(0:00) Are you building a business that grows through systems, (0:02) or are you just adding bodies to fight the chaos? (0:05) And if you're the bottleneck, the firefighter, (0:07) or the one everyone still relies on, (0:10) it's time to start building your machine.

(0:13) This is Strategy, Scale, Exit, (0:15) where I help ambitious founders (0:17) build more profitable, scalable companies (0:19) using the principles I learned (0:21) growing and turning around (0:22) million and billion dollar businesses (0:23) through Coltivar.com. (0:25) I hope you share and enjoy.

(0:27) Hey, welcome back to Strategy, Scale, Exit. (0:31) In the last episode, we unpacked the cashflow problem. (0:34) So if you haven't listened to that one, (0:36) go back and check it out, (0:37) because revenue means nothing, right, nothing, (0:40) if you're always stressed about payroll.

(0:43) So today we're gonna shift gears a bit, (0:44) but staying in the same lane of real scalability.

(0:48) Let me start with a statement (0:49) that might sound a little harsh. (0:51) If your only way of handling growth (0:54) is hiring more people, you're not scaling. (0:56) You're just expanding the chaos.

(0:58) Now, don't get me wrong, (0:59) I'm all for building a great team, (1:02) but if every new customer (1:03) means you have to hire someone else just to keep up, (1:06) that's a fragile model. (1:08) So in this episode, I'm gonna talk about (1:10) why systems, not just headcount, (1:13) are the key to scaling without burning out. (1:15) So let's go ahead and jump in.

(1:17) So many founders fall into this pattern. (1:20) Revenue grows, workload grows. (1:22) Workload grows, stress grows. (1:24) Stress grows, they hire. (1:27) Hiring grows, overhead grows. (1:29) Overhead grows, profit disappears, (1:32) and suddenly growth doesn't feel so good anymore.

(1:36) It's actually terrible. (1:37) I call this the growth spiral. (1:39) So you're moving forward, (1:41) but everything feels heavier with each step.

(1:44) You've built a business that's only as strong (1:46) as the number of people carrying the weight, (1:48) and that's not scale. (1:49) That's just more bodies, more complexity, (1:52) more stuff to manage. (1:53) And I talked about this in a previous episode (1:55) where a CEO wanted to scale his business, (1:58) he hired a bunch of people, (2:00) and he thought, okay, I'm gonna bring these people on, (2:02) they're smart, they're qualified, (2:03) they're gonna build out the systems, (2:04) and then voila, we're gonna grow. (2:06) But it didn't work out that way. (2:07) They lost a ton of money, right, (2:09) and almost went under. (2:11) So I don't want that to happen to you.

(2:14) Let me share another story too. (2:15) A few years back, I was working with a service-based company. (2:19) They had grown fast from six people (2:21) to over 40 in just under two years. (2:22) So on paper, it looked like success, (2:25) but the CEO, he was fried. (2:27) He was on 10 plus calls a day. (2:29) His leadership team couldn't make a decision without him. (2:32) In profit margins, they were slipping fast. (2:35) It was a very bad situation.

(2:37) And when I asked him about systems, he said, (2:39) yeah, we have SOPs, standard operating procedures. (2:42) We have a Google Drive full of checklists. (2:44) People can find what they need, right? (2:46) But when I asked his team, they said, (2:48) we're not sure where anything lives. (2:51) We just asked Dave.

(2:52) So this is a classic example. (2:55) Oftentimes, and I'm not saying SOPs and checklists are bad, (2:58) I'm a big advocate for them, (3:00) but if people aren't using them, (3:03) then it's just a complete waste. (3:05) So like I said, classic example here. (3:07) They weren't scaling, they were just surviving, (3:09) and Dave, he was a system. (3:12) It wasn't the SOPs and the checklists that were the system.

(3:15) So maybe you feel the same way. (3:17) Maybe, maybe not. (3:18) Maybe you're good. (3:18) But here's the thing. (3:20) Hiring people is easy. (3:21) Building a machine that works without constant human input, (3:24) that's hard, but that's scale.

(3:27) In fact, with key man risk, (3:29) that's when the entire business relies on one person (3:32) or a group of key people. (3:34) That can be really problematic. (3:36) And the way to solve that is through systems, (3:39) is through scalable systems.

(3:41) But the truth is oftentimes leaders, (3:43) they just wanna hire more people, (3:45) but people can only solve your problems up to a point.

(3:48) Beyond that, if your processes are a mess, (3:51) if knowledge lives in people's heads, (3:54) or performance isn't even tracked, (3:56) you're just multiplying the mess. (3:58) You're just scaling the problem.

