[00:00:05] Startups who fail to scale. You know, this is a serial entrepreneur hour and every week we run this show, we get deep into the issues of what it takes to start scale, exit, and repeat the process over and over and over again today, we’re talking about entrepreneurs and we’re very lucky because we have guy Cooper here with us today, and we’re going to talk about how entrepreneurs fail to scale.
[00:00:42] So if you think about it, there are probably a number of different areas where entrepreneurs or startups struggle. I looked up a statistic. There are 28.7 million startups in or small businesses in the United States. That’s 99% of all the small businesses in the United States fail to scale. So that is, that got me intrigued.
[00:01:12] It, it, it, it made me think about what is the reason why, why is it that so many businesses just cannot expand? I do know that probably off the top of the list, most of the small businesses would say that it’s money that they failed to raise the additional funding. I don’t believe that is the number one case.
[00:01:36] I actually think the reason that most businesses fail to scale is the entrepreneur. It’s the fact that the entrepreneur does not get themselves out of the way. And it’s that entrepreneur. That got them to, to be successful, that got them to launch that startup. It, it helped them succeed. The, the, the personality traits of that entrepreneur is what got them to stage one, but it’s not, what’s going to get them to stage two.
[00:02:08] It’s a very different formula to scale your businesses versus starting your business. And if you want your startup to scale, you’ll be listening in to the next hour. Hey Gary, do you have any initial thoughts before we kick it off here and let Jeffrey help moderate the show for us today? So, Colin, I just want to thank you first off just for having this topic.
[00:02:29] Uh, this, I mean, it’s, this is everywhere it’s prevalent, as you stated, you know, 28.7 million, uh, businesses. Uh, and so really excited about doing this. I completely concur and agree. Um, and I can’t wait to get. All right, so we’re gonna kick it off. Um, Jeff is the moderator today, as he’s just getting settled in right now, I will let everybody know if you do come on stage, um, we are recording and you give us permission to record.
[00:02:59] Uh, we do ask that if you are in the audience here now, and you have some thoughts on this topic, uh, you have some advice or you have a story to tell, please come onstage. In addition, you may have a startup that is struggling to scale and our panel here, we’ll talk to you about that startup and we’ll see, we can’t do to break the log jam.
[00:03:21] All right. So we’re going to pass it over to Jeff to help moderate today. Jeff, take it away. Uh, thank you for calling. Thank you guy. Thank you everyone for joining us. Yeah. Fail to scale. First of all, it rhymes, which is always good, but, um, it’s an interesting topic and we would love for people to raise their hands and join us on stage and share a story.
[00:03:43] Of of how you successfully scaled your company or why you think you had some challenges toward scaling your company or ask a question, you know, um, the moderators on stage, Colin, Michelle and myself guy, we’ve had the opportunity, um, to scale businesses sometimes more successfully than others and for different reasons, you know, when, when you think about what it takes to scale a business, um, it’s not just money and, you know, and scaling is not just about money.
[00:04:12] When you think about scaling, it’s also about building your team and I’ll tell just a quick story and then we can, um, Some other, uh, feedback from other people, but in terms of scaling a company when it comes to hiring, because obviously if you’re going to scale your business, you often have to scale your team and build that team out.
[00:04:30] One of the companies that I co-founded a number of years ago, it was called bar point.com. I’ve referenced that before, because I learned a hell of a lot of lessons from that experience. And we started that company. My co-founder, I just, the two of us and through circumstances, we were able to. Raise money and go public through a reverse merger with just the two of us.
[00:04:52] So literally at the end of the day, we were a publicly traded company. We had about $7 million in the bank and we had two people, my partner and I, uh, and we needed to scale up fast. And, and in this case we really needed to build a team. Cause we obviously couldn’t do everything ourselves. We had raised the money based on a proof of concept for a technology.
[00:05:13] Um, but we needed now to build a tech team, get a CTO, um, get developers and actually build the real project. So scaling was really important for us. And we thought like, We’ve got $7 million in the bank. We’re a publicly traded company. This ought to be easy, right? It’s easy to scale your business. You got money.
[00:05:31] What else do you need? Well, that was way, way wrong. So we thought, you know, w first person we wanted to hire was a CTO, a technologist, because it was a tech company. And we thought we would go out and look for someone, uh, for that position. And before we even put any ads out or, or tried to find someone, my partner was buying shoes at a shoe store, a Kenneth Cole shoe store.
[00:05:52] So I refer to the guy as Kenny Cole and the person waiting on him for shoes said, well, what do you do? He said, oh, I just raised money. I started a tech company and she goes, oh, my boyfriend, he’s a tech guy. Right. And, uh, and he, um, he’d be great for your company, so sure enough, we get his resume. We interview that guy.
[00:06:11] He seems perfect. Kenny Cole, we refer to him as Kenny call cause he came from the Kenneth Cole shoe store sales person’s boyfriend. So Kenny Cole looked like. Thing I say to myself, wow, this is easy, you know, hiring people with no problem. So we offer him, we negotiate, we make a deal. He’s supposed to start in two weeks.
[00:06:28] Everything’s hunky Dory. I’m thrilled. This scaling of business is really easy. We’re going to hire hundreds of people. No problem. Uh, so sure enough, Sunday night, the night before Kenny was supposed to start work, he calls me up at about 10:00 PM on a Sunday night. And he says, oh, Jeff, well about the job.
[00:06:45] Uh, well, um, you know, um, well my current employer, well, he kinda, you know, he kinda, you know, he didn’t want me to leave and he made me a better offer. And basically I’m not going to come with. And I had no backup. Like I was so naive at that point that I had made no backup plan. I had no resume sitting on my desk.
[00:07:04] I thought, Hey, Kenny Cole said, he’s coming to work for us. We’re all set. Everything’s hunky Dory. And that was a massive lesson in how hard it is to scale your business from an employee perspective, right? Hiring is, is a hard and time-consuming process yet. It’s an essential process when it comes to scaling your business.
