Rem Oculee is the founder and CEO of 9Q enterprises and Trust Asset Management. He also wrote the upcoming book, The Exit Mindset.
As a business leader, I suspect one of your biggest goals is to successfully scale your business. After all, not only scalable companies can achieve better, but I’ve found they can also be worth a lot more to potential buyers.
Therefore, one of the most important questions to ask yourself is “What makes a business scalable?” The answer to that is probably simpler than you think: Basically, scalability comes down to your infrastructure. I’ve found that the better your design, the easier it is to expand your business and achieve a higher valuation for your company upon exit.
Build a seamless infrastructure
As you think about designing your infrastructure for scalability, keep in mind that your goal should be to build the parts of your organization to work seamlessly together. To understand what I mean, think of your car.
If our cars worked like many companies do, they would break down every few minutes. They have a radiator problem, a spark plug problem, or an engine malfunction. Instead of relying on them to run smoothly, we would constantly put out fires and deal with emergencies. We would never get anywhere.
But that’s not what’s happening. Yes, every now and then a car part breaks, but that is rare. If it does happen, you can repair that part and then resume normal operation. Repairing the broken part usually does not lead to problems elsewhere. So try to create a business with an infrastructure as seamless as that of your car. In other words, make sure your current systems, locations, processes and people are functioning properly.
To do this, ask yourself some key questions: Are your systems cohesive or are they put together ad hoc? Are your processes well defined and efficient? Do your people automatically think about what to do when the market changes? Discipline yourself to be completely objective in your analysis; then think about the big, high-level changes you can make to dramatically advance your infrastructure.
Scalability is key
While it’s important to make sure your infrastructure is seamless, it’s also crucial to make sure it’s scalable. By that I mean making sure it uses automated processes, self-governing and as efficient as possible.
If it’s not all of these things, ask yourself a few more questions: Which aspects of your infrastructure are functioning perfectly? Why? Does your infrastructure deliver the same result where it belongs every time? Where do problems often occur? Answering these questions will help you identify opportunities for improvement.
In addition to scalability, this kind of self-driving infrastructure also helps to eliminate the possibility of ongoing problems. That means your business can be more profitable, more fun to run, and more attractive to buyers.
In my experience bottlenecks are the biggest obstacles in designing a good infrastructure. Of course factors such as good leadership, good execution and strong processes are important. However, a system can only run as fast as its slowest component, and those are bottlenecks.
Let me use a race car to illustrate what I mean. If you install spark plugs that limit a race car to 50 mph, that car will not win any races. Even if it’s designed well, it breaks down once it goes above 50 mph just because of one sub-optimal part.
A company works the same way. As well designed as it is, it can’t get past infrastructure bottlenecks faster than those bottlenecks allow.
So make yourself an expert in identifying bottlenecks. Examine your company’s processes and infrastructure, ask questions and observe from a high-level perspective. Sometimes bottlenecks are difficult to solve, but in many cases they become easier to solve once you identify them.
Finding solutions to infrastructure problems is of course easier said than done. Usually your team is busy. Asking them to solve a bottleneck by giving them more work creates pressure.
Sometimes they will resist. They may tell you that the changes you want to make won’t work. Or you may be told that your plans are simply beyond the capacity of available human resources.
If one of these scenarios happens, it doesn’t mean you should give up. You also don’t have to insist that your plan be carried out anyway. Instead, negotiate timelines and expectations and engage in conversation about how your plan aligns with your team leaders and relevant employees.
This approach can help you gain willing cooperation and commitment. Getting buy-in can go a long way toward solving the bottleneck.
Building an exit mindset
Ultimately, building a scalable infrastructure requires adopting what I describe in my book as the “exit mindset.” This mindset asks you to make every decision with the understanding that you won’t be running the company forever. One day you get out, preferably as cheaply as possible. And so, every action you take –from day one—must support a dynamic that allows your business to grow continuously and avoid the lethargy that comes from the daily grind.
Building a seamless, scalable infrastructure is a critical part of the exit mindset. After all, when selling your company, the highest premium lies in the future potential of your company. The ability to scale your business demonstrates future potential to a buyer without requiring a major investment or extraordinary effort.
However, the benefits of an exit mindset go beyond that. If you have this mindset, you can build a business that is so successful and so fun to run that you can decide not to sell it. Instead, you can decide to stay in control as your business continues to grow.
With a solid infrastructure and the right mindset, you can easily keep scaling when needed. Growth is almost automatic. You no longer have to deal with constant emergencies. Instead, you can ride with the knowledge that your scalable, automated infrastructure can lead to more growth, more opportunity, and more profit and more fun in your day.
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