Scaling Up
We all know how difficult it is to start a business. What’s even more difficult than building a business is to make sure that your business thrives. In terms of percentage, only about 1 out of 25 firms make over 10 million dollars. What sets these top 4% businesses apart from the rest?This book Scaling Up by Verne Harnish goes over everything you would have to know about scaling up including people, strategy, execution, and cash.
In order to be a functional business that is thriving, you need someone to guide the team. Now, guide doesn’t mean having all the responsibilities on one person’s back. Rather it means to motivate and guide your employees in the right direction or your common goal. What should your common goal be? Many companies set huge goals such as reaching 1 billion dollars in market capital, or becoming the number one in a very competitive market. Although these are good visions, they aren’t a good goal to set for the company. Because these “goals” are something that the company can hope to be in 10 years, but no guarantees on what might happen to that firm. Rather, it should set goals that everyone can achieve in a short-term. When a company has clear vision and right disciplines, that is when the company starts thriving.
People should have the recognition of the vision and goals and have the right incentives to get their work done, and the leader should make sure everyone on the team in on track. Now, how do you know who to hire?
When you are trying to figure out who to hire, it can be very difficult in such a traditional job interview where you hire by gut-feeling. Chances are, they are going to be a bad fit for the company. Rather, it should be a small task given to make sure that they are capable of doing their job position. This way, you would be able to eliminate the bad fits for the company and figure out who is the most knowledgable for the company. When you are hiring someone, you are faced with two types of people: the one that knows a little about everything and someone with deep domain expertise in one subject. When hiring, it may seem like a better decision to hire the well-rounded person to make the company good in every aspect. However, it should be individuals that have a variety deep-domain expertise for a well rounded team as they will get a lot more done than someone with a shallow understanding of what they are doing. When it is their first week at the company, people tend to just take them into a office tour and many employees tend to be lost. However, first impressions of companies matter to employees as well. Rather than a tour, it should be an incubator where they are introduced to their work and trained for their job. This way, people won’t have the impression that their work is complicated and hard. Training is said to also increase the loyalty that these employees feel toward the company. The people you hire should be aligned with the company’s core values. For example, a company with a core value of animal should not hire someone that absolutely hates animals as this person will find no joy of working here and never try to go above and beyond what is expected of them preventing growth. When a person is aligned with the core values, it is proven in a study that they get more than 40% of the work that they usually do.
When trying to scale a company, many people face one challenge. It seems like there should be less work for us when our company is expanding, but it seems to become more complicated. The reason for this is because of something called “growth paradox”, where many people think that management should become easier once the business scales, however it actually becomes much more difficult to manage. Why would business become more difficult to manage when there are more managers working? Well, because the complexity of the business grows exponentially as the more people there are, the easier it becomes to receive the wrong message or do the wrong tasks. In order to avoid these problems, there should be capable leaders, scalable infrastructure, and market dynamics to help the business prosper when it is trying to scale.
When your business is scaling well, then you need to make sure to keep the position you are at. Companies should have a meeting often to discuss the problems of the company and how to improve it. Some companies are hesitant to hold meetings as it can be costly. However, one company spent 7% on having meetings weekly. Then within few months, they were able to triple their revenue which was enough for 10 years of meeting. Meetings are something you cannot avoid for good communication within the team. How do you carry a good meeting? First you want to start off on a positive note by talking about the good news. Then you want to talk about what your customers are saying to make sure your customers are satisfied. After is when you pick one or two major topics to discuss and come up with a solution as a team. Then you close with a final phrase.
As the old saying goes, “Revenue is vanity, profit is sanity, and cash flow is king.” When Jeff Bezos was starting Amazon, he barely met his break even point, but still kept his prices low as he knew the importance of cash when starting out. The cash flow sheet should be checked daily to make sure you know where the money is going and to cut down on expenses that are unnecessary. When taking out a debt, a company should be careful. A debt should only be taken out when your business is profitable. If you are taking out a debt when you are losing money, it can be like pouring water into a broken bucket.
This book explains everything that you would have to know about how to have a healthy business and to scale it up correctly. There are many important things to learn from this book and I explained what I really liked about this book. For anyone that is trying to start or already owns a business, this book is a must-read. I highly recommend you to read this on your own as there is a lot of valuable knowledge in this book.