[00:07:25] So the lesson I learned from that was how hard it was. So the next thing we did was instead of hiring a CTO as our next employee, we actually hired an HR person. I was able to convince someone who had her own recruiting agency to come on board full-time and be our in-house HR person. And then with her at the helm of hiring, we were able to scale that business from the two of us or three of us with her to 89 employees at our peak.
[00:07:52] So we grew from two to 89. With her on board. And she was intimately involved in the hiring of every one of those 89 people. So scaling your business, hiring is a big part of it. And hiring is a lot harder and more complicated than you would think. So you want to have a strong strategy for scaling your business with hiring.
[00:08:14] So that’s my quick, quick, or maybe not so quick story about scaling through hiring. And with that I’m guided. You want to start off, start us off with a story. And again, if you’re listening and have a story you want to share, or a question about scaling a business, or why startups fail to scale their business, feel free to raise your hands and we’re happy to bring you up on stage.
[00:08:34] So, Jeff, what I want to do is I want to, I’m going to ask you a question. Um, so when you hired that one guy, um, that’s pretty powerful, but when you went from two to 89, it sounded like you really kind of doubt in your alignment. You know, you, you decided exactly what you stood for. So you were able to offer.
[00:08:53] The right type of people at that point, is that accurate? Can you talk about, um, alignment, like what it takes to start to engage and figure out, you know, what do I really stand for? And it is the personal Jerry hire. Do they align with us? Are they, or are they not aligned with us or what I would call Alignable?
[00:09:11] Are they potentially, Alignable where you can possibly get them in shape where they can move forward? That’s such a great question guy. Um, because what you’re really talking about is vision and vision and culture and, and in the startup world, you know, those two things are so important because when it comes to recruitment and scaling your business from an employee perspective, you’re spot on.
[00:09:35] I mean, it’s so important that you’re able to express clearly what the vision of your company is, because if you’re a startup by definition, you’re starting up, you know, you, you don’t have a solid product, you know, may not, not, not yet have a solid customer. Uh, or revenue model. So really what you ha you’re your biggest asset to attract talent is going to be how strong is your vision and how well are you able to communicate that vision?
[00:10:05] Because that’s what you’re selling to potential employees, right? You can tell them we’ve been in business for 20 years and we’ve got 150,000 customers. You’re telling them we have this great idea. We’re going to change the world with our technology or our product or our service, but it hasn’t happened yet.
[00:10:20] So you have to be really good. Not just you, but everyone who’s on the recruitment side of the house has to be really good at expressing and sharing that vision, which ties very much into the corporate culture. As you alluded to guy, you know, you want to know what type of culture this company is going to have.
[00:10:38] What’s going to motivate people. What is the right personality that’s going to fit in? Because if you want to scale and scale fast, everyone needs to be aligned, as you said. So it’s a, it’s a great question. So I think when you’re doing your startup and thinking about scaling, having a solid handle on your culture and your vision is really important.
[00:10:58] I hope I answered your question. Let’s have, let’s talk about the personality of the entrepreneur and how that personality could actually hold them back from scaling. We know that every entrepreneur who starts a business has got that dominant personality and, you know, they tend to be type a personalities, but sometimes that can work against you when you’re scaling a.
[00:11:20] That’s what I was hoping you could comment on that Michelle Guy, Jeff. Yeah. I mean, actually, as, as all three of you were just talking, what occurred to me even more directly that can be very uncomfortable for the company is that you start scaling and you actually, you need to change the management structure.
[00:11:44] Right. You know, calling to, to your point is like maybe the personalities that started the company or their culture or their skill set or whatever it is, does it work when you actually need to start growing? So, I mean, when I think about growing pains, I think that’s one of them is, you know, you have the son, you know, um, you know, maybe some amazing founders, amazing CTO, but they’re not up for the challenges of actually scaling the company.
[00:12:15] I think that can be a very uncomfortable situation. And if it’s not dealt with it, you know, it will just tank any plans that you have for scaling. And quite oftentimes, I’m sure people have encountered this that are on the session. Your investors may mandate it before they put in more money, you know, they’re they know, so it’s like, you really have to be, oh my gosh.
[00:12:40] Right? So brutally honest about these things. I think the hardest thing is letting go trusting others to launch projects, trusting others, to launch divisions. I think that’s the hardest part of it. Colin. I think you hit the nail on the head there delegation. One of the biggest challenges an entrepreneur has is learning how to delegate.
[00:13:02] I have a chapter in my book. I hate saying that, but I do call delegator dye and it talks about, um, you know, how important it is to be self-aware as an entrepreneur. To be self-aware and know what are the things that you really are the best person in the room at and what are the things that you’re not, and build a team around you where in those areas where you’re not the best in the room, you have the people who are and letting go and delegating, as you pointed out, college is essential for scaling a business where one person is doing everything cannot scale by definition.
[00:13:36] You’re going to be a roadblock. You’re going to be slowing things down. So to Collin’s point, letting go learning how to delegate well is critically important to scaling your business. I love this conversation. Y’all I completely concur and, you know, um, It’s E entrepreneurs, but moving to talk about where they’re going with their company company, and then they may not really check in with their team to find out where there’s friction points, where there’s roadblocks, um, where, and, and in that process of, of saying where we’re going as entrepreneurs as type a personalities, like common pointed out, we may even hit the accelerator to drive our business in the ground, um, before it can even take off because we don’t move to hire a weakness first or what we really don’t want to do in the company.
[00:14:26] As you said, as you stated, Jeffery, um, so, you know, we really need to move to, to hire, right. Um, we’ve made the move to hire. I like to hire my weakness first or what I really don’t want to do in the company. Um, and then to move, to hire other people. And then at the end move to duplicate myself in that process.
[00:14:44] But, but love it. I love to a saying that I’ve heard and I also believe in is, you know, higher for your replacement. Right. It takes a lot of, you know, what Coronas I’m going to say to like, to really like, fill that and believe that emotionally. But if you’re hiring for your replacement to get the company to the next place, you’re doing yourself a huge favor as well as the whole company.
