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Top 3 Traps When Scaling Up Your Business
30 July 2015
Bobbi Brown of Bobbi Brown Cosmetics is an interesting case study in scaling up.
What I find very interesting about Bobbi’s story is that family was always Bobbi’s most important priority (she has three children). That meant that at some point she didn’t want to keep traveling as it meant being away from them for too long. A big factor when building a business.
She was creating new products back in the beginning and had one development chemist to work with. She’d sold her product into Bergdorf Goodman and other major retailers wanted to stock it.
Estee Lauder’s son Leonard offered to buy her business because he had all the resources to scale it up. He had an army of development chemists and global distribution channels. Bobbi knew that she couldn’t scale up with one chemist, but she did want to keep growing her brand. So she sold in 1995 and has been the COO of Bobbi Brown ever since.
Handing over her business to let someone else scale it up means she has a global brand, plus has also been able to create the Pretty Powerful charity to support women and girls.
Being able to sell your company, stay on as the creative head, negotiate a great contract where you have freedom to navigate and grow your brand, and let someone else handle the scaling up, is one option!
It’s also important to know that there are traps inherent in scaling up that you need to carefully navigate.
Most businesses scale up organically.
Occasionally businesses get capital injections to take them sky-rocketing from zero to millions very quickly.
Other businesses scale up too fast; they lose control and crash and burn.
These are three of the most likely traps to avoid when you scale up your business:
1. Uncertainty about your business model
You really need to be very clear about how your model works. How you make money and at what points.
I’ve mentioned it before and I’ll repeat it here: The Business Analyst Question™ I always remember was ‘so how do you make money?’ What he meant was: ‘take me through every step of your process from the time you acquire a client, walk me through exactly what you do for them, and point out the exact points at which you make money’.
It’s a good exercise because you may find your model has some gaps and opportunities.
2. Uncertainty about the levers in your business model
If I were to offer you 2M to scale up your business fast, would you know what the levers are? Meaning, would you know how to use the 2M to invest in growth?
Most business owners tend to think of scaling up in terms of adding more people to their company, or acquiring another business or a brand, or adding another office or branch.
These are all valid and may work for your business as it is today, but not how a scaled-up version would look like.
A huge lever may be technology, for example, which enables you to reach more clients, automate and multiply, reduce the need for more people, and so on.
So, what are your levers for scaling up? Two of Bobbi Brown’s were an army of development chemists and economies of scale with massive production facilities.
3. Your business isn’t optimized with systems
Using the above examples, when you scale up you need to be ready with your infrastructure and systems.
I had a client who scaled up so quickly, without good internal systems, that once they had five times as many people in a relatively short period of time, things became quite chaotic. They didn’t take the time to automate, they didn’t invest in technology, they duplicated things rather than streamline, they added people and cost instead of processes, and ultimately imploded and had to scale back first.
Lack of systems can potentially ruin your scaling up efforts, so if you have the opportunity to scale up very fast, you have to address systems.