Stay strong!
We all know how difficult it is to start a business. What’s even more difficult than building a business is to make sure that your business thrives. In terms of percentage, only about 1 out of 25 firms make over 10 million dollars. What sets these top 4% businesses apart from the rest?This book Scaling Up by Verne Harnish goes over everything you would have to know about scaling up including people, strategy, execution, and cash.
In order to be a functional business that is thriving, you need someone to guide the team. Now, guide doesn’t mean having all the responsibilities on one person’s back. Rather it means to motivate and guide your employees in the right direction or your common goal. What should your common goal be? Many companies set huge goals such as reaching 1 billion dollars in market capital, or becoming the number one in a very competitive market. Although these are good visions, they aren’t a good goal to set for the company. Because these “goals” are something that the company can hope to be in 10 years, but no guarantees on what might happen to that firm. Rather, it should set goals that everyone can achieve in a short-term. When a company has clear vision and right disciplines, that is when the company starts thriving.
People should have the recognition of the vision and goals and have the right incentives to get their work done, and the leader should make sure everyone on the team in on track. Now, how do you know who to hire?
When you are trying to figure out who to hire, it can be very difficult in such a traditional job interview where you hire by gut-feeling. Chances are, they are going to be a bad fit for the company. Rather, it should be a small task given to make sure that they are capable of doing their job position. This way, you would be able to eliminate the bad fits for the company and figure out who is the most knowledgable for the company. When you are hiring someone, you are faced with two types of people: the one that knows a little about everything and someone with deep domain expertise in one subject. When hiring, it may seem like a better decision to hire the well-rounded person to make the company good in every aspect. However, it should be individuals that have a variety deep-domain expertise for a well rounded team as they will get a lot more done than someone with a shallow understanding of what they are doing. When it is their first week at the company, people tend to just take them into a office tour and many employees tend to be lost. However, first impressions of companies matter to employees as well. Rather than a tour, it should be an incubator where they are introduced to their work and trained for their job. This way, people won’t have the impression that their work is complicated and hard. Training is said to also increase the loyalty that these employees feel toward the company. The people you hire should be aligned with the company’s core values. For example, a company with a core value of animal should not hire someone that absolutely hates animals as this person will find no joy of working here and never try to go above and beyond what is expected of them preventing growth. When a person is aligned with the core values, it is proven in a study that they get more than 40% of the work that they usually do.
When trying to scale a company, many people face one challenge. It seems like there should be less work for us when our company is expanding, but it seems to become more complicated. The reason for this is because of something called “growth paradox”, where many people think that management should become easier once the business scales, however it actually becomes much more difficult to manage. Why would business become more difficult to manage when there are more managers working? Well, because the complexity of the business grows exponentially as the more people there are, the easier it becomes to receive the wrong message or do the wrong tasks. In order to avoid these problems, there should be capable leaders, scalable infrastructure, and market dynamics to help the business prosper when it is trying to scale.
When your business is scaling well, then you need to make sure to keep the position you are at. Companies should have a meeting often to discuss the problems of the company and how to improve it. Some companies are hesitant to hold meetings as it can be costly. However, one company spent 7% on having meetings weekly. Then within few months, they were able to triple their revenue which was enough for 10 years of meeting. Meetings are something you cannot avoid for good communication within the team. How do you carry a good meeting? First you want to start off on a positive note by talking about the good news. Then you want to talk about what your customers are saying to make sure your customers are satisfied. After is when you pick one or two major topics to discuss and come up with a solution as a team. Then you close with a final phrase.
As the old saying goes, “Revenue is vanity, profit is sanity, and cash flow is king.” When Jeff Bezos was starting Amazon, he barely met his break even point, but still kept his prices low as he knew the importance of cash when starting out. The cash flow sheet should be checked daily to make sure you know where the money is going and to cut down on expenses that are unnecessary. When taking out a debt, a company should be careful. A debt should only be taken out when your business is profitable. If you are taking out a debt when you are losing money, it can be like pouring water into a broken bucket.
This book explains everything that you would have to know about how to have a healthy business and to scale it up correctly. There are many important things to learn from this book and I explained what I really liked about this book. For anyone that is trying to start or already owns a business, this book is a must-read. I highly recommend you to read this on your own as there is a lot of valuable knowledge in this book.
Stay strong!