[00:15:12] Yeah. So good. So guy hire for your weaknesses. So if I’m, if I’m really good at one particular thing and, and, uh, I know a lot of entrepreneurs are good at sales. Some entrepreneurs are not so good at sales. I’m actually one of those people who are not very good at sales. So, you know, I, what I do, what I did in the past and when I, when I launch a new company is I find somebody who’s really good at that, because that is a weakness of mine.
[00:15:37] Is that where you’re going with this? Like it, and that’s how you can sort of break you’re you’re you’re a breakthrough and be, and become a growth. Absolutely Colin. And I think it’s, I think we need to go back and start with some strategy first, even before we get to that, that hiring process and who we hire, you know, as, as both of you stated, what is the mission?
[00:15:57] What’s the big why and why you’re doing this in the first place and what are the non-negotiables like, what’s a deal breaker, um, in your company, what do you really stands for? And, and, you know, where are those non-negotiables who is a right fit client to actually look at that and start writing that out.
[00:16:13] Who’s a wrong fit client because there’s nothing worse than having, you know, somebody that has a sour attitude come in and I call it refrigerator management when you allow them to spoil the whole refrigerator. Um, so we need to really kind of clarify where we stand, even before we move in that hiring process.
[00:16:30] And, and, and one of the main components are those non-negotiables and I call that the standard on the fly. Would you set up the standards and what you stand for? And you’ll re you know, you’ll raise the red flag. If something doesn’t. In alignment, right? So, you know, there’s times when you may have to poke the bee’s nest and deal with something, and that’s a tough thing to do with an entrepreneur, a hug, the bear, and have those tough conversations.
[00:16:55] But I think that strategy first has to happen even before you even moved to start hiring. And yes, then you move to hire, you know, my, my weakness is follow up, right. Really to really, to, uh, the touch point after and follow up. I’m clearly a visionary and want to charge forward. So I hire somebody that can move and help me to follow up with clients and with my team.
[00:17:17] Uh, that’s one of the first places where I go in hiring, uh, great, great point guy. And I think that, um, you know, hiring is tricky because, you know, also things changed. So you talked about hiring and having that, that focus, um, and the non-negotiables as you’re getting started, but also as you, as you actually develop your business model and actually I’ve covered.
[00:17:42] Things can change. And the one thing you have to also be flexible about if you’re scaling is you have to adjust to those changes and you might hire people in the early stages of the company that were great in those early stages. But when it comes time to really scale your business and grow your business and take on bigger or more clients, it might be that those early people, even though they were there from the.
[00:18:08] Aren’t still the best people, you know, for the job at that point. And you have to have, um, the, the, the awareness and the willingness to make those changes when the time comes. And sometimes it’s very painful because you may have to let go or move into a different physician. Someone who was with you from day one, you know, in the early tough days of the startup.
[00:18:32] But, but you’ve actually gotten to a point now where as you scale the business, you outgrow that person in that role, uh, the company does, and that’s one of the reasons why. To the session title. Why do startups fail to scale? That’s a very prevalent reason. They fail the scale is that they failed to adjust the team and the responsibilities of the team as the company scales.
[00:18:56] And they stay beholden to where everyone was when it was six people, you know, in someone’s garage. And now they’re 60 or 600 people. And those early folks may or may not still be the right people. And that’s hard. That’s really hard to do because these are your friends. I mean, let’s be realistic. A lot of these, we develop relationships, uh, when we launch these businesses and they become our friends.
[00:19:21] And so you’re, you’re basically saying to somebody who’s worked so hard who you’re friendly with saying, I’m sorry, you’re, you’re no longer going to be the chief operating officer or the head of operations. We’ve brought somebody else in and that’s what you’re going with that. Yeah, absolutely. I mean, it’s, it’s, you know, the, the team you have when you’re a scrappy startup is not necessarily going to be the best team.
[00:19:44] When you have 500 employees and a thousand customers, you know, it’s a different ball game. And that works in both directions. You know, I’ve, I’ve experienced it where, you know, one of the companies I was involved with the Bo, we got to a point in our growth where the board wanted us to bring in a so-called real CEO, meaning that the founder and myself who had started a company, the co-founder of myself, you know, we were the founders, but now we’re at the point where we needed someone with real big company CEO experience.
[00:20:14] And they brought someone in and I’m not going to name, name names, but they brought someone in who had big experience at a big well-known brand to be the CEO. But the challenge was that that person’s experience with. Big brands and not with, with, uh, a company that was growing, but we’re still at its hardest scrappy startup.
[00:20:33] And, and even though they might’ve been the right person for the job, from the perspective of the public markets and the financial world, they really weren’t the right person for the job for continuing to scale the company at the stage it was at. So that’s a problem at both sides of the spectrum, Collin, from, from the team you have to, the team you bring in.
[00:20:56] Nice, great, great Jeffery, you know, and I think there’s one component we’re leaving out of this as well. And Colin alluded to in the beginning talking about entrepreneurs, being type a personalities. And I want to, I want to bring an analogy with parents and children with parents. You know, there’s no rule book.
[00:21:13] There’s no. Book on how to raise your children. He, so as we move in that process, we make many mistakes. And with that, um, there’s times when, when we’re in our children’s way, you know, we can clearly see when they’re in our way and when there are hiccups and roadblocks and friction, uh, that they’re causing.
[00:21:33] But how often are we actually in there with. And causing friction and roadblocks. And are we even willing to look at that? And I dare say for the most part in general, unless we’re really conscious of that when we don’t, and it’s the same, you know, with, with our employees, it’s the same when we move them start a startup, you know, when we have employees, um, there may be friction.
[00:21:54] I mean, what I’ve seen so often is the leader will talk about what their concerns are. We’re not driving certain KPIs. Profitability is not where it needs to be. And because of that, you know, well what’s causing that. Well, my team is just not producing. Like they need to, well, why aren’t they producing the leader would move to go to answer that.
[00:22:11] And they never really checked in with their team to find out what that is. You know, you don’t know what’s in the way. And if we have a way where we can get in and check in, you know, where the wheels don’t fall off the bus with them complaining and that taking action, then we can really drive a really solid company at that point.
