It can be a wonderful problem to have: how to scale up to handle incoming business. However, this can also be a dangerous issue. The New York Times listed out-of-control growth as the third-largest reason why small businesses fail, just after the related problems of bad math and owners who can’t stop making the same mistakes. Growing faster than the customer base puts too great a strain on cash flows as expenses spike on the promise of unpredictable revenue streams. On the other hand, growing too slowly damages customer service levels and brand reputation, which mean everything to a service-based business.
Beyond getting the timing right, businesses stumble during scaling operations because they often don’t count on the fact that some problems become impossibly complex above a certain threshold. For example, 100 customers on a monthly subscription billing model could generate roughly 1,200 invoices. In addition, there are upgrades, service additions, downgrades, cancellations, slow payments, payment failures, and technological glitches. Doubling the customer base can multiply those challenges beyond the business’ capability to address new problems, such as server performance, alternative payment types, churn, promotional packages, international currency and taxation issues, and additional customer support. n nHere are three suggestions to help prepare for the inevitable challenges of scalability:
When businesses are just getting started, everyone tends to do every job out of necessity. In order for the business to scale effectively, ad hoc management processes have to end.
Clients want to feel like they receive individual attention for their invoicing needs. In reality, though, the company will quickly run up against a hard limit of how many hours there are in a day. Delegate a service company to handle details like billing and invoicing. Focus on improving core value operations.
The front line has to be trained to handle the day-to-day fires. Leadership has to let that go and do the long-range planning for scalability. The critical lesson from Ernst & Young’s Strategic Growth Forum last year was this: entrepreneurs fail when they forget to grow the business. Work on your business, not in it. In the rapidly evolving global market, stagnation is starvation. Scale up, but do it intelligently by putting all the right resources in place before the complexity hits.
Speaking of strategies to build and scale a successful subscription business, our Retry Strategy guide walks you through another one. Download it today to get simple steps you can take to increase your LTV by 43% or more: