9 Ways to Fail When You Scale

A co-founder of one of the com­pa­nies I work with teach­es busi­ness for engi­neers in an MBA pro­gram at Simon Fras­er Uni­ver­si­ty, in Van­cou­ver. When he asked me to come and give advice to those who want­ed to run their own com­pa­nies, we chose How to Fail When You Scale, as a topic.

Here are nine things that could dra­mat­i­cal­ly impede the suc­cess of your com­pa­ny when you’re try­ing to scale:

1. Peo­ple Need to Like You

An effec­tive leader some­times has to do things that make peo­ple uncom­fort­able – to chal­lenge them, hold them account­able or require them to solve their own prob­lems. We all want peo­ple to like us, but it gets in the way of a leader’s abil­i­ty to make tough calls or deal with sit­u­a­tions in a way that caus­es growth for the peo­ple who work with us. Growth gen­er­al­ly hurts in some way.

Per­for­mance requires ten­sion and the best man­agers cre­ate pos­i­tive tension.

2. In Love with Your Idea/​Product

It’s impor­tant to believe in what you do but, if you’re mad­ly in love with your own ideas, you might not be open to changes that need to be made, or things that need to be cut to tru­ly make the most out of your product.

Try, Lose and Learn. You need to con­tin­u­al­ly be open to learn and do some­thing bet­ter ver­sus being obsessed with your ini­tial idea. It will prob­a­bly change dra­mat­i­cal­ly, any­way, by the time you scale it.

3. Trust the Spreadsheet

I haven’t seen a busi­ness idea that did­n’t look good in a spread­sheet. Excel is spec­tac­u­lar at help­ing to ratio­nal­ize and sell your think­ing to oth­er people.

As a basic premise, when you’re look­ing at a new and unproven idea, you need to apply some crit­i­cal think­ing. If it is proven and you have repli­cat­ed a very sim­i­lar thing in your com­pa­ny, in the past, it’s much eas­i­er to project the future because you have a notable his­to­ry. That’s not what we’re talk­ing about. This is about new ideas that your com­pa­ny has not done before — more in the ​‘what could be pos­si­ble?’ realm.

Expect 2X the Cost, .2X the Rev­enue. This is a sim­ple rule of thumb to eval­u­ate whether you want to try it or not. Expect it’ll cost twice as much as your ini­tial think­ing and pro­duce 20% of the fore­cast­ed revenue.

At that point, if you still think it’s worth a try, then pro­ceed. And make sure you’re will­ing to lose all the mon­ey in that invest­ment and chalk it up to good learning.

4. Hire Friends & Family

There’s noth­ing wrong with work­ing with friends and there are some spec­tac­u­lar fam­i­ly busi­ness­es on the plan­et. And it’s not for every­one. The day you hire friends and fam­i­ly, you need to be OK with the day you may have to fire them. As com­pa­nies grow, not every­one grows enough with it.

Require 90% A‑Players. Only the most tal­ent­ed peo­ple can be in com­pa­ny roles, oth­er­wise they’ll slow you down. Emo­tions come into play with friends and fam­i­ly it can be chal­leng­ing to give tough feed­back, make tough deci­sions about them, put them on a per­for­mance improve­ment plan or tell them they need to move on. Do not hire any friends or fam­i­ly if you are unwill­ing to do that.

5. Leave the Num­bers to Accountants

Although many great entre­pre­neurs know how to make prof­it, if they don’t have an account­ing mind or are too busy with strat­e­gy, they may ful­ly rely on accoun­tants for the num­bers, And while you do need to trust the peo­ple on your team, you also need to verify.

Must Trust & Ver­i­fy. Busi­ness is a num­bers game, and you need to be con­nect­ed to the dri­vers of prof­it and cash flow, and to under­stand and ver­i­fy the key aspects that relate to your per­for­mance. Blind­ly trust­ing peo­ple, in any part of your busi­ness, is not great man­age­ment or leadership.

6. Start with a Low-Price Strategy

A few com­pa­nies can thrive with a low-price strat­e­gy – like Wal­mart and dol­lar stores – but they are rare. These have a huge dri­ver around logis­tics, effi­cien­cy and cost, and an abil­i­ty to make or buy cheap­er than any­one else on the plan­et. Typ­i­cal­ly, this very low-over­head mod­el has a no-frills cul­ture that’s spread through­out the entire company.