[00:22:29] And I believe that’s the ultimate competitive advantage, right? When you can get your team to be a part of the decision making process, would you both have control in the outcome? I think things just, you can really scale and take off at that point. And so I just look at my children and how I’m at the check in with them and say, Hey, what’s in the way.
[00:22:49] Anyway. That’s and I see Jess and anchored here as well for the stage. Yeah. And, and we’ll, we’ll jump over to Jesse in a minute here. We’re just ending that for a conversation about personality, hiring people who are a players who can lead them, like, you know, who could be leaders themselves that often create.
[00:23:12] Conflict amongst the owner and those individuals. And I like what you said about, you know, almost like kids. So that’s, I don’t know if that’s the right, right way of saying it, but, you know, allowing them to make mistakes and having the wherewithal and understanding to know, even if I am right and they are wrong, I have to step back.
[00:23:33] Nice. And so college, you know, I wasn’t really just talking about the children making mistakes, but I was talking about us as parents making mistakes and not even being willing to look at it. And we’re actually causing a stumbling block for our children. Um, you know what, let me just put it on the court.
[00:23:49] So. I can’t think of a business example right now, but we homeschool and my I’m sorry, my wife homeschools, um, I don’t homeschool. And in that process, my wife and daughter struggle sometimes. And it’s times when my wife is frustrated with my daughter, because she’s not doing some of the things that she needs to do, but I can see that my wife is actually standing over her and not allowing her to actually even try to learn the process my wife is doing.
[00:24:15] Is that, do you get it right? She’s sitting down in a chair doing the work and she’s like, did you get it? And my daughter doesn’t learn like that. And she’s trying to tell my wife, but my wife can’t see that process. She’s in the way of that process. We as entrepreneurs do that, we’re will, you know, My team’s not producing.
[00:24:33] And then I’ll go and dial in with the team and say, Hey, you know, why is production so low? Well, we’re not getting enough supplies in. And we’re really backlogged in getting supplies and it’s taking so long that we’re not able to produce in a timely matter. And we’re getting blamed for that. How often does that happen?
[00:24:49] It’s all over. It’s prevalent everywhere.
[00:24:55] No, those are, these are all, um, great, great points and great aspects. And, and, you know, it’s, it’s a pretty rich topic. You know why to start-ups fail to scale. We’ve talked a lot about personality of employees scaling through employees. There’s a lot of other topics relate to why a company can or can’t scale relative to processes.
[00:25:15] They may have relative to the customers they’re going after, et cetera, but let’s, let’s let Jessie, and then act could have a chance to either share a story about why you think starters failed to scale or a question you might have. So Jesse, welcome to the serial entrepreneur. Thank you. I appreciate it.
[00:25:34] And, um, well, I love hearing the conversation. Uh, guys, I’ve decided I love your personality, your energy, and the stories is fantastic. Um, I’ve been a part of a company now in the past 12 years, and we’ve scaled from three locations in two states to 27 locations in nine different states. And I’m so you being able to, at times we’ve scaled, we’ve grown past our leadership model.
[00:26:01] I think it’s a leadership model is so important as a here everybody’s speaking. Um, I have to have flexibility in your management model and your leadership model. You have to be able to assign clearly communicated, um, responsibilities, um, and not get lost in a job description. Right? Sometimes as entrepreneurs, we’re just trying to go through the steps.
[00:26:22] We’re going through the process real fast, and we can miss details. Um, You know, the devil’s in the details all the time, but we have to think through the details and still yet leave flexibility for the model to change because your, your startup might meet an opportunity to, you need to take advantage of, and it might be outside of some of the, um, you know, the structure that you’ve put in place.
[00:26:47] So it really boils down to, I believe in what I’m hearing everybody say. I agree with it boils down to being able to put together a good theme buys into your values, empower your team, allow them to come beside you, identify the opportunities and, and move with your team. Right. And give them some of that, um, flexibility in it.
[00:27:07] So, um, obviously this is all with the assumption that the market has been identified, the opportunities are there and we’re taking advantage of all the right things at the right time. But I think if you’re going to, it has to be within a management structure with accountability and flexibility, some autonomy for your team.
[00:27:27] That’s a great, great insights, Jesse, and congratulations on scaling your business so dramatically. That’s great. And you touched on something that I think is really important that Colin, Colin often says you, you mentioned, you know, responsibilities and, and, and making sure that that people have the right responsibilities.
[00:27:45] And Colin has often said here and outside of here, you know, when you’re delegating, it’s really important to delegate responsibilities, not tasks, right? If you, if you’re trying to scale your business and you are just assigning tasks to people, you’re really not scaling. You’re still leaving everything on your plate, but if you assign responsibilities to other people and let them run those areas of responsibility, then you’re in a position to scale your business.
[00:28:16] So I really liked that you brought up responsibilities. Can I just say one thing, sorry, real quick. Um, one of the things I’ve been working with our leadership team here is there’s a difference between delegation and dictating, right? Delegation has accountability and personal responsibility dictating and saying, go do this right.
[00:28:35] One has expectations is going to do what I said. The other one comes back kind of nurtures through some of that responsibility, sorry. Oh, no, that’s actually really good. Um, I was going to say is that this all comes down to a bottleneck, right? That the entrepreneur themselves become that bottleneck of that.
[00:28:52] If you’re not delegating responsibilities or delegating tasks, then the people around you are going to keep expecting that all decisions will be made by that one person at all tasks will be, um, dictated is what you said there, Jesse. Right? If however, if the entrepreneur can learn to let go and learn to delegate those responsibilities, then they can make that transformation and allow others to succeed as.
[00:29:18] Yeah, Colin and, and Jesse, you know, I, uh, I have a process where I say, we need to map out our decision and Matt is the acronym. It stands for momentum acceleration principle, and your team needs to be a part of that process as leaders. Um, there’s five key principles that we move in to map any decision. Um, and it’s, it’s alignment, you know, where you decide on exactly where you stand liability, where you get clarity and eliminate whatever the interference is.
[00:29:46] And Jake some control in the outcome, profitability would you did everything. You get everything you can out of. Consistency. Will you get everyone on board and you close the gaps that are there. And then sustainability. When you stabilize the outcome, secure the victim and go beyond, what am I saying, your team, if your team, what I, what I have my clients do is they post that actually on the wall and they have regular production meeting.
