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 on one of the following channels:

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.