If you’re considering taking your first steps toward scaling your business, you’ve come to the right place. This episode will let you in on the secrets of growing and scaling your business, so you can be better informed before taking this major step in your entrepreneurial journey.
In this episode of Influence By Design, Samantha and Tim talk about two distinct business concepts — growing and scaling. Growing a business involves increasing revenue, whereas scaling requires efficiency and profitability as revenue grows. While growth feels positive, scaling balances revenue and expenses. Understanding this distinction between the two concepts is crucial.
Samantha and Tim emphasise the value of measuring business metrics related to your team, technology, and client acquisition costs and explain why tracking staff utilisation, productivity hours, and time off is essential.
IN THIS EPISODE YOU’LL DISCOVER:
- The difference between growing and scaling your business (05:07)
- What could happen if you focus only on growing your business and forget about scaling it (6:42)
- Major costs to consider when scaling your business: People (09:08)
- Major costs to consider when scaling your business: Technology (12:25)
- The best way to stay on top of your costs: Recording your numbers (16:11)
- The value of tracking non-financial metrics (21:55)
- “You can grow a business from $100,000 to $100 million — that is growing your business. Scaling your business implies very much the same thing, but with a measure of efficiency that also makes it more profitable as you grow.” – Tim Hyde
- “Scale is inherently a good thing. Growing just means your costs increase, as well. And growth is expensive.” – Tim Hyde
- “One of the biggest problems as you’re scaling is getting out of your own way. So you might need to bring team members in that have a higher level of understanding, expertise, and experience than you.” – Samantha Riley
- “What gets measured gets managed. And if you want to make more money from your business, this is a critical thing to keep one eye on.” – Tim Hyde
- “Our most valuable resource as CEOs is time. Spending money to get someone to help us can fast track and help to get really clear on what’s broken, what’s missing, or where the gaps are.” – Samantha Riley
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CONNECT WITH SAMANTHA RILEY
Samantha Riley 0:00
One of the biggest problems as you’re scaling is getting out of your own way. So you might need to bring team members in that have a higher level of understanding, expertise, experience than you. But on the flip side of this, you might be two people heavy. So this has to be a real balance.
Tim Hyde 0:17
Growing your business should be easy, right. It’s to increase in size and scope of what it is you do so you can grow a business from $100,000 to $100 million. That is growing your business. Scaling a business implies very much the same thing, but with a measure of efficiency that also makes it more profitable as you grow.
Welcome to today’s episode of Influence By Design. I’m your co host for today, Samantha Riley, joined by my partner, Tim, whose warranty has expired, Hyde. Joining me today, Tim, I want to say how are you but I’m always too scared to ask. You’ve been a bit in the wars.
Tim Hyde 1:22
I have been in the wars. It’s not, it’s not particularly pleasant. Really.
Samantha Riley 1:27
We’re both laughing but I’m not … really am not laughing at you. Go on. Tell us what’s been going on in your world.
Tim Hyde 1:34
Oh my god. Okay, well, I turned 50 last year as some of our listeners know. And since turning 50, I’ve had a diagnosis of fatty liver, insulin resistance, sleep apnea. Last week, I had a kidney stone, which was not something I’ll ever recommend anyone do voluntarily. That was horrible. And then last Monday at basketball, I managed to break my ankle.
Samantha Riley 1:58
Unbelievable. Can I just say it’s not a turning 50 thing? Because I’ve done none of those. My goodness. Touchwood. None of those things since I’ve turned 50. But well, not fun at all.
Tim Hyde 2:11
Yeah, I’m on the horse a bit. I think I’m just, got a little bit too hard. But you know, I look, I’m insured and so good.
Samantha Riley 2:20
You know what’s better than insurance? Just eating some good food, drinking some good quality water, having a bit of sleep.
Tim Hyde 2:28
Good quality water. Did you want to say wine? I’ve just given up wine. And yeah, that’s all falling apart.
Samantha Riley 2:41
Well, I hope you are on the mend soon. Today, let’s answer a question that’s come through. The question has come through from Ian Crawford, who we’ve had on the show before. So big shout out to Ian. And he’s asked, what is the one major thing you see people trying to scale their business forget or not do well without even realising it? And I love this question. Because I’m a big advocate and say this all the time, you can’t read the label from inside the jar. So essentially, you don’t know what you don’t know. So I really love this question. And hopefully when we dive into it today, it gives you some ideas of where you can look in your business to take it to the next level.
