EP52 – What is Your Scalability Quotient

Evan Le Clus  00:00

At the end of the day, your business needs to operate without, you know, you can be working in some areas in the business, obviously, that goes without saying, but it’s not about founder equals business or business equals founder, you’re one of the resources of the business, the business needs to stand on its own two feet.

Evan Le Clus  00:17

Hello, you are listening to the Dare to Scale show with me, Evan

Warsha Joshi  00:23

And me, Warsha. This show is about all things scaling, scaling your business, your journey, and you

Evan Le Clus  00:32

You are here because you dare to dream, dare to dream big. So sit back and enjoy the conversation, or perhaps even join in.

Evan Le Clus  00:43

Hello, and welcome to the show. Today, I’m gonna be talking about the scalability quotient. Now, what is that exactly? Well, it’s my best practice on getting an assessment of where you are as an entrepreneur right now, in your business. Again, why would you want to do that? Well, there are five elements that go into the pillars of your business, which is your strategy, and financing your strategy, your business model that revenues, your people in leadership, your systems and cash flow. And then there’s your efficient operations. And, of course, the secret co-element you, how you front and show up in your business.

So again, these are a series of questions. And it’s a simple tool, simple questions doesn’t take long to do. And it will give you a yardstick and measure as to where you are right now. In three months time, six months time you take the quiz again, you should end up with a different result. Because as you make changes in your business and address one potential area that needs improvement, something else is going to give. So something else will then become apparent that needs improvement.

So your cash flow and systems for example. And then suddenly, there might be some issue in your business model. Or you might want to look at your strategy. And later on then then you need to look at your people, the culture in your business and, and that sort of thing. So it’s my best practice to find out where you are. And it’s also a way of separating you from your business meaning so many entrepreneurs that we’ve worked with like to think you know, what my business is my baby, I’d like to think you should think of it slightly differently.

Your business is a separate entity, and it needs the time and space to be a business. At the end of the day, your business needs to operate without you know, you can be working in some areas in the business, obviously, that goes without saying but it’s not about found that equals business or business equals founder. You’re one of the resources of the business, the business needs to stand on its own two feet. So that’s why this the secret core element you and how you relate to your business and how you show up. Okay, like say it’s my best practice. It’s something like a balanced scorecard if you’ve come across those before.

Now balanced scorecard is a way larger set of corporate businesses will look at various aspects of the business as a whole. So they will look at things like profit, they will look at things like people. Now whether that’s retention or turnover, or whether it’s employee satisfaction scores, they’re also looking at the quality, so your brand standards, and things like customer feedback. Now, you’ll notice that not all of these measures are financial, and financial and non financial, so you get an holistic view of your business. That’s why balanced scorecards are so powerful, and a lot of cases of balanced scorecards are used for like bonus programs and that kind of thing in the corporate world. So when you’ve achieved all measures, not just profit, but you’re taking into consideration all aspects of the business, that’s where it makes sense to then obviously meet your bonus targets and be paid the bonus now in the entrepreneurial space, the scalability question goes a couple of levels deeper. Okay.

And yes, it is financial and non financial metrics. But it gives you a very broad picture of how you’re traveling in your business at that time, and areas that might need improvement. Okay, cool. So I’m going to do a walk through a walkthrough. Rather, what I’d like you to do is if you’re at home, grab a pen and paper. If you’re on the road, listening on the fly, just be ready to answer the questions. And as you’re going through, please be realistic. Okay.

Think about the questions themselves, and really give a good consideration on a scale of one to 10 where each of these questions are for you right now. Okay, let’s dive right into it. The first question I have a succession plan an exit strategy in place, please rate that on a scale of one to 10 you If I can prompt you if you haven’t trouble thinking about that. So a lower score might be something like, if I’m hit by a bus tomorrow, I have no idea what will happen to the business through to, I can easily appoint a paid CEO anytime and meet any due diligence audit today.