When peo­ple have a hard time sell­ing in the mar­ket, they often default to a low-price strat­e­gy to get the busi­ness but may not have all the oth­er pieces in place, to be successful.

This is usu­al­ly a lack of strate­gic think­ing or a way to sell your val­ue in the mar­ket ver­sus a true low-cost strat­e­gy across the enterprise.

Strat­e­gy = High­er Price or Mar­gin. The best strate­gies allow you to com­mand a high­er price mar­gin in the mar­ket for your spe­cif­ic cus­tomers. Make sure that you are clear­ly focused on a strat­e­gy to get you a high­er price or pre­mi­um with your cus­tomers. If you do have a low-price strat­e­gy, build your entire busi­ness mod­el around being able to deliv­er and sell at a notably low­er cost to get a strong profit.

7. Estab­lish a Cul­ture where Peo­ple Self Manage

For a while, there was a trend in the tech world that peo­ple could run autonomous­ly and ful­ly man­age them­selves. While it’s a nice the­o­ry, many com­pa­nies had a rude awakening.

Every­one Needs a Boss. That’s why CEOs have boards: to help them to make bet­ter deci­sions, be more account­able and per­form bet­ter. With­out a clear man­ag­er — who has reg­u­lar con­ver­sa­tions about how to improve, and how goals are being met — peo­ple float, are not engaged and under­per­form in the medi­um term.

8. Think that Charis­ma and Con­fi­dence Matter

While charis­ma and con­fi­dence can be won­der­ful and help­ful in many ways, with­out some­thing sol­id behind them, they can lead to unde­sir­able outcomes.

Humil­i­ty & Dri­ve Pre­vail. For long-term suc­cess, you need sub­stance to back the style. Humil­i­ty allows peo­ple to learn and grow and seek out the best answers, and dri­ve to pre­vail and push through chal­leng­ing sit­u­a­tions, no mat­ter what.

9. Save Time by Hav­ing Min­i­mal Meetings

As a leader, you will spend most of your time in meet­ings. And while we can all agree that many are painful and a com­plete waste of time, that is not a rea­son to have less.

Meet­ings are lead­ing. As a leader, meet­ings are your pri­ma­ry tool to cre­ate results in a busi­ness and crit­i­cal to your suc­cess. It’s unfor­tu­nate that zero time is spent on this essen­tial skill, in our for­mal edu­ca­tion. You have to learn how to effec­tive­ly run a meeting.

Pow­er­ful meet­ings cre­ate clar­i­ty and the right action to move peo­ple and the com­pa­ny ahead, sup­port­ed by clear goals for team mem­bers and clear data to tell you how things are working.

The Chal­lenge

• Which of the nine items on this list do you think might be get­ting in the way for you, right now — and that might ben­e­fit you the most?
• How can you take it up a notch?

Want to learn more? Lis­ten or watch our Growth Whis­per­ers episode about How Teams Fail When Scal­ing Up Their Business.

About Kevin:

CEOs typ­i­cal­ly place their first call to Coach Kevin with a cri­sis to solve. They stay because of his busi­ness acu­men and no-holds-barred, tell-it-like-it-is style.

Kevin’s career spans 20 years, over a dozen coun­tries and four con­ti­nents. He’s worked with hun­dreds of CEOs and exec­u­tives, help­ing them to break through busi­ness chal­lenges, grow their com­pa­nies and find per­son­al suc­cess along the way.

These expe­ri­ences inspired Kevin’s book, Your Oxy­gen Mask First, in which he reveals the 17 habits every leader must know to tran­scend the per­ils of suc­cess, and achieve even more.

About Lawrence & Co:

Lawrence & Co’s work focus­es on sus­tain­able and enhanced growth for you and your busi­ness. Our diverse and expe­ri­enced group of advi­sors can help your lead­ers and exec­u­tive teams stay com­pet­i­tive through the use of var­i­ous learn­ing tools includ­ing work­shops, webi­na­rs, exec­u­tive retreats, or one-to-one coaching.

We help high-achiev­ing lead­ers to have it all – a great busi­ness and a reward­ing life. Con­tact us for sim­ple and impact­ful advice. No BS. No fluff.