Today we learn specifically why it is important for an entrepreneur to be able to scale his or her small business.
My brother-in-law, who is a successful doctor, loves to hike. Every time I get ready to head off on an extended hiking vacation, he expresses frustration at his situation: “I would love to do that, but if I’m not at work, my practice doesn’t make any money! My overhead doesn’t go away, and if I’m not there seeing patients, no revenue is coming in.” His cost of missing work is far greater than the cost of the trip to Nepal for a week. If he gets sick, he has to cancel all of his appointments and loses an entire day’s revenue. Sure, he can double-book his appointments the next day, but there are only so many hours available during which he can see patients.
Ron’s brother is an attorney, as is his brother-in-law. They face the same challenge as the doctor. They can only bill for services when they are meeting with or solving other people’s problems. How does a doctor replicate himself? How does an attorney scale her business? No doubt about it, doctors and lawyers are entrepreneurs who build a business around themselves. However, these types of businesses do not scale as well as other businesses. It’s not that it can’t be done, but doing so involves leveraging other professionals or bringing in additional partners, which brings its own set of challenges.
I have a friend who is a professional tile layer. The work he does is absolutely remarkable, truly an art form. But when the building market is soft, he can spend hours or even days bidding to win a contract. Sometimes he gets the bid, but increasingly he’s finding that people are choosing to use cheaper tile layers.
When he does land a job, he spends his own money or credit to get the supplies he needs for that job. Frequently, his work requires him to order special tile products from overseas. He worries (understandably) that his workers might break the expensive tile while transporting it to the job site. The cost of Italian granite or Egyptian marble is enough to bankrupt him if it gets broken before the masterpiece is finished. To mitigate his worry, he involves himself in every aspect of ordering and moving the imported tiles and supplies.
As good as he is at what he does, the question he forgot to ask himself years ago was, “Will this tile business scale well?” Do you understand why the tile business is difficult to scale? He can only lay one piece of tile at a time. And no matter how many tile layers he hires and trains (and pays!), each one of them can only lay one tile at a time.
Before you jump headlong into starting a business, it is absolutely critical that you consider how you will scale your business. Most people start their business without asking themselves this essential question. But the answer will make all the difference in the amount of work you are required to do yourself in the business and the amount of revenue you can make via the business, without having to clone yourself.
Next time we’ll get some examples of businesses that do scale well.