Tim Hyde 3:31
But I think that’s a good one to add to here, Sam is, what is scale and what is growth?
Samantha Riley 3:37
Yeah, I think this is really important.
Tim Hyde 3:42
So that’s what we need to understand, what scale is. I think it’s one of the terms that, it’s kind of thrown out there in many ways, but people don’t necessarily really understand what that actually means to scale a business.
Samantha Riley 3:54
Definitely. Before we jumped on this call, I was talking about, I’d seen someone or had dinner with someone last year, and she was just starting her business. And she was asking what I did, and we were chatting about that. She said I’ve just started working with a coach, I went great. What are they helping you with? She said, are they helping me to scale, but she hadn’t actually started her business. It’s just, you need to make sure that you find a person to help you for exactly where you are in business at that time. And this particular conversation had us not 100% agreeing at every part of the conversation, which is fine because we’re all allowed to have our own opinions. Right.
Tim Hyde 4:41
Absolutely. And we had, we did go in, you know, full disclosure, we did go and Google a couple of answers to see what the good definition of scale was, not just the Sam and Tim version. What would you do if someone came to you and said, Can you help me scale my business? I haven’t started yet. And my, you know … I’d send them away to actually get started first. Yeah, it’s much easier when you’ve got something there to start. But let’s look at the two definitions. Firstly, right? Growing your business should be easy, right. It’s to increase in size and scope of what it is you do. Right. So you can grow a business from $100,000 to $100 million, that is growing your business. Scaling your business implies very much the same thing, but with a measure of efficiency that also makes it more profitable as you grow. So if you were to think about this, just a sort of, you know, dollars over time kind of graph, and draw a line of top line revenue, and a line of costs growth, just makes them both go up.
Samantha Riley 5:53
Yeah, so it’s a line essentially, that’s in a straight line upwards.
Tim Hyde 5:57
But they’re, they’re in parallel, right. Your costs and your growth are largely kind of doing the same thing. Let’s ignore the fact that there’s a little intersect at the beginning of breakeven, right, where your costs exceed your revenues.
Samantha Riley 6:09
Let’s not, let’s not dive deep there today.
Tim Hyde 6:14
All right. Scaling implies that as your revenue grows, your costs lower, or increase the gap between top line and costs. And my top line revenue may mean all of the dollars that you bring in compared to what you spend, and the gaps, the profit. So scale is inherently a good thing. Growing just means your costs increase, as well. And growth is expensive. We know that.
Samantha Riley 6:42
I know both of us have spoken with many, many, many business owners that are in a situation where they’ve grown, and sometimes to really huge amounts, you know, seven, eight figures in multi millions of dollars, that are saying, my goodness, like we’ve grown, we’ve got all this revenue coming in, you know, we’ve got $25 million coming in. And I still don’t have any money going in my pocket. Or I’m still not making any more money than what I made sort of five years ago, when my revenue was a lot smaller. And that’s because they haven’t scaled, they haven’t worked out where they can become more efficient, so that they become more profitable.
Tim Hyde 7:23
Yeah, I think that’s the thing that I’ve heard a lot of. And I’m going back to, probably at least 10 or 15 years ago, a conversation that I had with an accountant friend of mine, Leanne, so shout out to Leanne, if you’re listening. And she told a story of a client that they, that she’d worked with. And they were, when she originally went into them, there were 25 million in revenue, four partners in the business. And, you know, by any stretch of the imagination, 25 million is a pretty successful business. What they did was restructure, took a bunch of divisions out, and got rid of them, cut the staffing, massively looked at what was profitable, and what was not profitable, and effectively reduced the size of the business over the course of 12 months to about 5 million in top line revenue. However, anything, Oh my God, why would you do that? That sounds Yeah, that’s like … right?
Samantha Riley 8:22
You only got 20% left of what you had. Okay. All right.
Tim Hyde 8:25
But running a $25 million business is a pretty stressful thing. You got lots of fingers and lots of pies. Running a $5 million business is much easier as is running a $50,000 business, much easier. But the here’s the real thing that she was saying that each of the owners was able to double their take home revenue in a $5 million business that they couldn’t do and $25 million one.
