Infrastructure or revenue? Which one first?

Do you build infrastructure to grow and then add turnover, or do you achieve turnover and then add infrastructure?

If you have lots of money and investment then it is easier to put in bullet proof administrative processes to make sure that you can cope with most of the permutations of your sales.

But realistically most businesses don’t have this luxury of loads of investment.  And tbh any massive upturn in sales will always lead to permutations of administrative handling that you just can’t budget for until you have revenue so you’ll be in a constant state of change and adaptation once you start trading anyway.

The other end of the spectrum is not having adequate administration or operational resources and it all going to shit – and you pissing off your core clients with the sloppy admin.

But so many people spend a lot of money on fancy processes, systems and even premises – recruiting a crack team without doing the one thing that is paramount to all of this actually generating sales.  Once you have sales you can launch beta tests of lesser priced products or services whilst you are learning on the job. But at least you can see if there is interest in your market.

There is many a salutary tale of great companies out there with perfect back offices and no revenue. Look at the UK Sperm Donor bank as a great example, if a slightly odd one – just today in the news it said it had been open for a year and has 9 – yes you heard that right 9 donors.  Now no donors, no business right?  Surely a better way would have been to open a donor registration without all the admin back up first to test the water because – if sperm donation was to be a business then you need to make sure half your clientele i.e. your donors are going to want to ‘contribute’ FIRST. Before massive investment in infrastructure.

Obviously if you are talking about developing a drug or launching a nursery then you need to make sure you have a properly tested, compliant, legal and not dangerous product – but if Apple had waited until the iPhone was perfect it would never have been launched.  It has evolved over time.  Our franchise product here at Diamond wasn’t perfect to start off with but our franchise investment reflected that and as we improved we increase the investment to represent the increased value in the more polished product.  There would have been NO POINT in either case if there was no demand.

So whilst great admin can mean growth is steadier, fewer late nights and bulletproof invoicing – there’s no point if there are no sales.  Dealing with volume of sales and having a backlog of admin as a result is a nice problem to have.  Whereas having invested in a product or service that just doesn’t sell – well that’s game over.

So in this particular incident of chicken and egg I guess the egg needs to come first.  Then you can build or buy a bigger and better chicken to lay bigger and better eggs in the future.

Good luck and see you next week.