(4:00) More people doesn't necessarily mean more progress (4:03) unless you have the systems in place first. (4:06) That's the key.

(4:08) So here are three signs that you're scaling the wrong way. (4:12) So we'll get practical here, (4:13) and I'll share with you the red flags (4:15) that you might come across (4:17) that indicate that you're scaling through headcount, (4:20) not systems.

(4:21) All right, so here's number one, red flag number one. (4:23) You're stuck in decision fatigue. (4:25) If every single issue lands on your desk, (4:28) and you're the bottleneck for approvals, (4:30) answers, or directions, and trust me, (4:32) like I've been there before in my role as a CEO (4:35) running a business, (4:36) I could tell you that's a systems gap.

(4:38) All right, so that's number one. (4:39) If you find yourself in this spot, (4:41) everything's flowing through you, (4:42) and you're the bottleneck, that's a big problem. (4:45) That's a giant red flag.

(4:46) That's not a pink flag. (4:47) That's a giant red flag. (4:48) Or maybe it's somebody else in your organization.

(4:50) Everything has to flow through Sarah, (4:52) or Dave, or whoever it may be, right?

(4:55) Number two, your onboarding process is, (4:57) just figure it out as you go. (4:59) So if every new hire has to shadow someone, (5:03) or ping teammates for info, that's not onboarding. (5:06) That's called tribal knowledge.

(5:07) So having a system for onboarding is really key.

(5:10) Number three, your org chart is top-heavy. (5:13) It looks like an inverted triangle. (5:14) So if you keep hiring managers, (5:16) just to keep people accountable, (5:18) it probably means your processes (5:20) aren't doing the heavy lifting.

(5:22) And this is what I often say to owners too. (5:25) Too many companies, they don't spend the time (5:27) to build the systems, so they're hard on the people.

(5:32) And the way that I prefer to run a business (5:34) is build the processes, (5:37) and be hard on the processes, and soft on the people.

(5:40) But like I said, companies don't have processes, (5:43) so they're soft on the process, (5:45) but they're hard on the people. (5:46) That's backwards.

(5:47) That's how you create burnout, and you destroy morale, (5:50) and you create high turnover.

(5:52) So like getting in somebody's face, (5:54) and yelling at them, because your system is terrible, (5:57) and it's not well-documented, that's on you. (5:59) So you shouldn't be doing that.

(6:00) So you should be looking internally. (6:02) And I've had to do that myself. (6:03) That's why I could say this.

(6:05) There have been times where I'm frustrated with people, (6:08) and then I look at my system, (6:09) and I'm like, no wonder why I'm so frustrated. (6:11) It's my system, it's not the people. (6:12) All right, so that's a side note.

(6:15) So check this out. (6:16) As a CEO, you're not meant to be the operator forever. (6:19) That's the truth, right? (6:20) Your job is to become the architect.

(6:22) So that means designing systems at scale, (6:25) creating structure your team can plug into, (6:27) building dashboards, not doing data entry, (6:31) setting outcomes, and not just managing tasks.

(6:33) So when you shift from an operator to an architect, (6:36) I could tell you everything changes. (6:38) You stop reacting, and then you start engineering. (6:41) And that's what your business needs. 

(6:43) So let's break this down into a framework. (6:46) So I'm gonna give you three pillars that I focus on (6:49) when helping a business scale with systems.

(6:51) Pillar number one is process. (6:54) Every repeatable task needs a clear documented process, (6:58) but don't overcomplicate this, right? (7:01) Start with the stuff that happens most often, (7:03) like sales, client onboarding, delivery, billing, et cetera.

(7:08) Or what you could do is you could ask yourself, (7:10) you say, all right, if I left, (7:13) if I went on vacation, turned off my phone, (7:14) nobody could get ahold of me, what would break first? (7:17) And what would be the most problematic thing to break? (7:20) And then start documenting that.

(7:22) So just use a simple SOP structure. (7:24) And SOP stands for standard operating procedures.

(7:28) So begin with what is it? (7:30) Who owns it? (7:31) What triggers it? (7:33) What's the step-by-step? (7:34) And what tools or templates are needed?

(7:37) And even better, you can record a Loom video (7:39) walking through it and it's fast (7:41) and your team can then watch it anytime.

(7:43) And I think Loom has a new AI capability (7:46) because I was talking to my brother (7:47) about this the other day at lunch (7:49) and he's really good at putting together (7:50) like operating guides and whatnot for his business. (7:53) He's like, you could record the Loom video (7:55) and then AI will transcribe that (7:58) and it'll create it into a checklist and a step-by-step. (8:00) So check that out if that's interesting to you.

(8:02) That's Loom, L-O-O-M.