Samantha Riley 8:51
Hmmm, interesting, hey.
Tim Hyde 8:53
By focusing on what the purpose of your business is, which is to make profit for you. Mm hmm. Love it. And I don’t think you know, as we scale, we want to keep an eye on that. Right? That’s absolutely, yeah.
Samantha Riley 9:08
So let’s talk about some of these efficiencies that we’re talking about here within scaling. You know, I think one of the major costs of a business that’s at that level is definitely people, staff. You’ve got tech, you’ve got other resources. Let’s dive into people first, because I think that this can be one of the biggest costs. Now this can actually go either way, we’re talking about delegating, and teams, you definitely need to do it because one of the biggest problems as you’re scaling is getting out of your own way. So you might need to bring team members in that have a higher level of understanding, expertise, experience, than you, but on the flip side of this, you might be two people heavy. So this has to be a real balance. What do you want to add to this, Tim?
Tim Hyde 10:02
I think that’s probably … We know that as a business grows, you know, whilst technology might be the initial big outlay for you, over time, it becomes your staffing bill. That’s going to be probably the biggest chunk of most businesses, again, depends on the nature of business, if you’re a product focused on that, but with the other big rock that you probably don’t have as much control over. But I got a mate of mine who’s got 1000 staff. And I constantly joke with him that he’s probably paying for 10 people to sit on the toilet at any moment in time.
Samantha Riley 10:39
So he’s got a high amount of staff, he’s got a large team.
Tim Hyde 10:46
But you know, that’s one of the big, the biggest things. And I think, you know, just to sort of underpin, you know, all of this, this conversation, and to potentially sort of touch on to Ian’s question about what’s missing from businesses that scale, it’s real understanding of the metrics that are arising out of those three resource buckets, those staffing, right, we need to be looking at utilisation. Okay, so if you’ve got 10 people sitting on the toilet, there’s 10 people that you are paying for, but not getting productivity from. Okay, if you’ve got people who turn up, you still have this, this funny joke about minerals back in my project management days, when I saw people sort of, say, I’m gonna get eight hours of productivity and have every single resource that works for me. Good luck, good luck, you’re probably more likely to get five hours of productive time in an eight hour day out of a resource that you hire. And so really understanding that, but a business that can get six hours of productive work, rather than five hours of productive work. Well, one of these businesses is going to be more efficient and effective at delivering solutions to clients. And therefore the gap between cost and revenue will be bigger. That company will scale. But if you don’t measure that, as a metric in your business, you will have no idea. You’ll be thinking you’re getting eight hours but not getting eight hours.
Samantha Riley 12:22
Totally, totally. Let’s talk about technology. Because this is another big one. Obviously, it’s one of the big three, we just mentioned that. I find that when businesses start, they’re very scrappy, you know, we bootstrap, we’re doing as much as we can with as little, you know, as little money as we can. We’re trying to get everything up and running. And this can mean that we’ve got a whole heap of technology that’s kind of strapped together. And one of the things I know and that I do with my clients at a certain point is go in, and we actually map out their entire technology, I guess, let’s call a bundle, you’ve probably got a different word for it. But, take stack. There we go. That’s much better. And we usually can go well, what do all of these different pieces do? And how can we, now we know that, can we choose three or four or max five pieces of technology that can still do all of this, but we don’t have so much like strapped together? It’s like sellotaped together, you know, you can just visualise it.
Tim Hyde 13:35
Yeah, either there’s a, there is a thing, and I’m gonna get into that, because that might be just fun and slightly terrifying to know what I’m spending subscriptions on, but I don’t really use very effectively. There are absolutely certain tools and whether you, you know, or wouldn’t necessarily take Samsung;s advice here on , you know, must only have five, you know.
Samantha Riley 13:56
So I didn’t mean, you know, this is exactly what we’re doing. But essentially, what we’re trying to do is simplify and get rid of as much fluff as much as possible. Agaib, it’s coming back to efficiency. Yeah.
