The Big 3: Operational Scaling in Your SaaS or Tech-Enabled Service Business

In a prior post on the the Big 3 challenges common to nearly every growth-stage tech-enabled services (TES) businesses, we explored the importance of building and developing your team.

In this post, we’ll focus on a second growth imperative, operational scaling. Bending the growth curve to double, triple or quadruple revenues presents a new set of operational challenges for your business. Some are more obvious than others and, in fact, the “below the radar” hurdles left unchecked can pose the most troublesome and lingering impediments to your scale-up plans.

A Common SaaS/TES Scenario

Let’s start with a typical scenario; your TES operation is humming along at over 20% growth and you’ve just broken through a much anticipated revenue barrier, maybe its $5, $10 or $15 million. We’d all agree that, in most cases, the current organization, business processes and systems at $10 million won’t necessarily work as well (or at all) at $20, $30 or $50 million. We can some shed light on what to do about it and when by asking ourselves a few fundamental questions:

How should you think about developing a proactive yet measured approach to scaling the business?

How does your business strategy reflect the operational reality? Is it tailored to your operational competencies, assets, and processes?

Do you understand the link between your growth strategy and execution quality?

What are the most important and most challenging factors to mitigate scaling risks?

Your company’s ability to bend the growth curve is rooted in a healthy understanding of the current operational realities and the state of your change-capable organization. Can you add team members, new processes and systems while preserving everything that is special about your current, nimble unit? Any unforeseen issues with an evolving organizational and operational dynamic could divert your energies, the company’s focus and waste precious growth capital dealing with the necessary course corrections.  And while the focus in clearly on top line growth, you may have to prepare your team from the bottom-up.

Scale Functionally and Lead

Introducing new roles and team members into the organization is an obvious growth step. To scale your operation, the “mean, lean, wear lots of hats” machine must evolve to more functional roles with dedicated specialists (like customer support, product management, customer success, business development, line executives, etc.). No problem. What’s not so obvious is how the current team deals with these changes, particularly if they don’t have a lot of prior experience. If team members are used to taking direction from the top (the CEO or the founders, for example), they may have questions or concerns about their new manager, their role and the revised roles of everyone around them. When it comes to building a growth-oriented team, don’t assume everyone understands what you’re doing and why. Just because you’ve laid out a logical and viable scale-up plan, architected the new organization, hired all the right people and committed to new processes and systems doesn’t mean they know how to adapt and work together effectively. It may sound mundane but take the time to clearly define the new roles, responsibilities, process owners and who is ultimately accountable for the results. Then, assume the role of educator, conscience and sentinel every step of the way.

Develop a Value Creation Playbook

Scaling a a SaaS or TES business is hard work. Period. You’ll want to find a value creation playbook to be your situational guide. It should include a set of success factors, tools, methodologies and best practices necessary to scale a tech-enabled services business and complement what you already do so well.

And although most of it’s not rocket science – this phase of company building requires there be a clear link between the strategy, the plan, the value creation milestones and how every team member fits in. There are a few more subtle scale-up hurdles that can have a material impact (up or down) on the results. They include:

  • Communicating broadly, consistently and frequently to every team and team member at every level. This is far easier to say than do and is one of the “secret elixirs” to mitigating the scale-up risks.
  • Assessing the need for critical, long lead-time hires. Start recruiting early – it always takes longer than you think. Build a bench of talent for parts of the organization where you’ll need to scale the team. This helps you to make high quality hires – just in time.
  • Institutionalizing “tribal knowledge” – by documenting and sharing the essential stuff in the heads of the founding team that new hires need to do their job at the highest level and to avoid reinventing the proverbial wheel.
  • Determining early which systems and processes won’t scale – refactor them pre-emptively.
  • Courageously tweaking the organizational dynamics whenever necessary to find the business’ optimal cadence. As you scale-up, you’ll see a shift from mostly high performance individual contributions to team-based deliverables. It is one thing to execute as a high performance silo. It is quite another to consistently add horsepower, create new teams and redefine processes in order to meet your accelerated growth, EBITDA and productivity goals.
  • Knowing what to do today and what to put off until tomorrow, next month or next year. Most entrepreneurs and investors talk about and get the importance of “focus”. What separates the successful businesses at this growth phase is knowing what to focus on.

Inattention to any of these details can lead to indecisiveness, team paralysis, or lackluster performance and even put a drag on morale and esprit de corps – which, of course, is exactly the opposite of what you’re trying to achieve with an accelerated growth and investment plan.

Don’t React. Plan.

As we discussed last time, the secret isn’t just figuring out what the hurdles are but also how to take up the gauntlet to address these critical success factors – like operational scaling – in the most expedient, capital efficient and sustainable way. In doing so you’ll also help ensure that every invested and/or re-invested dollar in the business will generate the highest returns.

Next time, we’ll be discussing the 3rd and arguably the most ubiquitous growth challenge, demand generation where positioning strategy, buyer insights, behavior-based nurturing and meaningful conversion metrics form the foundation of an optimal content marketing and demand gen strategy. In the meantime, you can learn more about The Big 3 , the difference between building Unicorns and Workhorses in our Don’t Die Trying post, and If You’re ready for Growth Equity.