Someone asked me for the definition of scaling. They had seen it used frequently and thought they understood from context, but had never seen a really solid explanation.
I’ve mentioned scaling in relation to Maker businesses, but I can do better.
First we are going to talk about scaling, and then we’re going to look at scaling as it applies to bonsai businesses, because there’s a ton of ways to scale that won’t apply to a bonsai business.
Scale — The F*** Of Business
Similar to the old skit about the F-word, scale can be used as a noun and a verb, as well as a variety of meanings that are fairly contextual. So if you’ve ever understood it in a way not mentioned here – well, you’re probably not wrong. It’s just that in the interest of space I cannot be that thorough.
Scale is a concept loosely understood to mean ‘approaching the limits of growth’. It doesn’t mean growth alone – certain kinds of growth are not scalar.
This is easiest to explain through examples.
To scale a business: this means that, without too substantial increase in costs, you’re growing your revenues. (If your costs increase too much, you’re not scaling and may already be at scale.)
To work at scale: means something like ”working at optimal capacity” – maybe enough work that it’s cost-effective to hire a bookkeeper and an admin, so that you can maximize your billable hours. Or for goods, it might mean you have optimized your supply chain, margins, and cash flow. At scale can also indicate that a ceiling has been reached, similar to the situation outlined in this post where there’s no direction to grow that isn’t self-limiting.
When to Think about Scale
The constraints of scale are among the first things I tackle with clients. How big do you want to get? Are you willing to do X? How about Y? Let’s look at the numbers.
Many’s the time I totted up an hourly fee against a desired billable hours to demonstrate that there’s no feasible way, under the circumstances, that they will meet their income goals. So then we sit down to look at ways they can.
Scaling is the second stage of qualification. In the first stage you’re looking to answer the question, “Can I get paid for this?” If the answer is yes, the next question you’re looking to answer is, “Can I make a living at this?” Or, “Is this worthwhile?” (if the thing you’re selling is just a portion of your income or product line.)
It’s important to realize that inherent to scaling is the process of discovery. If you’ve never tried to grow in a certain direction, you really have no idea what kind of obstacles you find in the path. It’s not failure to try something — many things – only to have to back off and try something else.
Some businesses simply cannot scale, either because the constraints of the business model or because the business owner doesn’t find potential avenues of growth desirable.
Let me explain that last point:
5 Things You Need to Know as a Creative to Have a Chance of Success in Business outlined several examples of how and why certain businesses can scale – loosely, because there’s little ability to grow revenue without simultaneously raising costs, and time is of course finite.
The other constraint is not wanting to grow certain way. Let’s say you’re a bookkeeper. It’s nearly impossible to automate your business. You can’t raise your prices, past a certain point, and the only way to be able to handle more clients is to hire another bookkeeper to work under you. But you don’t want to hire.
You can phrase this two ways. Either the business ‘can’t scale’ or it’s already ‘at scale’. See how contextual this term is? In general, it is understood that it ‘can’t scale’ if you aren’t making as much money as you want or need. Otherwise it is already ‘at scale’.
Scaling Bonsai Businesses
As I mentioned before the process of scaling begins with looking at the business as it currently stands, and figuring out the options for growth and scale.
Bonsai business rests on the assumption that other values come before growth, so we set out first to figure out what these are.
Once your deal breakers are ruled out there are still a lot of possibilities. That’s why instead of talking about scaling we instead focus on Limiting Agents. Because we don’t know which avenues of growth are going to be the best yet – it’s a matter of which obstacles to growth you are able to overcome.
So here’s the way that Limiting Agent Battle Doctrine works.
- You’ve identified all the ways you can’t or won’t grow. There are several avenues left, and you naturally have a sense of which ones are the most interesting or likely.
- You pursue one or more of these avenues. Or more to the point, you try to pursue them but you are blocked by an obstacle.
- You determine what type of obstacle it is, and whether the situation lies in developing skills, systems and/or capacity, or simply spending money to fix it.
- You either correct or ameliorate each obstacle until you basically ‘fight to a standstill.’ This means the obstacle can’t be mitigated enough to move past, relative to its costs and benefits.
- So, you pick a different avenue of growth. However, you carry with you the gains of your previous wins, so it isn’t like the time is wasted.
That’s the definition of scaling and how to apply it to your bonsai business.
Got any other terms you want an explanation for?
Click here for a worksheet to help you figure out how to scale.
[ssbp]