[00:30:12] They have regular meetings and they have those five principles there, alignment, liability, profitability, consistency, and sustainability on the wall. One player on the team may not understand what all five of those components are. They may understand under the surface, but really intrinsically. They may not understand it, but I found that anytime you have three or more people, they can.
[00:30:33] And if you ask your team, once they know this process to actually, Hey, help me make decisions, right? We’re not going to complain. We’re going to take action. So we’re going to be responsible in this. So if you bring up something, that’s a concern, you need to bring up a solution. We can move to move forward within this concern, but mapping that.
[00:30:50] Right and up, and that’s really helped companies that scale and transform relationships, relationships with leaders and teams and people are far better, uh, when, when everybody’s able to weigh in that process. That’s why I believe that’s the ultimate competitive advantage.
[00:31:10] That makes a good sense guy. And I like the acronym map. Um, acronyms, as silly as at first, they seem, they end up being extremely valuable in helping us, uh, remember and share, you know, processes and things that are important to the company. So thanks for sharing that. Um, and it, um, do you have a scaling story or an opinion of why businesses fail to scale or a question.
[00:31:41] Hey, Hey, Hey, it’s UNC it’s here. So I love the energy out here. You guys are having, and I’m kind of, uh, uh, you know, scaled, couple of his startups failed it and then went ahead with another startup where I escaped. So right now we are having 40 people, a startup with founders and co-founders and employees and everyone doing really well in multiple geographies.
[00:32:06] That is how we are scaling. So what I have observed with a lot of startups are a lot of businesses, is, is that. Pretty fundamental. The founders need to think they are going to go big and, uh, they, they have to make it. So it’s not like if they are a startup, this would feel like it’s, it’s still a baby.
[00:32:31] It’s a, still a baby. If they are thinking, then definitely it’s a big hiccup, then they will definitely fail to grow. So if it’s. Whole management team need to be drained. Whole management need to need to be that vision of where you want to go, where you want to leave in which market who want to lead along, what kind of customers, how in the Ford kind of growth culture you want to build across the company?
[00:32:58] So it’s, it’s an alignment of whole, of responsibility. It’s whole of vision and it’s whole of delegation. So these are the things that are driving growth for, for the startups along. Now, uh, coming to, uh, coming to the employees, the initial employees or the first employee. So this is what we handle it is we deploy subsidiary company where we keep on moving our foster space, employees, working on those projects on any surveys.
[00:33:32] And then the moment they become big or they become a, we could see the tracks and happening in these subsidiaries. Then we start hiring the management and the leadership positions. So this is one of the way we handle. We handle all of the initial batch of employees who are really happy to keep on walking with some new projects after a couple of years, like if somebody has invested already three years, so it’s a whole opinion out there.
[00:34:01] Two and half year or three year, they are going to get bored with their daily day-to-day work. So they look out for new things. So when they look out for new things, we give them opportunity to move ahead. New subsidiary companies. So this is the way we are. We keep on communicating and keep on pressing the gap and keep on scaling with all these employees and with, with existing management, can’t let us 15.
[00:34:28] So this is, uh, this is what, uh, we are currently doing. Thank you, Ankit. And thank you for sharing that. That’s really interesting. It’s almost like you’re building an incubator mentality within your organization, which is really, uh, you know, also another strategy for scaling your business, where if you give the opportunities members
[00:34:53] expand into new areas, even areas that may, they may have come up with. So they have some ownership of the concept or the idea. Um, that’s a way to grow the business, uh, and that’ll work in certain industries. It might not work in every industry, but it sounds like you’re, um, effectively doing that. So that that’s great.
[00:35:13] Uh, thank you for sharing that. Um, Raul, welcome to the serial entrepreneur hour. Do you have a, a story you want to share about scaling or not scaling or a question for any of us?
[00:35:27] Oh, thank you. Thank you for this opportunity to speak up. So I do have a up and a I’m running, so a one and a half year, more than one and a half year. And, uh, what I found I can, I, with my partner left when I started, we were two people, two directors, and, uh, uh, just to like, you know, six months back of one of the partner left two because of a heavy investment and internal, but, uh, what happened?
[00:35:52] They can only do, uh, we are basically developing our three, uh, like, uh, three products badly and not offer like, you know, uh, is completed, but, but still, uh, I do have a patients as for the, my experience, like, you know, uh, we should have a patient. And, uh, we should like, you know, focus on the process. This should not focus on the profit on it.
[00:36:14] It should focus on the process and they should learn from the new set of stairs because everything is not like, you know, one side to what I found. Like, you know, if I do have a business and definitely we can achieve that goal. So now I’m going to release my product in most, probably January, and then Maddie, happy to it.
[00:36:34] Isn’t my experience that I’m setting that you, and now my partner who left or six months back, he wanted to join back, but I have finally removed to my mind, the documents and everything, and eight on one, uh, like, you know, uh, him to come back because he left in a very bad situation. But now, uh, like, you know, it’s a stable and now he wanted to come back.
[00:36:56] So that is what, like I’m setting with you. I don’t have any question. Okay. No, thank you, Rahul, that, that that’s, uh, you brought up a couple of good points to highlight. Um, you mentioned processes, and I think, you know, when it gets down to scaling your business, um, having processes are really important and good processes and, and that’s in all aspects of your business, you know, obviously companies that are really successful in sales typically it’s because they have a very well-defined proven sales process.
[00:37:28] They know if they call a certain number of people and, and get a certain number of responses, they’re going to get a certain number of sales. And that’s something that you can scale because then you say, okay, well, if I, if one sales person can handle X, then 10 salespeople can handle 10 X and you can scale your business based on process.
[00:37:47] So thank you for bringing that up. Yeah. I actually have one more point. I’d like to call out a leak. You know, what happens once we have new to the market, like suppose you are going to start a company. Definitely we are new. Right. We don’t have any idea. We maybe like your experience older, but like, you know, uh, experience order in the same company, but now you’re going to start a company, but that is a completely different.