So I’m ready to exit. And if you’re ready to exit today, there’s a good chance that you have a good valuation already lined up. Cool. So you have your score, from one to 10. I have a succession plan an exit strategy in place. Great. Right, let’s go on to the second question. I have regular clients who I bill each month. Now to give you a prompt, a great answer might be about 40% of the clients are recurring, and no one client is more than 25% of revenue. A low score might be I have less than 10% of my clients on regular monthly billing.

So on a score of one to 10, I have regular clients who I bill each month. Great. Question three. How many of your people today do you see growing with you as you scale? Now a great answer there might be all of them. And more. We rock. So there’s beautiful alignment with your culture, there’s a great fit with everybody. And you’re absolutely kicking goals. Hello score might be something like, you know, I have to reassess most of the team for what the business will need. So there’s maybe a disconnect with the people who’s doing what, and whether they are a players B players will see players. So on a scale of one to 10. How many of your people today do you see growing with you as you scale? Cool.

Question for my cash flow is dependable, and financial statements accurate and timely. Let’s scale of one to 10. My cash flow is dependable and financial statements accurate and timely. So a great answer over there might be something like you know, I really am up to date with everything. I know what my numbers are. I know I have a budget in place. And I compare it back to budget. I know who owes me money in the marketplace, I know who I owe money to in the marketplace.

My cash flow is solid, and it’s under control. I know my cash cycles, that sort of thing. Now, quietly, a lot of entrepreneurs may not have actually made friends with their inner CFO, they may not actually know exactly what’s in the books, and maybe it’s like some sort of mystery, don’t want to know that if you are up to speed, that’s great. That’s a good score of 10. A lower score might be something like you know what, that’s what’s my accounting, but I struggled to make sense of where we are financially. There really, I’m not aware of where we are. And even if I look at the numbers, I don’t fully understand them.

On a scale of one to 10. My cash flow is dependable, and financial statements accurate and timely. Cool. Question five. Roles and processes are documented and reviewed twice a year? A lower answer might be, you know, we’ve got some job descriptions, and usually only review them when we want to hire new people. You know, we’ve only got a few members sort of in the team, but I rely on those team members to get everything done. So maybe an over reliance on individuals rather than process.

The Great answer might be you know, processes are definitely live documents. And they’re updated after every critical situation. So you’re constantly growing, and learning and implementing. So on a scale of one to 10. Our roles and processes are documented and reviewed twice a year. Question six. I have let go. I can take a month off and my business still runs without me. Some entrepreneurs out there might be saying Sheesh, no way, no way can’t do that. I’m lucky to get a day off each week. All right. So that would be a lower score. higher score might be something like you know what, I actually can take a month off, and my team would hardly miss me. If you’re sure what would hardly miss me even means it’s while you’re away on your vacation or on your break. You can actually put your phone aside and your laptop aside and you can be present on your break. Because if you’re still working while away, that doesn’t count.

So I can take a month off means I can take a month off. Can you do that? All right, on a scale of one to 10 I’ve let go. I can take a month off and my business still runs without me. Great. So question seven. We’ve got a clear understanding of what motivates our clients to do business with us. On a scale of one to 10 We have a clear understanding of what motivates our clients to do business with us, though a lower score might be, you know what, it’s a little bit hit and miss right now. But you know what we’re getting clearer. You could think in terms of your niche and your value proposition.

You know what, we kind of know what that is, but it’s not quite aligned yet. Right? Through to, you know, we’ve got a wow factor happening over here. The outcome and the focus attention on the clients and the social proof and all, that all speaks for itself. We’re in alignment customers, it’s very clear why they work with us why they buy from us, and we understand that with clarity, so on a scale of one to 10, we have a clear understanding of what motivates our clients to work and or to do business with us.