Tim Hyde 14:10
Yeah, yeah, it’s what it is working out what you actually need, and making sure that you use it. I’ve seen lots of people, you know, put in CRM systems, and then never use them. And you know, then it becomes an expense to your business that you’re eventually just gonna get rid of. If you use these things, they can become incredible at increasing the productivity of your most expensive resource, which is people, right, and time, right? Those are the expensive resources. And so when you’re choosing your tech stack, you want to be able to choose, you know, choose tools that increase the efficiency of your people resources. Not that, decrease or doesn’t do stuff for the sake of doing stuff.
Samantha Riley 14:53
Absolutely. So I definitely recommend doing that, start to map out what is the process of, you know, the outcome that you’re trying to achieve? What does each piece of technology do at each stage? And can you move one completely out? Because another piece of tech that you’ve got can actually do that same function? Or close to. Yeah, maybe even better.
Tim Hyde 15:16
Yeah, one of the things I like to do when, again, just touching back on Ian’s question about, you know, what do people miss? Or what should you be focused on? Is sort of mapping. How does a customer move through your business? Okay, so how do they find you? What do they do next? What do they do next? What do they do next? How do they give you money? How do you deliver it? How do you keep them? etc, etc, etc. Okay, and putting some KPIs against each other. That’s, again, what gets measured gets managed. But secondly, also, what is the, you know, at different stages, what are the resources and or technology that you have in your business that supports that function, or does not support that function? And I think that’s an important sort of question to answer as well as you, as you look at scaling.
Samantha Riley 16:09
Totally, totally. So I think the next piece is, well you were just talking about reporting then. And I think one of the most important parts of reporting, and you and I do agree on this, is keeping track of the cost of acquiring a client, or keeping a client delivering to a client. Because essentially, that’s what we do, right? That’s our sole purpose. That’s why we’re here. And these are some of our biggest costs, and also can be some of our biggest money sucks. If we don’t get it right.
Tim Hyde 16:47
Yeah, I completely agree. You know, we do this stuff. And we just forget our marketing side of things. We do a lot of stuff that apparently has no cost. I love this one, you know, people’s head up to networking events, but don’t spend anything on marketing. What about the two, three hours you just spent in this room?
Samantha Riley 17:08
In drinks, and in time, right? In the $70 breakfast?
Tim Hyde 17:12
You got to spend that, you got to spend these resources, and we need to start looking at what is it you know, when we’ve talked about the cost of acquisition of a client, you sometimes might see in marketers talk about this, this COA, Cost of Acquisition. How much does it cost for you to get a client to sign on the dotted line and hand over some money for you? All of the marketing activities you do, and I’m talking, your networking activities, your advertising spin, the cost of your salespeople, you, if you’re doing the sales, you know, how much time you spend on social media from a business context. And it’s scrolling through TikTok for shits and giggles, but every time you write an article, post an article, respond to the comments, building your Facebook group, recording podcasts, you know, all those costs, right, coming to your Cost of Acquisition. And obviously, we want to be able to spend more to get people, right, so we can play with, but also want to minimise that cost. Okay, we want to make that as efficient as possible. So if you were to start tracking, say over the last three months, how much time and dollars you spent on all those activities, and then divide them by the number of clients, well, you might suddenly be a little bit surprised that it’s in the 1000s of dollars of activity to get somebody.
Samantha Riley 18:36
Right, which isn’t a problem if you’ve got a super high ticket item. So if you figure out that your cost of acquisition is $5,000 to acquire a client, and your monthly revenue from that one client is $50,000 a month, not an issue. Right, you’d be handing that $5,000 over as many times as you possibly could. But if your cost of acquisition for a client was $5,000, and you were charging $500 a month, and your churn was really high and the lifetime value of that customer’s only three months, then you’re in the red.
Tim Hyde 19:17
Yeah, and you might not even be realising it. And so particularly when, you know, if it’s just you in your business, or you and a small team, it’s really easy to overlook that cost. And you know, you get stuck in this trap of thinking wise, you know, I seem to be working really hard and not making what I deserve. If you feel like that, this is why you’re spending more money to get your client than you actually make from them.
Samantha Riley 19:45
Yeah. So the only way that you can figure out what’s going wrong is actually recording all of your numbers. The number of actions you’re, you know, the traffic, your conversion rates, your, you know, your no shows, your all the things need to be recorded so that when you look at the numbers, they paint a picture. And you can see straight away, oh, there’s a hole here, let’s fix just this one piece, because the numbers don’t lie.