[00:38:14] So like, you know, uh, it takes time to understand what we were like, you know, one and a half year back. And now what is the product that we are developing both are like, you know, completely different. So we should have Harbor, like, you know, uh, some pieces on these things also April profit. It doesn’t come immediately.
[00:38:33] We must dispense, uh, at least three years because I belong to like a business family background or I, you know, that process, the partner who left me, he’s a and, uh, like, you know, uh, you know, maybe Jeffrey you maybe knowing like, , it’s one of the top organ and she would, uh, So, uh, the people who are 80 and like, you know, more so you’ll get to know us in the PG and he was IATN, but he left unfortunately, but now he want to join back.
[00:39:06] The patients is also very important once you already starting energy. Yeah. Patience is definitely important role, but the other point that you brought up. Important for scaling your business, especially if scaling your business requires raising funds, is what’s your relationship with your co-founders?
[00:39:22] You know, you, you gave a good example in your experience where you had a co-founder, they either lost interest or lost faith in the company left. Then of course, you got things back in order and they wanted to come back, you know, understanding the relationship between founders co-founders establishing in writing and in legal documents.
[00:39:43] You know, what happens? Should you part what happens to the equity? Should someone part, you know, too early or before things get off the ground is critically important to scaling your business. And one reason why some businesses fail to scale is they get bogged down in the fundraising process. The two founders started out and they said, oh, we’ll split it.
[00:40:05] 50 50. That sounds great. We’re friends. We were college roommates. Let’s do that. They put nothing in writing. One of those two partners left, but he left and retained his 50% equity. Now the remaining partner is trying to raise money, but he only owns 50% of the company. So it’s not going to be as attractive to investors.
[00:40:27] And if you do find investors, it’s going to be incredibly dilutive to you as the founder, because you actually aren’t selling off a a hundred percent of the company really only selling off 50% of the company. And you’ve effectively. Tied a big weight to your feet, uh, in the fundraising and scaling process.
[00:40:46] So it’s really important if you’re starting a business with co-founders, it doesn’t matter if it’s your spouse or your best friend from college or your roommate or whatever, no matter how good your relationship it is, you need to basically have a prenup agreement and have proper documentation, so that you’ve accounted for what happens should one of the partners leave as what happened to you?
[00:41:08] Well, so thanks for bringing it up. That’s a great point. And Rahul mentioned processes. So I’d want to open it up to the folks on this stage, Colin and guy and Michelle, you know, let’s talk a little bit about how processes help a company scale or prevent a company from failing to scale. Sure. Jeffrey, before we bring up processes, can we talk a little bit more about unpack a little bit more?
[00:41:29] What you stated? Cause that’s pretty powerful. What you said. There’s many times where, where a company may have the funding when they start, but they grew up. You know, as they grow, they grow, bro. And Dell was one of those companies in the nineties. Um, they they’ve rapidly, they were growing really rapidly.
[00:41:46] And what happened was they couldn’t, um, their turn, their cash conversion cycle was 63 days. So they grew so fast that, um, if they. A dollar. It took 63 days for that dollar to come back in the company. And they didn’t really have the means within the organization to be able to structure that differently or do something about that.
[00:42:08] So they had to bring in a CFO. And so they brought in a CFO and when Tom Meredith actually came to Dell, he identified that Dell didn’t even know Michael Dell and the team didn’t even know that. And what happened over time was it took about 10 years, but in 10 years time, um, Tom actually looked at every, every quarter, he looked at an area where they could actually move to have better cash flow in that area.
[00:42:32] And by the time he left that company, uh, 10 years later, He had, he had a negative 21%, 21% in his cast and Virgin cycle. So what would happen is they will get a dollar and they would sit on that dollar for 21 days before that dollar was even spinning their company. So they were a lot more liquid at that point and the company will then a much better way to place.
[00:42:55] And that, that goes again to what we talked about earlier, herring, your weakness, even in note, you know, um, you know, I dare say I know that I wouldn’t have been competent enough to even know that I would have had to have hired a CFO to bring that forward there. And it sounds like Michael Dell was in the same place.
[00:43:11] I love that story guy. And I love that you talked about, um, growing and growing broke because another reason why. Startups fail to scale is they don’t manage their money. You know, no matter how much money you have, it can be mismanaged, whether it’s a a hundred thousand or a hundred million, um, if you don’t manage your money, you know, cash is oxygen for a company for a startup.
[00:43:37] And, and if you run out of cash, you’re doomed, no matter how good you think your businesses, Colin, I saw you flashing. You wanted to add something. Yeah. And I think this talks to, I’m sorry, this talks to your point about processes, but also a number of people have talked to Jesse and guy talked about alignment back in 2005.
[00:43:58] My company Hostopia, we had about 500 employees and we were, um, just ready to go to an IPO. It was a small IPO and we had about six or seven people on the executive team. And what would happen every quarter is, you know, everything’s great. And at the near the end of the quarter, somebody says, oops, I dropped, I didn’t do this.
[00:44:26] Or I missed this target, or I missed that. And it was almost like we were getting, um, sideswiped or like we, we were, we were totally unprepared for the fact that we were gonna miss that quarter. And, and then what I did is I brought in a CEO coach Patrick fee, and he’s been on this show and he has a system called rhythm systems.
[00:44:48] And we began to implement goal setting in our company. And that goal setting, what we did is we re we, we pretty much had three to five measurable goals per executive. And every quarter we would review those goals, the company’s goals, and then individual goals. And every week we would meet on those goals and each person would read.
[00:45:09] Yellow or green their goal. So the Alliant, we began to get much more in alignment and we knew weeks before the quarter ended, whether or not we were going to miss our target on a particular project. And by doing that, we were able to move the company and scale the company. Literally the wheels were falling off the bus of this company.
[00:45:32] And by implementing these types of systems, it really helped us to scale to a huge level level and ultimately solve for a large price. Colin that is dynamic. And so often one of the reasons why companies don’t scale a startups, those scale is because they’re taught to look at lag measures. They’re taught to look at the primary KPIs, profitability, revenue, growth, satisfaction, client retention.
