Kate’s Q&A – September 2015

This month David has asked me a great double whammy question:  why scale your business, and what’s the biggest challenge in scaling?  He’s sitting pretty on a great consultancy model based business, and has a six-figure income and no staff. Now he could grow his business – get people in, expand his offering, but he says there is a huge difference in the cost of delivering this and doesn’t see how he can make it work for him and importantly his customers.  Because his business is all about him.

Well this is such a great question I am going to answer it in two parts. This week is going to be part one – which is the WHY.

And the first bit is really simple – you don’t HAVE to scale, David.  The whole point of running your own business is that you can do what you bloody well like, WHAT specifically you want to do and HOW you want to do it.  After all that is why we all decided to be purveyors of our own destiny – to make our own call.

And I love a simple business model where it’s all about you and your relationship with your clients – the quality of your service delivery can be second to none.

So why would you scale?  You will certainly add headaches, finance  requirements and say good bye to flexible working hours so you have to be ready to dig deep to do it.

So why did I decide to scale?  Why did I not stick at £1m and a £100k income? This is the WHY, David.

Here’s my big 5 reason as to why SCALE your business.

  1. Increasing net value. There is little value in your consultancy business. It’s not saleable as you are the only asset. So if you are looking to increase your asset value you need to create a business model that means you can effectively make yourself redundant and the business has these independent income streams.  So that’s a very good reason from moving away from consultancy.
  2. Creating a saleable asset. There’s a big difference in what someone will pay (and a limited market) for a one-site courier operation.  Now when you have over 40 or 60 sites (our eventual target that’s a different baby.  There’s a lot more people interested in this size of operation.
  3. I wanted to stop being a wage slave i.e. move away from income dependent on my personal work.  Consultancy effectively means you are a still a pounds per hour kinda business – and I state right here, right now that there is absolutely nothing wrong with this. However if I take a day, week or month off my business – it functions without me there.    When I ran a small courier company topped up by consultancy to be honest the consultancy was more lucrative – but no Kate for the day and no money so that’s not financial liberation – I was still effectively a wage slave. Now there’s 25 sites UK wide earning money even when I am on holiday
  4. With volume comes discount. Like better buying rates, which enabled us to compete in a very competitive arena. To expand our services we had to divert in to a particular arena that required a service we had to buy from a third party. In order to secure good buying rates we needed volume. In order to get volume we needed to expand geography sales force – which we could only do by scale. So it was a catch 22 really – we needed to scale to compete.  Diamond Guildford couldn’t do this – Diamond nationwide could.
  5. Risk is spread.  It was all very Guildford-reliant back in the day – if my depot did badly then I was buggered because my income depended on it.  Now if we have a bad day the likelihood is that somewhere in the network someone is having a great day. So the ups and downs of turnover are leveled out.

So there’s my top 5 reasons for scaling summarized:

  1. I wanted to increase value
  2. I wanted to create a saleable asset
  3. I wanted to stop the business being Kate reliant
  4. I wanted to achieve better buying rates through volume
  5. I wanted to spread risk

There you go David – hope that helps a little.  You don’t have to scale your business – if you are happy and have great life then I would have a good hard look at your WHY for scaling. After all it’s not for everyone – I know a lot of very wealthy people with lifestyle businesses and they are the smartest and happiest people I know.  But if you are interested in SCALE – and maybe you are, for the reasons I have just discussed, then look out next week for part two of scale – the biggest challenges.

Have a great week.