Lessons From Scaling How Organizations Grow
In today’s issue…
411 words, about 2 minutes to read
We have seen companies from $1M to $10M in a single operating location. Four to 50+ employees all working in a local market. So, what is different and why do some companies scale and others only can dream of it?
We produced a staffing chart from $2M to $10M over 5 years ago, it showed the difference of a 'wear many hats' environment and one with much more specialization and bench strength. A copy of the that illustration is available by clicking here.
But what are the key lessons from observing companies climbing the growth ladder? (particularly when hiring great talent seems to be the biggest obstacle.)
Let’s condense the learnings:
1. Selling and installing resources are the critical flywheels to growth. You can’t add more salespeople if you can’t install the work; and installing capacity does not always beget more jobs to work on.
2. But, the best of the best of these employees are your most expensive asset. So cost effective scaling is how you add support people to make your best better (more productive) and simply not just adding more bodies. Another way to look at it, reducing the productive impactors of your best people ... things that inhibit selling and installing more.
3. When does design/engineering and project management take on full time effective roles? Taking proposal design/prep off the salesperson’s plate and handing off project oversight to project managers, expands the bandwidth of many companies. A good design/engineer can support up to $5M in project revenue while a good project manager can direct up to $1.5M in labor revenue cost effectively.
4. So, is it that job specialization occurs at $5M and is maximized at some point? Our witnessing of companies with single operations above $10M is that they tend to add too many people and/or too much support costs becoming very payroll heavy.
So, what is the key ingredient to scaling? Forget about Revenue per employee; rarely does revenue pay the bills. Gross Margin per employee is much more meaningful. Gross margin per payroll dollar is your best bet. Generate $2 for every $1 of payroll and the organization can efficiently grow. Clear the way for the most productive people in the business to get their job done.
If you want to go faster; remove the barriers for selling more and installing more/better.
And, remember the intelligence of the group far outweighs the smarts of any one person.