcome you want? What strategy will drive profit?
The variants on the profit equation that you need to consider include:
- Industry average competitors
- Uniquely differentiated competitors
- Low-cost competitors
- Competitors with a digital advantage.
On the other side:
- Customer willingness to pay
- The cost to produce and deliver your goods.
Profit lies in the middle. Focusing on two or even all three of the levers is challenging, but it will result in the greatest results if executed properly.
But remember: The management of the profit equation is ongoing. You need to manipulate it in action and create a strategy that can be adjusted when and where necessary, always tying it back to the bottom line.
Ideally, you want to spend less while delivering more, resulting in higher profits. Before you can do that though, you must identify your profit levers. Finally, does your profit equation tie back to your points of differentiation, trade-offs and choices and ultimately business theory?
5. Activity integration
Your fifth, final and most important point is activity integration. You need to make your strategy happen. The previous four steps are meaningless unless you can do something with them.
Activity implementation is the result of the business performing a certain set of discreet activities. These include the sales force, managing customers and managing returns. This is your core and critical to business. Think of each business unit as a part to a mechanical watch.
The challenge becomes: How do they all work together in the service of the four points above? Your goal is to ultimately create something that is beautiful and precise. Independently, these departments are meaningless. Success lies in multiple activities, all working together to drive your strategy.
Start by driving your strategy and ensuring integration
To get started, consider which activities are necessary to drive your strategy and ensure integration. How these activities work together reinforces everything you’re doing. Activities amplify each other, until 1 + 1 = 3.
The problem is that multiple activities working together is difficult to replicate. There is no single activity (or silver bullet) that will drive success. You need to optimise all of your activities — you need ten primary activities, and you need to do them all very well. That’s activity integration.
The problem is that it’s not easy, which is why so many organisations fail at this stage.
If you can get this right though, the results will speak for themselves. 1x1x1… to 10 = 100%. 0.9×0.9×0.9… to 10 = 35%. That’s the power of activity integration. It also means that doing each activity at 90% will bring the entire organisation down to 35%.
Walt Disney conceptualised the entire Disney business according to activity integration. Each element worked into the next, starting with movies at the centre. Get that right, and all the other activities — Disneyland, merchandising and so on — work. Negate the movie piece and the rest disintegrates.
Bringing it all together
- What’s your theory?
- Do you have a clear, consistent and concise theory on how to succeed?
- How does that theory translate into your choices and trade-offs?
- What definitive things are you choosing to do and not to do?
- How do these choices drive differentiation? You need a core differentiation that customers can appreciate, value and buy into.
- How does your differentiation ultimately drive profits? Can you articulate it, and what levers are you pulling?
- What activities do you need to implement your strategy, and how do they ultimately integrate with each other?
Your Business workplan
Your key business plan to discover and implement the five core elements of a business strategy
Briefly describe the THEORY underpinning your organisation’s strategy.
A theory is a mental model about how your organisation does (or could) create value. It reveals hypotheses about how an organisation can create significant value. It usually entails:
- Foresight about the evolution of the industry in which you operate
- Insight into how your organisation can create value in the industry as it evolves
- Hindsight about how you might build past competencies, relationships and assets.
We theorise that
Key questions about yourself
- What are the assumptions embedded in your theory? Are they valid? Could they be tested?
- Would the other leaders in your organisation describe a similar theory underpinning your strategy? Do you have a consistent view of opportunities and mechanisms for value creation across the organisation’s leaders?
2. Choices & trade-offs
Identify the CHOICES & TRADE-OFFS that you have made, and need to make, to act on your theory.
A choice is a clear decision to do something specific and meaningful. A trade-off is a clear choice not to do something that is somewhat tempting or attractive to pursue.
- We have chosen to Identify 3 to 5 important strategic choices you have made
- We still need to make choices with respect to Identify 3 to 5 important strategic choices you still need to make
- We have chosen NOT to Identify 3 to 5 important trade-offs that you have made
- We still need to decide NOT to Identify 3 to 5 important trade-offs that you still need to make.
Key questions to ask yourself
- Do your choices and trade-offs clearly reflect your theory?
- What’s preventing you from making the choices and trade-offs that you still need to make? What would it take to definitively make these choices?
Identify the points of DIFFERENTIATION that are embedded in what you do (i.e. in your theory, choices and trade-offs).
Differentiation is something that clearly distinguishes an organisation from others in the industry. It is something that other organisations targeting the same customers are not doing and which those customers ultimately find valuable.
- We are different (or strive to be different) with respect to
Key questions to ask yourself
- Do your customers see and experience these points of differentiation? Would they agree you are different in this regard?
- Would the employees in your organisation describe similar elements of differentiation? Do you have a consistent view of your organisation’s differentiators across the organisation?
- How easy is it for your competitors to emulate your points of differentiation? Could they easily copy your points of differentiation? If not, why not?
Identify how your points of differentiation drive PROFITS.
