Module 4: Venture Growth, Scaling Scalability

Drivers of Scalability:

-Light Asset Base -Automated Processes -Low Cost Labor

Growth...

-doesn't always increase survival -requires tradeoffs -is experimental process -is change -should not be assumed -requires people, processes, and control

Growth Decision Template: (9 Questions)

1. Why should we grow? 2. How should we grow? 3. How much should we grow? 4. How fast should we grow? 5. Do we have the right people, processes, and controls in place to support growth? 6. What are the risks of growth? 7. What are the risks of not growing? 8. Do the benefits of growth outweigh the risks? 9. How do we manage the risks created by our decisions?

Hess Top 10 Growth Challenges

1. determine and maintain strategic focus 2. learn to delegate, manage, lead 3. installing the right processes for quality and control 4. managing cash daily 5. making hiring a rigorous process 6. pacing growth 7. building an accountable, family culture 8. scaling sales and people 9. learning to live with mistakes and change 10. building a management team that works together

Growth:

Adding resources (assets) to increase revenue

Scaling:

Adding revenue without adding the same amount of resources

According to Investopedia, what is the definition of a scalable company in a corporate environment?

Can maintain and improve profit margin while sales volume increases

According to Hess, which of the following is NOT a Top 20 growth challenge? Learning to delegate, manage, and lead. Scaling sales and people. Managing cash daily. Finding product-market fit.

Finding product-market fit.

Growth Risks:

Growth can stress people, processes, and control Growth can dilute a company's culture and its customer value proposition Growth can create quality and financial challenges

Eyebob's Case Study

Julie Allison Minneapolis, MN completely self funded - no investors market: baby boomers who need nonprescription reading glasses that appreciated style and quality struggled to get into eyewear retail chains because they feared her products who take away from their high margin prescription business her initial success came from selling to upscale men's clothing stores took 6 years to reach 1 million in revenue and eventually reached 4.5

What are the drivers of scalability?

Light Asset Base Automated Processes Low Cost Labor

According to Martin Zwilling in "10 Tips for Building the Most Scalable Startup", which of the following is NOT one of the 10 tips? Make sure you do all the work yourself to increase your personal profits. Outsource what is not strategic to optimize leverage. Build a strong team to help take yourself out of the critical path. Attract and relish investor funding.

Make sure you do all the work yourself to increase your personal profits.

Professional Services vs. Scalable Business

My partner and I are architects, which means our business relies on our professional know-how and expertise My question is, do you want to be an architect or own an architectural firm? As sad as this may be to hear, I don't think you can do both A scalable business, at least as I define it, is something that can run without you personally doing all the work

Is growth the same as scaling?

Nope

In what areas can a company grow?

Revenue/Sales Company Value Profits Number of Employees

3 Secrets to a Scalable (and Sellable) Business:

Teachable Valuable Repeatable

In the reading from Sutton & Rao (the Preface), they mention 4 big lessons they learned while crafting the book. Which of the following is NOT one of them? Scaling entails more than 'The Problem of More'. Scaling starts and ends with individuals. Those who are adept at scaling believe they are lucky and have no control over their fate. The similarities between scaling challenges are more important than the differences.

Those who are adept at scaling believe they are lucky and have no control over their fate.

According to Hess's Growth Decision Template, what is the first question we must ask when thinking about growing your business?

Why should we grow?

Other technologies that help with scaling include labor-saving technologies such as ___________________ ____________________ management systems used by large retailers including Amazon and Walmart

automated warehouse

Economies of scale:

costs FALL as production increases

Diseconomies of scales:

costs RISE as productions increases

Economies of Scale:

costs fall as production increases

Diseconomies of Scale:

costs rise as production rises

Whats the next step after completing the growth risk audit?

create a risk management plan

According to Hess, growth...

growth is change growth is evolutionary growth requires constant learning growth requires focus and prioritization growth requires processes and people growth requires business risks growth is constant improvement and scaling

Scalability is a characteristic of a system, model, or function that describes its capability to cope and perform well under an ______________ or __________________ workload or scope.

increased expanding

Focus on marketing and _______________ channels to get the message out quickly

indirect

A scalable company is one that can _____________ or _____________ profit margins while sales volume increases

maintain improve

In financial markets, scalability refers to financial institutions' ability to handle increased _____________ demands

market

Use a ___________ viable product (MVP) to validate the model

minimum

Companies with low operating _________________ and little to no burden of _________________ and _________________ don't need a lot of resources or infrastructure to grow rapidly

overhead warehousing inventory

Some tech companies have an amazing ability to scale quickly, making them high growth opportunities. The reasoning behind this is a lack of ________________ inventory and a ____________________ (SaaS) model of producing goods and services.

physical software-as-a-service

At its core, a scalable business is one that focuses on the implementation of _________________ that lead to an efficient operation

processes

In the corporate environment, a scalable company is one that can maintain or improve __________ _______________ while sales volume increases

profit margins

If you need investors, start with a ____________ idea

scalable

good growth is characterized by...

strategic focus, operational excellence, continuous improvement

Scalability, whether it be in a financial context or within a context of business strategy, describes a company's ability to grow without being hampered by its ______________ or available _________________ when faced with increased production

structure resources

Growth Decision Template:

why should we grow? how should we grow? how much should we grow? how fast should we grow? do we have the right people/processes to grow? what are the risks of growth what are the risks of not growing do benefits of growth outweigh the risks? how do we manage the risks of our decision? (questions 2 and 4 are interrelated)