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Guest: Don Schiavone, Partner, CEO Coaching International
Episode in a Tweet: Former COO of Grasshopper shares the three keys and one metric you must optimize as you start massively scaling your business.
Quick Background: Don Schiavone, the former COO of fast-growing Grasshopper, “The Entrepreneur’s Phone System,” was instrumental in leading the company as it optimized its 100% digital marketing growth strategy and its eventual sale to a Fortune 500 company. He brings together an in-depth understanding of technology with a data-driven “test-everything” philosophy: You can’t manage what you can’t measure. While coaching entrepreneurs at CEO Coaching, Don’s approach to coaching focuses on three pillars of success: people, process, and systems.
Transcript: Download the full transcript here.
Key Insights on Scaling Your Business
1. There are three main keys to scaling your business. The first is having the right people on board for the stage of growth your company is in.
Companies go through various stages, from startup to market penetration and growth. At each stage you need different skill sets on the team to generate meaningful growth. The key is to identify what critical skill set you need, what gaps do you currently have, and then go out and find the right people to bring that scale to the company, said Don.
If you’re looking to change the trajectory of your growth and get rapid growth, you’re going to have to do things differently. And often times that means you have to bring in new people whose skills match the stage of growth your company is in.
2. The second key to scaling your business is to have the right processes in place to maximize growth.
Too often leaders get lured in by the latest gee whiz tool that promises to transform your business. Unfortunately, if you start using tools too early on your way to scaling your business, you lock in poor processes that are inefficient and harder to change, said Don. The better strategy is to try things, fail fast, iterate, and incrementally improve your processes with the right people. Once you have processes in place that you know work and deliver results, then you can focus on implementing the best tools and quickly scaling your business.
3. The third key to scaling your business is to use the right tools to automate your work.
At Don’s last company, Grasshopper, their business came 100% from digital marketing. They started with the right people to help them craft, design, and code their digital marketing messages. Through fast experimentation and iteration, they tested and measured everything until they got the results they were looking for. Once they optimized it and had processes that they knew worked, they went and looked for tools that could automate those processes.
So it was a very specific three-step process. First, they got the right people on board. Second, those people created malleable processes and did fast experimenting to see what worked. And third, they found tools to automate the processes.
4. You should always be experimenting and iterating throughout the company, but the executive team has to ensure you’re not forcing too much change at once.
Once you do a pilot with an experiment and prove the efficacy of that new process or new tool, then you roll it out to the rest of the team. And all parts of the company from marketing, to software development, to HR should be experimenting at some level, said Don. However, the executive team has to strike a healthy balance between innovation/iteration and continuing to execute day to day on your secret sauce that’s been making you successful. If you’re innovating/iterating all the time, you’ll have nothing to optimize to and create constant switching costs that benefit nobody.
5. The key metric many fast-scaling companies optimize is revenue per employee.
Scaling is about growing your business without having to increase the cost of delivering that service at an equal rate. If you can grow revenue much faster than the cost of growing that revenue, you’ll add fuel to your business by increasing your profits, said Don. The key to achieving that is maximizing your revenue per employee. This is a great metric to measure how efficiently you are growing the company. A good SaaS business should be in the $300,000 to $400,000 revenue per employee range once they get scaled. At its peak, Grasshopper was over $800,000 in revenue per employee, said Don.
Coaching Takeaways
1. Focus on the three keys to scaling your business: the right people optimizing proven processes using the best tools. Keep improving on and iterating these three keys and your business will continue to thrive no matter the external circumstances.
2. Push the organization to innovate and iterate–but not too much. Use your skill as a leader to know just how much you can push your team to optimize and maximize the business without going too far and blowing things up.
3. Closely monitor and optimize your revenue per employee. If you can make this metric continually move up quarter after quarter, you’re on your way to solid, profitable growth.
Transcript: Download the full transcript here.