- A useful way to examine the connection between strategy and profits is to examine a simple version of the profit equation as follows: Profit = (Number of products sold x Price of products) – Expenses. Identify how the organisation’s differentiation elements drive profits as follows:
- Identify those elements of the profit equation that apply for your strategy and complete the statement where applicable
- We are able to sell more products than rivals (YES/NO) because
- We are able to charge higher prices for our products than rivals (YES/NO) because
- We are able to reduce our expenses relative to rivals (YES/NO)because
Check those that are appropriate and complete the statement
- We sell more products because
- We charge higher prices for products because
- We reduce expenses because
Key questions to ask yourself
- What more could you be doing to increase volumes, charge higher prices and/or reduce expenses?
- Does your profit equation tie back to your theory, choices and trade-offs, and to your points of differentiation?
- Is the profit equation consistently understood across the organisation?
5. Activity integration
Identify the ACTIVITIES needed to deliver on your points of differentiation, and assess whether these activities are adequately INTEGRATED with one another (i.e. reinforce one another).
- STEP 1. Write up a brief description of each activity required to deliver on your organisation’s elements of differentiation.
An activity is something that a organisation does repeatedly in the process of developing, marketing and delivering products and services to clients.
- STEP 2. Draw links between the activities that currently reinforce each other.
Reinforcement between activities comes about when two activities support each other such that when they operate together, they are more effective than if they operated independently i.e. doing one activity well enhances the other activity.
Key questions to ask yourself
- Do we consistently view our organisation as an integrated system of activities that reinforce one another, or do we tend to deal with each activity independently?
- Are our activities arranged in a way that consistently and effectively delivers on our key points of differentiation? If not, how could they be rearranged to more effectively deliver on key points of differentiation?
3 Strategies For Growing Your Online Business Fast
Wooing customers requires a sincere devotion to giving people value.
Jay Abraham is one of the world’s leading business consultants and mentors to people like Tony Robbins, Daymond John, Joe Polish, Stephen R. Covey and Russell Brunson. Over the years, he’s built and scaled eight- and nine-figure businesses, and is constantly sought after by some of the most successful companies to help grow their businesses fast.
I recently spoke to Abraham about the ways in which he grows an online business, and what he told me was that it boiled down to three primary strategies applicable to growing any business, whether it’s online or offline. Most people who struggle with this know that it’s hard to grow or scale a business.
They think that to grow a business, they need major capital or funding. While that might help, it’s also a shortcut that doesn’t always pan out. Sometimes, having the coffers filled can actually sidetrack you. Instead of looking for ways you can become profitable, you look for ways to grow by spending more.
The answer to growth is not in merely scaling out your spend. It doesn’t equate to having more employees or a bigger office or any of those things for that matter. The best way to actually do this is organically by bootstrapping. If you’re a solopreneur or running a small business, then this information is integral to your own growth.
Rather than trying to spend more, you have to focus on conversions. Conversions are at the heart of any business. If you don’t have an offer that converts, or the capability to track those conversions, then you’re wasting your time. You can’t scale by any measure without a properly converting offer in your business.
Rather than spending money on the superficial, you have to spend it wisely to get that converting offer working. That means that if you spend $1 to acquire a customer, you have to ensure that you’re making that $1 back and earning more. Otherwise, you have a business that’s losing money, not one that’s making money.
That’s the premise and basis for building and growing business. You simply can’t scale to any degree without that. There are many ways to actually do this. Creating a converting offer can be done through a variety of mediums. One of those mediums is the webinar.
Russell Brunson often tells the story about how a single webinar saved him from bankruptcy twice. Liz Benny and Kent Clothier have used a single webinar to generate millions of dollars in sales. It’s a powerful medium you should be using to sell something.
There is a particular process to selling through the webinar. Most entrepreneurs confuse selling through a webinar as teaching. You shouldn’t be teaching at all. You should be breaking down limiting beliefs through the vehicle of stories.
The truth is that most people don’t buy through webinars because they have false or limiting beliefs. These beliefs are attributed to the vehicle, or offer itself, as much as they are to internal and external beliefs. Successful webinars focus on destroying those false beliefs. Once those dominos topple down, selling becomes almost effortless.
Abraham talks about three primary strategies for growing your business fast. Each of these strategies has several tactics tied to it. But, at the heart of it, there are really only three paths forward. If you can heed one of these paths, you can likely achieve your business goals.
However, keep in mind that the path from zero to seven figures is not going to be the same as the path from seven to eight figures or from eight to nine figures and beyond. The skills you need to use to get to seven figures in your business are not going to be the same skills you use to move you further up. And it’s easy to get stuck in one cycle, often repeating your revenue year after year and not moving beyond that.
Anyone who’s serious about making money online understands that there are challenges when going from one phase to the next. It can be frustrating to say the least. And without a proper sales funnel, actually growing the business will be difficult. You need the right systems in place in order to capitalise on the process.
What most people fail to focus on are the email sequences. How can you bridge that divide between leads who enter your world and those who become customers? The answer is through the email sequence. The email sequence is key for building a relationship with the lead by telling your story.