Okay, question eight, our leads are well qualified and convert readily. Our leads are well qualified and convert readily. A great score over there. You know, my marketing referrals come in regularly, and they bring in ideal clients and leads. Again, maybe your channels are steadily finding those ideal clients, and the conversion is effortless, so you’re actually stepping into the conversation your clients are having in their head, you’re meeting them where they are, providing them what they need, and, you know, it’s like a match made in heaven. On the other hand, if they’re not well qualified, and not converting easily could well be, you know, I have to say yes, to any business that walks through the door. Or if there’s any difficulty in your sales process, maybe you’re not finding the right leads.

So on a scale of one to 10, our leads are well qualified and convert readily. Okay, question nine. When hiring for new positions, I employ a structured process to select the correct candidate. When hiring for new positions, I employ a structured process to select the correct candidate. Now there’s several pieces to this one. And remember, there’s an element of your culture in your business. And there are certain parameters around those the culture that cannot be changed. And if there’s no culture fit to start with, maybe that person is not the right fit, even if they have all the skills in the world. Just bear that in mind.

So a low score might well be you know, I need the right skill set first. Because that’s all that’s important, isn’t it? All the way through to, you know, a great school might be and that’s part of that structured process where there’s a values and a culture fit, come before skill set and experience. And you know, that initial culture fit might be great. But then you stress tested by having that person work with your team for a day, just to see how they fit in. So on a scale of one to 10, when hiring for new positions, I employ a structured process to select the right candidate. Okay, question 10. My business assets, including the know how is protected, and my risk register is up to date, I was going to want to turn my business assets, including know how is protected, and my risk register is up to date.

Some entrepreneurs we’ve worked with have said, You know what, other than my office furniture and stuff like that, what are the business assets and know how. So that would be a lower score. Maybe you have a disaster recovery plan. And you know, it’s critical, but you’ve not got to it yet. So what if something were to happen, something were to break? Are you protected?

The great score would be, you know, I regularly review my risk assessment matrix, my online security, and my intellectual property security. But all the bases covered, so part of your systems is protecting your assets. We asked you, do you know where all your domain names are? And do you control them? How about access to your website hosting? Are you absolutely in control of that?

If something were to break with an outside supplier? Will you be held to ransom? That’s what we mean over here. So your intellectual property like your domain names, even your trademarks and copyrighted, this sort of works? Are those all protected and secure? Are they backed up? Question 11. Moving on, is we have regular meetings to align activities with company priorities and resolve any miscommunications.

So on a scale of one to 10, we have regular meetings to align activities with company priorities and resolve any miscommunications. So a great score there might be you know, my team runs consistent, cohesive and focused daily, weekly and monthly meetings. Daily me meetings are things like a standard meeting, no more than five minutes, everybody comes along. It states what they say to when, for example, what they have on their plate the help they need. And it really isn’t a prolonged meeting. It’s just, this is where we are guys, this is the help I need just to prisons, exactly what needs to be actioned that day.

 And weeklies are obviously slightly more sit down kind of meetings, and monthly is even more so. But again, it’s that regular cycle of communication to make sure that you’re aligned in the action you’re taking as you’re moving forward each day that aligns with company priorities. And if there’s anything that doesn’t make sense, that miscommunication or that misunderstanding is dealt with on the day. And a poor score over here might be something like, and I’ve experienced this in the corporate world, we have reactive meetings, to manage from issue as they arise. And sometimes with the firefighting, it’s hard to have a cohesive way forward. And I know this has happened at least twice or three times in corporates that I’ve worked with, there were severe cashflow, squeezes. And when you’re in crisis mode, or survival mode, that’s where that can get a little out of control. But of course, this is not regular.

Okay, what we are talking about with regular meetings, is having the focus on the right thing for the right reasons as you go through the week, and then having weekly meetings to make sure that things have been addressed and the needle has been moved forward. Okay, so on a scale of one to 10.

We have regular meetings to align activities with company priorities and resolve any miscommunications. And the final question, again, is about you. I pay myself a fair market wage, and the company also makes profit distributions. Let’s go to one stand, I pay myself a fair market wage for the work I do in the company. And the company also makes profit distributions.