(8:05) Okay, pillar number two is performance. (8:07) You can't improve what you don't measure.

(8:09) So set up simple dashboards that show, (8:11) are we doing the work? (8:13) Are we hitting the goal? (8:15) Is the process creating value?

(8:18) So for example, how many leads do we convert this week? (8:21) How many customer tickets were resolved on first touch? (8:24) And what's the average time to delivery?

(8:27) So you don't need 100 KPIs, (8:29) just track the ones that are right, that are consistent.

(8:32) Like at Coltivar, that's what we have. (8:34) We have software for our clients (8:35) and all of our clients are on the software (8:38) and they have access to core KPIs.

(8:40) So we measure things like LTGP to CAC, (8:43) lifetime gross profit of a customer to CAC, (8:45) customer acquisition costs. (8:47) We measure gross profit, revenue per employee, (8:50) return on invested capital, just to name a few.

(8:53) And all these KPIs are in one place (8:55) on a very easy to read dashboard.

(8:58) It's graphic, you could click on it, (8:59) you could look at trawling to a month. (9:01) But a tool like this has been extremely valuable (9:03) for our clients (9:04) and you could have something like this too in your business.

(9:07) Just make sure you have some type of dashboard (9:09) so you know what's going on in your company.

(9:12) All right, pillar number three, people in the right roles. (9:15) So systems don't replace people, they empower people.

(9:18) But for that to work, your team needs clear roles, (9:22) documented responsibilities, (9:24) authority to make decisions within their lane (9:27) and success measures.

(9:29) So at Coltivar, we call them success measures. (9:31) Every employee should know what does success look like (9:35) in their role and then they should score them once a quarter.

(9:38) We use a system where we just score these success measures (9:40) green, yellow, red. (9:41) Green's on track, yellow's slightly off track, (9:44) red's like a major problem.

(9:46) So when employees have success measures, (9:48) they know what does success look like in their role (9:50) and what's expected of them and it makes all the difference.

(9:53) All right, so check that out.

(9:54) All right, when you get this right, (9:56) people stop bringing you problems (9:58) and start bringing you results.

(10:00) And that's when the flywheel starts spinning. (10:02) So here's a quick story. (10:04) One founder I worked with was convinced, okay? (10:07) She was convinced she needed to hire three new people (10:09) to handle growth.

(10:10) So instead we documented her customer onboarding process. (10:14) We automated the intake form, we built a simple checklist (10:17) and we added a shared calendar.

(10:19) Then we hired one person with the right skills (10:22) and trained them to own that entire system.

(10:25) The result, they doubled capacity with fewer errors (10:27) and they didn’t need the other two hires.

(10:30) And that’s huge, that’s huge leverage. (10:32) That’s the power of process, people and clarity.

(10:36) So let me ask you, are you building a business (10:38) that grows through systems (10:40) or are you just adding bodies to fight the chaos?

(10:43) And if you’re the bottleneck, the firefighter (10:45) or the one everyone still relies on for answers, (10:49) it’s time to start building your machine, okay?

(10:52) So just start small because it could be overwhelming. (10:55) Trust me, I’ve been there.

(10:56) Pick one process, document it, train your team, (11:00) track performance and let it run without you (11:02) because the real goal isn’t to do more, it’s to do better.

(11:07) So scale isn’t about working harder, you know that, right? (11:10) It’s about designing a business that works (11:13) with or without you.

(11:16) All right, so in the next episode, (11:17) we’re gonna get into the five metrics (11:19) every founder must know cold, okay?

(11:22) And this is gonna be really critical (11:23) because systems give you control (11:26) but metrics give you visibility.

(11:27) So you’re not gonna wanna miss this one. (11:29) We’re gonna talk about return on invested capital, (11:31) return on labor, cash velocity (11:34) and the numbers that actually move the needle (11:36) in a growing business.

(11:38) So if you haven’t subscribed yet, be sure to do that (11:40) so you get notified every time I drop a new episode (11:44) and share this with a founder who is hiring like crazy (11:46) and still stuck.

(11:47) So that’s one way you could be a part of this movement (11:50) is just help share this with other individuals (11:52) who are also trying to scale and sell their business.

(11:56) Be sure to message me down below, (11:59) send me some comments if this episode hit home for you (12:02) and just remember, you’re not just a CEO, (12:04) you’re the architect of a business that lasts.

(12:07) So let’s build it right.

(12:09) And if you need help with any of this, (12:11) you can always connect at coltivar.com (12:13) and we have a ton of resources there (12:14) so be sure to check that out.

(12:16) All right, I’ll catch you in the next one. (12:18) Take care of yourself, cheers.