Tim Hyde 20:19
Yeah, and it’s super important, right. And this is the thing I think people don’t do effectively enough when they’re looking at scaling versus growth. So if you’re getting to that, you know, seven figures, eight figures, wherever you happen to be, even six figures. And you go, I seem to be working really hard, or your partner has commented that you’re working really hard. And you’re going, I don’t know where all the money’s going to, right? It’s going into these hidden costs that you’re just not measuring in your business. So while you’re growing, you’re not scaling.
Samantha Riley 20:54
Absolutely. Now that we’re talking about reporting. We’ve just talked about acquisition, lifetime value. So things like churn, refunds, your cost of delivery, you know, your staff, your technology. These are, these are things that you need to report on. But you brought up something that when you said it, I was like, How did I not even think of this in the conversation? And that was recording how many days off you have? Super clever.
Tim Hyde 21:24
Yeah, I mean, I tried to track, and look, it’s easy to get overwhelmed. You can track just about everything. But you know, you don’t want to just sit there and track …
Samantha Riley 21:31
And you don’t want to turn it into a full time job, just tracking a spreadsheet, right?
Tim Hyde 21:35
When you can, if you’re at a certain scale.
Samantha Riley 21:39
You’re right, but it’s not worth, as CEOs, we do not want to be doing this.
Tim Hyde 21:45
I do not want to be doing that. Right? Now this is part of that delegation, right, pushing the responsibility of reporting activity back to your team is an important part of scale. But I think it’s important that we also track, you know, non-financial metrics, not just about you know, cost of acquisition, lifetime customer value, initial customer value, churn rate, email, open rate, all these sorts of, you know, probably, more easily measurable things. I think it’s important as entrepreneurs that we track the number of days off we have per month, where you literally don’t open your email, or you don’t pick up your phone, you know, that you get thinking time or time with friends and family, whatever it happens to be for you. I think this is a really important metric we sometimes overlook as well. But even that, you know, what’s your number of sick days per, you know, per employee? You know, because that’s going to speak to the culture of the organisation as well, if people are always taking sick days, well, maybe something’s not quite right.
Samantha Riley 22:52
And then, you know, exactly like I said before, where the gap is, or where things are falling apart, so you can start to address them. Yeah. I love this conversation. I love this question. When I read this question, I was like, Oh, this is a meaty one. Because yeah, like I said, you don’t know what you don’t know, necessarily. And even if you did realise all of this, I know, from being in business, that there’s always something that’s like, Ha, that was a really good reminder. I haven’t been doing that. Let’s get that sorted out. Tim, what’s one thing that you would like to leave people with from this conversation?
Tim Hyde 23:31
I think probably the, just that reinforcement, right? You know, what gets measured gets managed. And if you want to make more money from your business, this is a critical thing to at least keep one eye on.
Samantha Riley 23:50
Yeah. 100%. Because it’s when you realise things have not been reported, nine times out of 10, probably even 9.9 times out of 10, there’s a gap there that’s just screaming to be looked at. Yeah, 100%. I would like to leave this conversation with, if you’re not sure of exactly where the gaps are in your business, or if you’re not sure about exactly what you should be looking at or looking for, then reach out and get someone to help, because the most value, there’s only two, two currencies that we can spend, time and money, I guess, health I guess in a way, I’d never even thought of that before. I’ve not actually thought of that because I always talk about your two currencies and hang on, there’s three. You’ve just proven that just this week. But let’s talk, you know, it’s someone … Our greatest currency is time that we can spend. It’s the most valuable resource that we have as CEOs, and that spending money to get someone to help us can fast track this process and help you to get really clear on what’s broken, what’s missing or where the gaps are.
Great conversation, Tim, thanks for joining me, broken and all. And thank you for tuning in and listening. If you have enjoyed today’s episode, we’d love for you to take a screenshot on your phone, tag us, and share your greatest aha moment because when we share these, it brings together a collective learning. You may have heard something that someone else has missed and it might be just what they needed to hear. It also helps you to reinforce what you’ve learned today. Thanks for joining us and we’ll catch you on another episode next week of Influence By Design.