As business owners we get excited when we see more sales, more dollars coming in, especially when you see revenue growth year over year. But after a few years of that consistent growth pattern, you start to notice another pattern emerging that gives you the opposite feeling of excitement, “dissatisfaction”.
You become dissatisfied because although your business grew, you didn’t necessarily become more profitable. You realize now that you fell into the growth trap. At this point, the business has ballooned with expenses, and you need that consistent revenue coming in just to maintain the business. Your life fills up with stress because you are always worried about it falling apart, you don’t have much room for error.
As your business was growing you added more overhead in the form of payroll, locations, products, etc. to keep up with that growing demand. This is exactly why your business has not become more profitable.
At the opposite end of the spectrum is scaling your business. This happens when your business is generating more revenue with the same number of resources, i.e., employees, locations, etc.
Some businesses are more scalable than others such as software and entertainment companies compared to service companies like restaurants, childcare, etc. That’s because most of the work goes up front in creating the product and then the work shifts on selling that same product over and over again. With all this being said, I believe you can scale any business so long as you avoid the growth trap. You do this by getting as excited about finding ways to cut expenses. It feels rewarding to hire employees but it feels terrible to let them go.
Avoid this by only hiring when it is required not desired.
You do not hire tomorrow’s employee today.
You don’t commit to adding new locations because you think you are going to expand and you don’t bring in more inventory because you think you are going to sell it.
Above all things you must maintain discipline, you have to know what is your maximum production base on your current resources before you add more.
If you do this, I promise you, you will avoid the growth trap, you will scale your business and become more profitable.