[00:45:58] And what I just heard you talk about was lead measures, the elusive piece of your people, and really getting your people on board where you can really move forward. Um, those lag measures, as you stated are after the fact they’re past, right? What what’s going on now, what’s in the way, what, where are we struggling now, where we can move?
[00:46:17] And you got your team on board where they get way in, um, where you can really drive the lead measures and avidly, you know, you know, you definitely get the lag measures on the backend, but I love how you live. You live with the lead measures. Yeah, it’s a great point. Guy. Leading indicators are much more.
[00:46:39] As KPIs then than things that are lagging. And after the fact, because if you look at it after the fact and you don’t know how you can change it, you’re not going to be able to improve anything. Rahul, I saw you flashing. Did you have something you wanted to add? Uh, yeah. So I just want to know, like, what are the best way to, uh, you know, having, uh, angel fan funding and all, because, uh, in that area I’m like, you know, I don’t have much idea because this is our living company.
[00:47:09] Uh, and this is, I think that the product and all, but I don’t know, like, you know, angel funding at, right. But actually I’m quite visited the, uh, product, not with the angel funding, but it’s still like, you know, I’m looking for what, I don’t know, what are the best way, how to move in the market and how to present myself and that kind of thing.
[00:47:26] So know, I don’t have much idea until like, you know, I am completely busy with the product or the I’m not getting chance or so, but it’s still, I want to learn, uh, your experience, how you got funding. Well, you know, we’re talking about scaling and why people fail to scale here today. But I will say, you know, raising funds, um, is part of the scaling process.
[00:47:47] So, you know, there are a lot of resources out there about angel investing. Um, Jason Calacanis does a podcast called this week in startups. He talks quite a bit about angel investing. He actually wrote a book called angel, which is a great resource. And I highly recommend also typically in local markets, there are often angel investing groups because those people who have some means that are looking to make angel investments like to come together as a little collective or a group, so they can vet out companies together and look at opportunities together.
[00:48:20] So I’d recommend you look for local angel investment groups, wherever you are located. You know, I’m in south Florida and I know there’s Palm beach angel investor groups in south Florida angel investor groups. There are a lot of. That you can reach out to, and they have pitch nights often where you can come in and pitch your business and get in front of a group of potential angel investors.
[00:48:43] So I would, I would start looking at locally and I would, um, follow some of the resources that are available in clubhouse, in podcasts, et cetera. Um, and maybe look at Jason’s book on angel investing. Yeah. The other thing we’re starting to see, which is popular now is, um, a rise in these crowdfunding platforms like start engine or our crowd.
[00:49:04] Um, I would definitely check those sites out. There’s a number of other ones out there as well, but the U S D regulated, I know you might not be in the U S but you know, every country has its own rules, but I will say in the United States that they’ve deregulated March a rule called reg CF, which is regulation, crowd funding, where you can raise up to $5 million with not a lot of restriction.
[00:49:27] Um, and there’s a lot of platforms out there that can help you raise money. In addition, there are other, um, regulations like regulation, a plus, which allows you to solicit for securities and raise up to $75 million. So I was told that I don’t, I’ve confirmed that myself, but I know it’s a pretty substantial number that you can raise for your company as well.
[00:49:48] It’s interesting. You bring up money as a topic because more often than not, there are only really four reasons why a company fails to scale and that’s because they don’t have the people, they don’t have the money, the stories off, it’s just not a compelling product or service. Um, and they don’t have the systems.
[00:50:07] We’ve talked a little bit about systems here. We’ve talked about people, you know, it’s really important to try to identify, um, the money aspect and how are you going to raise money to get from where you are today, to where you want to be. It becomes particularly more difficult for companies. Our recurring revenue businesses, where you have high cost of acquisition per subscriber, and it takes months or even sometime years to break even, or make your money back from that subscriber.
[00:50:35] So the more you grow, literally, the more money it costs to grow. Um, there are different banks as well that you can connect with. In the case of a subscription business, I found Silicon valley bank in the United States is probably one of the best ones to work with because they really understand, um, the subscription type of businesses.
[00:50:55] But it really depends on your business. It’s important to identify where you are today and will, or you will be three years from now, two years from now. And if you want to achieve those objectives three to two to three years from now, you need to raise the money to, uh, to, to, to do that. You need to hire the great people which we talked about.
[00:51:15] We need to implement systems and we need to raise. Colin. Can I have you repeat those four sectors again because I have four, but they’re different. Well, you know, it’s, it’s interesting cause I am actually working on a book right now and uh, we hired a publisher two weeks ago. Um, Forbes advantage and you know, I did this talk at MIT in 2012 and it was really trying to dissect.
[00:51:41] It’s really what this show is all about. It’s really trying to figure out what’s the formula that serial entrepreneurs do over and over again, to start scale, exit and repeat, and at each of those stages, and we’re talking about the scale stage right now, it requires people, money, story and systems. Now, when I talk about the story and scaling, I talk a little bit about, okay, we know you’ve already established who you are, what you’re doing, where you’re going, and hopefully you picked an idea that’s scalable and has a moat.
[00:52:14] And if it has a moat, you got pricing power as well. Something like doc. Which we just sold to GoDaddy. Um, but the one thing that when it comes to your story, when it comes to your compelling proposition, um, I had asked that you look at your X factor and this is something that Jim Collins talked about in Verne.
[00:52:31] Harnish really worked on this theory and really improved it a lot. So you can Google it on the internet. X factor. X factor is something that you have that your competitors do not have. It’s the Domino’s 30 minutes are free and you re-engineer your entire organization. So you can deliver on that X factor.
[00:52:52] I’d host Topia for us. It was, we were an email and hosting company and we had a 100% migration guarantee, which meant that we had the best capability in the world to migrate websites. Every company needs to have an X factor, if it, if it really wants to scale. And Verna talks about I’m going by memory here.
[00:53:14] All right. But Vern talks about. Every industry has bottlenecks. And if you can identify what those bottlenecks are and solve those where your competitors can’t, or even if they can, there’s still six months to a year behind. That’s what an X factor is. National car rental came out with their just show up on the lot, get in the car and go phenomenal that I was converted from day one when they came out with that.