Now this might have you scratching your head a little bit like why would you ask a question like that. So often, we find entrepreneurs can confuse company money with personal money. So the very first thing we definitely recommend that is to keep those two things separate. Once they are separate, if you’re working in a particular role in the business, you need to be paid a fair market wage for the work that you do. Several reasons for this one, it means that the profit that you’re then recording in your books, is actually a fair representation of what is actually happening in the business. Because if you’re not taking a salary, and you’re showing more profit than you should be, there’s a challenge there.

To remember one of those, one of the very first questions, exit strategy, if you were to step out of the business, are there enough people doing the right things in the business independently, so the business can keep running? Okay, so I pay myself a fair market wage, and the company also makes profit distributions. So what does that mean?

Again, is this a separating company from private, and all we really mean here is, every six months or so, there’s excess profit, you pay it out as profit, and it flows one way from the business to you. And it’s not available one way or the other.

What I’m saying is, the company pays it out. It’s yours. That’s your income, and you’re getting a fair return on the investment you’ve made in your business. So poor score over there might be you know what, I’m busy paying everyone else first. What do you mean by pay a fair market wage? Okay, so we’ve talked a little quite a lot about that already. And obviously, a great answer is I pay myself a decent salary, maybe not market rate, but I pay myself a decent salary. And I rely on profit withdrawals for the rest of what I earn. That’s probably medium school. But if you are absolutely keeping private away from business, I do you pay myself a fair market wage and profit distributions every six months.

Okay, so that that’d be a great score. Fantastic. So there you have 12 questions that go to make up these scalability questions, Tally up your results, work out your percentage, and you know, you’d be the judge of sort of where you are. But generally speaking, 60 to 80% is great. Less than 60, there can be a challenge somewhere in the business, and you may not be ready to grow rapidly above 80%, you’re probably really in good shape. And you can probably get on with scaling really rapidly. If you head over to Data scale.com/sq You can take the online quiz. Number one, you’ll get the results. You’ll get some information over there as well as the category totals. And that will then help you understand where in the six elements or in the secret code element you where there might be a challenge that you need to address and it will give you an idea where to start first.

If you feel you’re having difficulty or challenges You don’t know where to start, this will actually help you do that, you know, there’s no better time to get a real picture of where you are right now. And there’s no better time to make improvements than now. Now is the moment, you’re here, this is the present, let’s get on with it. So we develop the SQ the scalability quotient in house that was developed for entrepreneurs and new the listener. And the reason it was done and why we’re sharing this in a podcast today is just to bring to your awareness that a it’s available, but B to help with our mission, which is to strengthen the SME segment. And the SME segment in any economy is the one that actually makes the difference. In today’s high inflation, sort of scenario, and challenges and X, COVID, and all that kind of thing.

It doesn’t really matter what the economy’s doing, okay, you control where you are. And as you do that, and build your business and make it stronger, you help your team, you help your customers, you help your suppliers and the ecosystem you operate in. And that makes everything stronger. And that’s what we want. And that’s why we do what we do at that scale. So there you have it 12 Simple questions on various elements of the five elements of your business plus the core of secret element, which is you and gives you an idea as to where you are and the real picture of where you are in your business right now. I hope you enjoyed today’s session. It’s been wonderful sharing the scalability questions with you. Give us your feedback, let us know how you went and do come back every three or six months. Take the quiz again.

And you know what you’ll find out how you’re progressing and getting better and better. We appreciate you for listening all the way to the end. And it’s been a pleasure, like I said, do take care be safe. And we will see you at the next episode. Cheers.

Warsha Joshi  21:55

Thank you for joining us and for listening all the way through to get the show notes, the transcription and of course to subscribe, visit dare to scale.fm

Evan Le Clus  22:07

The success of the show is thanks to you. So please keep the five star reviews coming. Remember to share this with your network and keep the community expanding. We’ll catch you at our next episode and in the meantime, keep daring and keep growing