If you’ve been successfully growing your revenues at a rate of 4-15% per year – but not significantly growing your EBITDA as a percentage of revenues – congratulations for growing – but bummer that you aren’t scaling.
Don’t get growth mixed up with scaling. Growth means adding revenue at the same pace you’re adding resources; scaling means adding revenue at a much greater rate than cost. Here’s why that’s a big deal:
- Growth companies earn a valuation of 5-8 times EBITDA. Scaling companies – 10+ times EBITDA.
- Companies that are scaling have the resources to:
- Dominate their category
- Attract the best and brightest team members, and
- Disintermediate challengers.
How to go from a growth company to an Authority-based business that’s scaling.
The problem for most growing companies is they have a growth culture – not a Sustained Scalingtm mindset. That switch from growth culture to Sustained Scalingtm Mindset is a big deal…but in a nutshell it goes like this:
Step 1: Replace bogus “strategies” with real market identity – or as we prefer to call it – a category that you own. It’s dumbfounding how many companies point to a financial plan, brand plan, or some mission, vision, and values statements when you ask to see their strategy.
These are important…but they are NOT strategy. They do not define who the company is and why people like, trust and transact with it.
Most alarming to us is that companies craft their identity to appeal to whichever customers buy the most product – not around the:
- Problems that the company solves,
- Job that it does,
- Business purpose,
- Point of view that it advocates,
- Category where the company is the Authority,
- Customer avatar, and
- Difference it makes in the lives of its customer/community members.
Step 2: Create an infrastructure for Sustained Scalingtm — then do it again and again until it’s a way of life. Your growth company was fortunate to find a market niche that grew rapidly. You rode a wave. But did you create the wave? Companies that scale know how to create the wave. They do this by building a community around the Category that they own. And then make that habit.
Step 3: Build an internal community of practice that works on the business as much as it works in the business. Taking the time to design an organization that can sustain scaling is what distinguishes great teams from those that catch a lucky wave. Sustained Scalingtm involves constantly questioning how your organization should look. There are processes, like leadership development (culture is ALWAYS a reflection of leadership), growth hacking, process design and continuous improvement, to name a few, that are Sustained Scalingtm imperatives.
Some Companies Just Can’t Scale
Not every company can achieve Sustained Scalingtm. Here’s the kind of companies that fail Sustainable Scalingtm:
- Companies that are stuck on Brand and not completely dedicated to being an Authority that leads a Category.
- Leaders who don’t create a culture of collaboration around growing the company’s Authority and Community.
- Companies that haven’t defined, tested and institutionalized a growth hacking processes
- Companies that don’t use measures to motivate improvement.
- Companies don’t recognize the warning signs – that they need to scale because their growth days are over.
But there are those that can! Here’s the description of a company that will be successful at Sustainable Scalingtm:
- Leadership understands what it means to be an Authority-based Business and lead a Category,
- The company’s leaders create a culture of collaboration around growing the company’s Authority and Community,
- Members of the company understand and use a growth hacking processes,
- There’s a disciplined use measures to point to, prioritize and motivate improvement, and
- There’s a Community Design and Management process that centers on identifying community member’s wants – and delivering solutions to those wants.
Achieving Sustainable Scalingtm is hard work – but then being the best in the world at anything is.
Click the link below and take the assessment to see if your company has what it takes to scale. Or contact us and let’s explore how you can achieve Sustainable Scalingtm.