You've Built a Successful Business. Now, How Big Can You Take It?
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- Player: Allon Raiz
- Company: Raizcorp
- Launched: 2000
- Claim to fame: In 2008, Raiz was selected as a Young Global Leader by the World Economic Forum, and in 2011 he was appointed for the first time as a member of the Global Agenda Council on Fostering Entrepreneurship. Following a series of entrepreneurship master classes delivered at Oxford University in 2014, 2015 and 2016, Raiz has been recognised as the Entrepreneur-in-Residence at the University of Oxford’s Saïd Business School.
- Visit: www.raizcorp.com
Allon Raiz admits he’s obsessed with scale. After 20 years, he isn’t sitting back and enjoying the successful business he’s built. He’s actively scaling Raizcorp right now. He’s putting systems and processes in place, and investing in technology that will exponentially build his business. Why now? Why not just enjoy what you have and maybe take a few more personal days?
Allon’s response is pretty much that he lives for growth. Why take more personal days when what drives you is your business? When Allon asked Donald Gordon why he listed Liberty after so many years, he said it was because it took him 27 years to make Liberty an overnight success.
Allon is now 51 years old and he completely understands what Donald meant. Scale is an exponential thing, and it doesn’t happen overnight. You need knowledge, confidence, profitability, perspective and maturity. Allon is driven to see what he can do with all of that. He wants to see how big this thing he’s built can get before he dies.
Q: Why do some businesses scale, and others just don’t?
My fundamental belief is that all businesses can be scaled, but not every entrepreneur can scale a business. If you look across any industry, they are littered with entrepreneurs who have not been able to scale their businesses. On the other end of the spectrum, in every industry, there are the so-called big five that have managed to scale successfully.
The secret, in my experience, is ensuring that the business model replicates itself at a lower base cost – including the additional costs of management and systems.
Said in another way, the economies of scale need to include the costs of the management of that scale. Too many small businesses replicate themselves and find that the complexity of growth requires management and controls that are more expensive than the savings from the economies of scale.
I believe that every business has the ability to be designed in this way, but not all entrepreneurs have the ability to create this design.
Beyond the design elements, all scalable businesses require – according to the academics – three additional elements. They require capital, talent (people) and process. Companies that scale well spend a disproportionate amount of time thinking and planning ahead so that these elements are in place.
My 19 years of experience in the incubation space have taught me that there is an additional fourth element – a profitable market.
Companies that start in markets that are small with high levels of competition find it much harder to scale than those in larger markets with less competition, so I would recommend to any entrepreneur wishing to have a scalable business that they should consider their local market before designing a scale strategy.
Q: What are the dangers of scale that CEOs need to be aware of?
What the books don’t tell you is that every time you employ a new person while scaling a business, it becomes the biggest business you’ve ever run.
If the biggest business you’ve ever run has 40 people and you grow to 41, then 42 and so on, each additional individual, each individual geography and even each additional capital resource (such as a vehicle or machine) creates an exponential layer of complexity to your business.
My experience has been that there are a number of ‘breakpoints’ that require step changes to the operational model of the business and, if those step changes are not achieved, the business tends to hover around those breakpoints.
These breakpoints occur at approximately 15 people, at 45 to 50 people and at 100 people.
To give you an example, if you were running your staff meeting in a small room every Monday morning, at some point your staffroom would become too small. This would mean you either have to move to a bigger building (which comes with its own complexities) or split your staff meeting into two separate events.
Splitting your meeting into two events could mean fidelity loss of your message between the first and second meetings if you only attended one. And if you happen to attend both, not only will it diminish your capacity, but the dynamics of each meeting will be completely different.
The interpretation of the information would therefore be altered accordingly and you will then have to deal with an organisation that is interpreting the message in two different ways.
Q: Do CEOs need to change their mindsets in order to scale?
Definitely. The biggest mind-set change for the entrepreneur is to become the right CEO for their particular sized business. A five-person operation requires a completely different skillset to a 150-person operation.
Many CEOs are not ready for the change, some are not able to change and some live in a conflict between the way they used to do things (the good ol’ days) and the new way they are required to do things based on a new context and new levels of complexity.
This indecisivness between past and present creates an ineffectiveness in the CEO, which has a huge impact on the growth capability of the business.