Which Critical Constraint is Stopping You From Scaling Your Business?

What's the biggest constraint in your business model that's going to hold your business back from scaling?

I'm making the assumption for this edition that you do not have a problem with leadership capability, poor systems, sloppy approaches to planning, execution and reporting. I'm assuming you've got a constraint inherent in your current business model that's going to make it difficult for you to scale. And if you want to scale - you're going to have to find a way to overcome that.

This week, I'm going to share a few real-life examples of how other companies have overcome scale constraints and then give you a few questions to help you unshackle the potential in your business.

First... get yourself in the right frame of mind

Right up front you need to stop normalising your business model. What I mean by that is, don't accept that just because things are the way they are.. or have been that way for a long time, that they're not changeable.

Of course they're changeable!

If you don't start with this assumption, you won't look at your business model objectively or creatively and this will get set you off on the wrong foot. Start with the mindset of "nothing is sacred or unchangeable in this business model".

Second... ask "what is the #1 issue in my business model which is going to prevent me from scaling"?

If it's not immediately obvious to you.. these examples might help get some creative juices flowing.

Example 1 - Constraint: Capital Intensive Business Model - DDLS (Now Lumify)

As Group CEO of EdventureCo, my team and I acquired one of the largest IT training businesses in the country which had plataued at 35m in revenue for 5 years and had around 120 staff. What stood out to me is that it was highly dependent on face-to face-training in A-grade campuses that cost anywhere from 0.5m-1.5m to fit out, each!

These campuses were beautiful, yes… but you get to the point pretty quickly where you just can't keep building more at that price. We already had campuses in every Australian capital and there weren't enough people in the larger regional areas to justify those kinds of investment levels. We know we had to find a way to increase student volumes from any geography without adding more million dollar campuses.

People in the business however, were attached to the old model. We constantly heard "that's just what this business is. It's been built off the back of offering 5-day technical IT bootcamps with high quality instructors in a premium face-to-face environment. We can't possible change that, it's why people buy from us".

So how did we overcome that constraint? No we didn't go fully online and self-paced as the completion rates are very low in that delivery model. We built a live but remote learning experience that was as good as, if not better, as being in the room.

We leveraged all the campuses we already had by reconfiguring each one to create "receiving rooms" so students in any capital could attend a class run by an instructor in any other campus in the country using very high-end AV equipment to make the experience world-class. This allowed us to maximise our gross profit per course without sacrificing any quality at all. In fact, the students in the receiving rooms were so thrilled with the quality of the experience, we got better quality ratings from them than the students in the room with the trainer! Go figure.

It took a lot of work to develop and it was only one of many changes, but it absolutely overcame the major constraint to building profitability in that business. That business went from 35m with no profitability, to over 50m and very solid double-digits profitability within 4 years.

Example 2 - Constraint: Access to Talent for Critical Roles - Flight Centre

For most service businesses, the biggest constraint is access to trained talent who stays and this was major constraint for Flight Centre. They had 200,000 people applying for 2,000 front line roles about 10 years ago. So they took the top 1% into Travel Consultant roles, but still had a 45% turnover rate in year 1. It was costing them a fortune in recruitment and training. That's a very leaky ship to keep filling up!

To address this constraint they decided to create Flight Centre Travel Academy (FCTA) - a branded, paid-for-by-the-consumer training offering. They offered to train students (the 198,000 who didn't get a job when applying) to do a Diploma of Travel and Tourism.

FCTA recruited the students and delivered the training, and the company I worked for helped them out by managing the compliance, reporting and funding access they needed to make it work and to reduce financial barriers for students.

This model allowed Flight Centre (the parent company) to recruit students straight from this new talent pool. They'd done a good quality education certificate, delivered by their own people and meant they were job-ready for their Travel Consultant roles.

The resulting outcome was that Travel Consultants who'd come from FCTA had only an 18% turnover rate in the first year of the job, vs the 45% turnover rate from those who'd been selected as the best 2,000 out of 200,000 applicants! This created huge recruitment, training and payroll savings for the parent company.

It goes to show that if you have a difficult role to hire for that's critical to your business model and you need lots more than the market can offer, sometimes you can take control of the talent pipeline by building your own profitable training business on the side and using that as a talent pool to sure up your future recruitment.

Example 3 - Constraint: Geography - Zinc Group

I interviewed Pete Cleary from Zinc Group on the ScaleUps podcast. He's a great guy with a big vision but he hit a major constraint to scaling his business, which was geographic.

Between 2005 and 2016, he built his business to 30m in revenue in Australia, doing promotional, brand activation and entertainment marketing i.e. branded tennis balls at Australian open, Toy Story drink bottles at the cinema, merchandising strategies, loyalty and incentive models.

But they wanted to keep scaling, and there just weren't enough of their types of customers in Australia. So they decided to go international.

They went all in, and over the next 3 years entered 14 countries. Their strategy was so successful and well-executed that by 2019 they had built team of 220 people.

They merged with a German partner in 2020 and are now a 200m+ revenue business.

Now it's your turn.

Now its up to you to think about what is holding back your business. Try asking yourself these questions:

• What is the #1 issue in my business model which is going to prevent me from scaling?
• What are 5 different, creative ways I could potentially overcome that constraint?
• Out of those, which strategy is my team most likely to succeed in implementing?

 Now get started!