The first strategy for growing your online (or offline) business is through acquisition. How can you get more customers? Often, to do this, you need to setup a front-end sales funnel. You need to have some sort of offer that will bring the customer into your world, whatever that might be.
Abraham says that there are loads of different tactics that work here. Webinars are one strategy. But, there are also free-plus-shipping offers, other tripwires (which are low-ticket front-end offers usually from $1 to $37) and other lead magnets such as free ebooks, checklists, cheat sheets and so on.
When you sit down to think about how you can acquire customers, you have to envision their pain points and how you can go about adding some value to their lives. You might lose some money on the front-end. But, if you have a proper sales funnel, you can maximise the average cart value with up-sells and one-time-offers that will make your ad spend profitable.
The second way that Abraham says that you can grow your business is through ascension. How can you get your customers to ascend a value ladder? What email sequences can you plan that will move the customer up the progression of value in your business.
With the proper sales funnel and email sequences in place, you can take a customer from your low-ticket, front-end offers up through your value ladder to a high-ticket offer. During each step of the ascension, you have to ensure that you’re adding tremendous amounts of value in the exchange.
If you’re not adding value, then the customer simply won’t ascend and you won’t grow your business (fast or slow). That’s what it takes. Be sure that you’re adding loads of value during each step of the process if you want your customers to ascend and make more money.
The third way to grow your business is through frequency. How can you get your customers to buy more frequently? That’s the big question. Can you do this through a continuity plan or through new offers or some other monetization? The challenge is doing this without zapping too many of your resources.
Some people struggle to understand how they can grow their business. Others have growing pains. When you grow, you need to scale out your infrastructure. You need more employees and systems in place. Again, the same strategies that took you to seven figures won’t take you beyond.
Take a look at your product or service offering and figure out how you can get your customers to spend more frequently. How can you monetise your customers while still adding more value in the exchange. Don’t just look for ways to extract more money from current customers. Look for ways you can get them to spend more often and monetise that.
This article was originally posted here on Entrepreneur.com.
Scale Your Values To Scale Your Business
Can you grow without losing touch with your core principles?
I always get asked, “What is the best way to scale my business?” Even by my business coaching clients.
Based on my experience, scaling a business through values will help to achieve sustainable growth, in any industry. Value-based companies should start with understanding their core values and how to scale those values before worrying about how the company itself will grow.
Failure to scale these values causes all sorts of problems when the company begins to scale. Your core message gets lost. Your team’s motivation decreases. Your lack of a strong corporate culture leads to a lack of production.
Don’t lose your values
Losing sight of the values that comprise your company culture makes organisations less successful, efficient and effective. It can even cause companies to fall apart. Don’t undermine or undervalue your company’s values or mission.
Studies have shown the impact that a focus on company values has on operations. According to Deloitte research, mission-driven companies have 30 percent higher levels of innovation and 40 percent higher levels of retention. Companies with happy employees that are aligned with their core values also outperform the competition by 20 percent, Gallup found.
Set the stage
When new interns start at our firm, we tell them that we do not teach about working in sports. We only teach four things, the four core values of our company: gratitude, empathy, accountability and effective communication. In order to get everyone aligned, we reinforce these values in all three stages of scaling our business, and we use different strategies to instill them.
Invest in the learning stage
Understand that your new employee is an investment in your company, not a privilege. You are investing in a person’s professional growth and, for those with a values-based business, you also invest in their personal growth.
The learning stage is where you tell stories and share content which will get your team aligned with your core values. Find people who represent the values you aspire to follow and tell their stories. Provide examples of people who succeed with those values. Also, share times of failure that happen when people do not live aligned with the standards that your team is supposed to follow.
Don’t execute the messenger
The next stage is the execution phase, where our team members mature through those core values and eventually become profitable. The execution stage is where an employee learns to balance the values of a company while also maintaining profitability for the firm.
Having an appropriate compensation package is key at this stage. What matters is that there’s a learning phase that we as employers invest, an execution phase that leads to profitability, and then an equity phase, warrants or even investment from our employees.
Equity stage: Retain and reward
The equity or partnership stage allows your company to scale and thrive while maintaining a connection to core values. Equity or partnership rewards employees who have shown a commitment to your company and its culture over an extended period of time.
Setting an appropriate timeline to transition from employee to partner is important. People need to know that there is a light at the end of the tunnel.
SAS shows how to scale
Some of the biggest companies have been able to grow and scale because of their commitment to their culture.
Billionaire Jim Goodnight’s company, SAS, is one of the many companies that operate based on values or a mission. They are committed to a holistic approach, providing core values, support and appreciation to their employees. They see themselves as “authentic, accountable, curious and passionate” and put those values into everything that they do.
Live your core values
If you remain firmly rooted in your core values and principles, you’ll be able to not only bring monetary success to your company, but personal success to yourself, your employees, your community and the people you interact with every day.
Remember, nobody can succeed without inspiration. Show them how to give back, how to be of service and how to succeed. Empower them with values that will change their personal and professional life.
Inspire other companies to follow your lead by sticking to your core values and working to empower others to be successful.
This article was originally posted here on Entrepreneur.com.
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