[00:53:41] And I’ve always used national car rental because of that, they re-engineered their systems to make it fast for business travelers to get in and get out, pick the car that they wanted. Southwest re-engineered as well, wheels up that was their X factor. How can we get wheels up faster and make our flights more efficient than any other airlines in the industry?
[00:54:02] This is what I’m talking about. When I talk about an X factor, what is it that you have that’s different that can help you scale. And the last one is systems, and we’ve talked a lot about that setting up goal setting. Um, using profiling to help hire great employees. Um, I used a system called Rockefeller habits, which was developed by Verne Harnish.
[00:54:25] There are a lot of entrepreneurs. We often we run our companies, you know, off the cuff. That’s what we do. We just sort of do what we do. We go away. We go, but we don’t realize how much we’re leaving on the table and how much opportunity is there when we can actually implement systems that can help us scale.
[00:54:43] And there are a lot of, uh, companies out there that help help with that. I know guy, you work on that too. So you probably have a little bit more information on that than I do. Colin. I love it. And vert hardest. I’ve really subscribed to his, uh, philosophy and methodology. I love scaling up and those assets grabbed those four principles that he had people strategy, execution, and cash, which are the same things you said.
[00:55:08] Um, you just, and I love that you reframed it, where it fits, how you move. And you know, the reason I subscribe to this and I need to really look at this because I’m sure they’re the same. Um, obviously we talked about people, but strategy are the systems we can set up. As we talked about systems, we can set up processes and procedures.
[00:55:26] We can set up the methodology. Um, and how the team moves forward. Uh, the military moves or something. They call the leaders leader’s intent, where they set a task. They, they share why they’re doing the task and then they state the end state to their troops. So their troops can go forward in that process and, and know that they’re going to take this bunk this hill, because it’s the highest elevation where they can, uh, get the deployments.
[00:55:49] Right. But because they know why they’re doing it and what the instate should, can look like. It ends up being better than leadership could have ever imagined because they really drove that those three tenants of the leader’s intent. So we can move into strategy, but how do we execute that? And can we really hold our team accountable where our team can really, uh, first off be consistent, um, move in it and not have any friction points or roadblocks in their way and sustain that process and then obviously cash as well.
[00:56:20] So I love that you did that call and I’m going to definitely talk to you more about that. Well, that’s great. Uh, thank you, Colin. And thank you guy for that. Those, those are great pillars, great things to focus, Collin, you know, listening to you talk about the X factor. It dawned on me. We really need to do an episode of the serial entrepreneur hour.
[00:56:39] Just sharing examples of X factors. I think that would be incredibly informational to the listeners, just cause it’ll spark thinking. What’s your own company’s X factor when you hear these examples of other companies, X factors. So maybe we’ll have to get that on the schedule in an upcoming episode of the serial entrepreneur hour.
[00:57:00] What do you think? Well, I think it’d be a great one. No, I think, I think it’s a great idea. I, I was planning on next week. I’m doing an open mic on why do startups fail to scale? I feel like we have only. Touched the surface here and we haven’t gone deep enough. So I definitely wanna, you know, run next week and guy, if you’re available, run this topic again next week.
[00:57:23] Why do entrepreneurs fail to scale? I have like tons of notes that I haven’t talked about yet. And there’s a lot of, a lot of people in this area who, who could give us a lot of valuable advice as well. Um, and then we could run the X factor the week after. I think that’s a great idea. Awesome. Well with that, I want to thank you guy and Collin and Michelle and Rachel, and I want to thank, uh, Jesse and Roe for coming up and, and sharing their thoughts as well.
[00:57:50] I think this has been a really worthwhile discussion. I hope that everyone who’s been listening in the audience found some value in our discussion today. And as a reminder, this show is being. And you can find the recording of this episode and all episodes of the serial entrepreneur hour email@example.com, which is the website for startup club.
[00:58:11] And you can sign up for our mailing list to keep informed of other upcoming events and cool things happening in startup club. So Michelle, with that, do you want to give a little teaser of things that are coming up when startup club, as we close out here? Absolutely. So we’re so happy to announce that Mr.
[00:58:32] Wonderful of shark tank will be on startup club, October 28th, 4:00 PM. Eastern time. He, this is his second time on startup club. The first time he spoke to many folks, um, heard their ideas, uh, gave him a little bit of feedback and then. Selected, I think about four or five individuals and actually it’s in honor of breast cancer awareness month, he selected several entrepreneurial women that he is going to practice their pitch with him.
[00:59:12] So we’re so excited. The last session was phenomenal and we’re looking forward to, you know, getting even better glimpse into what it takes to get your startup off the ground with Mr. Wonderful. And, um, a group of ladies on October 28th. Also, we get, we do have a website that we’ve actually just relaunched it.
[00:59:39] Start up.club where we record write blogs, have transcripts of many of the recurring sessions, including this one serial entrepreneur club. We encourage you to check it out. And sign up for email. Um, our emails are sent to give notifications of porn or notable events coming up. So we hope that you can do that in that you enjoy the new website.
[01:00:06] Thank you so much. And everyone have a wonderful, yeah, I think it’s important to sign up to this mailing list because we have a number of speakers just this week. We actually, um, uh, we’ve got agreement from, uh, a particular author. He’s a top, probably one of the top 10, uh, top authors in, um, for entrepreneurship in the, in last century.
[01:00:29] I mean, we’re really pulling him out of retirement. It’s very cool. And, uh, but you’re not going to know about it. I mean, you can, if you’re there at the right time and you look at the app and you swipe, you know, you swipe through you’ll, you might see it, but if you’re not, but if you’re on the mailing list, we promise you when we get a big speaker, we’re going to let you know.
[01:00:46] So check out, check out, start up.club, join the mailing list. Great. Well, thank you, Colin. Thank you, Michelle. Thank you guy. Thank you everyone for joining us for this week’s edition of the serial entrepreneur hour, and we hope that you’ll join us again next Friday. Same time two o’clock Eastern time here on start-up club.