How to Build a Scalable Business

A big part of maximizing your return on investment is ensuring the positive cash flows resulting from the business can be poured back into more rapid sustaining growth into the future.

Automate Processes

Traditional business requires manpower. Manpower cuts into the scalability of business operations because incremental growth requires incremental hiring and investment in other core business assets including PP&E.

Eliminating these types of asset-intensive investments requires automation. Automation ensures the same or more is accomplished with fewer people. It often requires a larger input of up-front planning, implementation and effort, but the cash kicked off by this type of business can be remarkable. Here are some of today’s areas where automation has helped greatly.

  • Marketing. The internet has truly revolutionized and scaled our ability to connect buyers and sellers for transactions. ROI can be more easily measured and sales leads can be nurtured without the need for the addition of another salesperson or marketing person on the margin.
  • Finance. Once there were slide-rules and graph paper. Then there was Excel. Automated business finance intelligence is assisting today’s operatives to do more with less input. Once implemented, today’s operations require much less input, but more checks on whether or not the processes are properly functioning.
  • Operations. From manufacturing to logistics, today’s automation technologies are assisting to trim expensive overhead. The WSJ has its fair share of stories wherein manufacturing companies trimmed headcount with expanded technological investment.

Functionally increase the power of your operating leverage by automating where you can. Some call this a job killer, but it is ultimately a value-adding task for shareholders. There are the naysayers. But some, like Clayton Christensen have shown the real solution to this problem is more innovation  (not less as some would suppose) which in turn creates more jobs for the overall economy. However, it may not increase immediate efficiency within a business.

Outsource the Non-Core

Before we discuss outsourcing, I want to be adamant that most winning companies fully understand what their core competencies are and then work to exploit them. They don’t outsource core knowledge that provides a long term competitive advantage. The key phrase there is “long term.” Some may be tempted to sellout for today’s greater margins and easing of balance sheet assets to relinquishing strategic control over a competency that will be needed into the future.

However, for everything not so critical, it should be duly outsourced. Individual tasks and projects are more easily scaled, thus freeing time for internal abilities to be utilized to their maximum.

Invest in Technology

Whether it’s automation, tracking or logistical tools, there needs to be greater investment in efficiency maximization. Only then can assets be truly maximized to their greatest potential limit. Today’s solutions allow for scale maximization without the need for added labor assistance. It’s the perfect mix from point #1 discussed above and proper technology investment and implementation.

When investing in technology firms should be sure to not do so simply for the sake that the technology itself is “good.” There needs to be a measurable reason to invest. When full justification for such investment can be made, then users should be fully ready to

Grow–Not Growth at All Costs

A good friend of mine has worked for Amazon Fresh for the last four years or so. Initially, they focused on growth at all costs, but refocused as they were attempting to build a profitable model that could be replicated in multiple cities, not just Seattle. Growth is good, but profitable growth must be maintained. Growth at all costs, will never lead to a scalable outcome. In fact, if growth is not properly measured and controlled it becomes an outcome with a negative ROI–never the situation one would want. In other words, it’s best to invest in positive, increasing returns.

Partner, License, Franchise & Resell

Where possible, partner, franchise and provide expert VAR assistance and support. Scaling can often mean finding hundreds of other firms to help in the expansion and sale of your product and/or service.

Make it Repeatable

When you’re talking about an industry that could grow and grow rapidly, making the process repeatable is key to shifting core aspects of the business to others both in and outside the business.¬†While McDonald’s patronage has been steadily declining its probably not a result of the repeatable nature of their business. There are certainly other demographic and macro factors at play, but like our Amazon Fresh example above, it’s best to find a way to make the process repeatable and profitable and then do just that: repeat and profit.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.
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