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How to achieve scale in your business
The most scalable businesses are businesses that sell software programs, businesses that you have the IP for, whether it's a gateway or subscription based, where you can sell the product multiple times. You press ‘control/copy’ and off you go.
Great examples for scalable businesses include Xero, and Adobe, because quite often, once you build a strong product, the crowd helps to perpetuate the product sales. But of course, not everyone has the technical knowledge to build software. But don’t despair.
How to achieve scale with a service business
While service-oriented businesses are less scalable, you can still successfully grow a service business. These kinds of businesses need people with the skills to provide the service, and that's what slows down the scalability. They also require strong processes and quality control to ensure the client experience does not diminish.
Take a simple example, like a cleaning business. You need to teach someone how to mop a floor and yes there is a technique to it. It’s not necessarily difficult to do that—but the process is fundamental to the ongoing success of the business.
The other issue with growing a service-oriented business is staff retention. In more complex operations like business brokerage business, where you're teaching staff about financials and different laws, and where the sales cycle is longer, staff retention becomes more important and conversely the business is less scalable.
To scale a business that has technical skill requirements, buying your competitors out to not only get the clients, but also to get you staff that are already proficient, providing a strategic growth opportunity that can help you leapfrog the opposition That's much more costly than, for example, just finding the clients if you have a software business. However, what do you know the alternate cost of having to train and grow the business through your own efforts?
If you’re not blessed with a software business and you want to achieve scale, there are a number of common inhibiting factors. Money is the obvious one. Angel investors and private equity firms have and appetite for only certain types of businesses. They can bring not only money to the table but also the additional skillset requires to help the business grow, but be careful, they often want a controlling interest in the business. When dealing with them, it’s important to be prepared properly and know your options.
Needing ‘talent’ is another common requirement for scale. This can be found through partnering, a joint venture, franchising or simply funding a jockey or giving a manager an equity share.
Setting your course
No matter what route you take to achieve your scale, it’s important to ensure you are ready for it. Document your business plan, your process and what you are looking for. We see so many businesses that want to franchise, but have no systems or compliance in place. We see people who want LINK to find them a business partner, but don’t have a clear idea of what that partner’s role will be or what terms they are willing to bring that partner into the business. That’s ok, we can point you in the right direction and help get a clear view of what the future will look like.
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LINK Australia, Managing Director