MBA1610 Q&A Wednesday: How do I scale my service-based business?

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Hey O. Welcome to the $100 MBA show. Because business never stops. That's why we deliver daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of the Hundred Dollar mba, a complete business training and community online. And today's episode is a Q and a Wednesday episode. In our Q and A Wednesday episodes we answer a question from one of you, one of our listeners. If you have a question you want to ask, just email me over at Omar MBA Net and today's question is from Justin. And Justin asks how do I scale my service based business? Hey Omar, I run a web services firm where I help my customers build and run their websites. Right now it's just me. I will design, create, launch the website and even host and maintain it for them. Business is actually pretty good these days. But I need to scale. I need to make sure I'm not denying customers. I guess it's a good problem to have, but I have too many customers. How do I scale without losing the quality that I deliver to my customers on a personal level? Thanks for your advice. Love the podcast. Listen to it every day in the morning. Justin well Justin, that's a great question because a lot of service based businesses start start with one person, one individual with an area of expertise delivering a service. But at some point you're going to have to scale the business beyond yourself and it sounds like you're well beyond that point where you're getting more customers than you can handle. You don't want to say no to people you want to start being able to work on your business and not in your business. So speaking of business, let's get down to business. So today's Q and A, Wednesday's question from Justin. How to scale my service based business is a very important one. When you are the creator, when you are the craftsman or craftswoman, right, you're tied to the hip, to the business. And it's okay to be like that at the start, but once you start rolling like Justin is rolling, you gotta start moving away from the business. You gotta start making sure you can scale your service so that you're running your business and it's not dependent on you, it's not dependent on your talents. That way if you want to take two months off, you can, it doesn't require you to actually produce the work for the clients. This is like a sneaker company with the founder in the factory creating the sneakers. And if the founder is not in the factory, then the sneakers don't get created. There is no business, no product. Now I know this is a service and it's a little bit different, but you want to kind of understand the economics are the same. The way you scale is going to be very similar. So let's talk about that for a moment. Now, before we actually scale out and start getting other people on our team to fulfill our promises to our customers at the level that Justin is happy, he said he doesn't want to sacrifice quality. Before we do that, I want to say that you can do something with these extra customers until you make these hires and start scaling. One of the things that I did, so I had a service based business for a while. I actually did the same exact thing Justin's describing. I used to create WordPress websites, host them, deliver them to my clients. At some point I couldn't deliver on all the things that my clients were asking me to do. So one thing that you can do is that you can refer them to somebody else that can handle the work and you can get a finder's fee so you can make an agreement with other developers, other designers, other service providers, and they don't even have to be competitors. It could be other people that like create logos, people that create swag, T shirt designs, maybe accountants, lawyers, things like that. You can just come up with an agreement, hey, if I refer a client to you, would you be cool If I got 10% of whatever you charge the customer? And it could maybe just be for the first project or whatever it is, but the point here is that you can actually do something with that customer, serve them, give them somebody that can help them. And at the same time, you can actually be compensated for that from your side. You're making easy money, you're making your customers happy and it's just an interim state until you actually scale. On the other company side, they're happy to get a new customer and 10% is nothing for how much it will cost them to acquire a customer. So they're happy and it's just for the first project. After that, they're a customer for life. Of course you can agree on the right percentage of terms that works for you and the other companies or other freelancers. Now let's get into the scale. Before we get into the how, we got to understand one thing. We got to change our mindset a little bit when it comes to scaling a service based business. I've been there before. I know some really good entrepreneurs in my area, actually locally, that have scaled their shirt space businesses and this is their advice too. So you got to change your mindset and understand that no one, no one's going to do it like you, no one's going to do it as good as you. No one's going to be able to produce the results that you're always expecting or maybe deliver the project the way you like it. Right now. You have complete control over the outcome that you deliver to the customer because you're doing all the work. But once you say, hey, I'm going to hire somebody else to do the work and scale out, that person's going to deliver it in a different way, in a different capacity. Maybe not at the same exact standard, but your goal is just to make sure it's at 80%. You're going to just have to accept the fact that they're only going to deliver the quality or the level that you expect at 80%. I'm saying this because I know a lot of founders have very, very high expectations for themselves. And when they come to scale, they get disappointed and they feel like, oh man, the quality is suffering. It doesn't need to suffer a lot and it does actually need to suffer at all. The 20% we're cutting out here is really something that a lot of people probably won't notice. You're going to focus on the most important 80% when delivering it to the customer. It's just the cost you have to pay. And I'm just saying this right now because this is going to save you a lot of heartache and gray hairs. It's just going to save you a lot of pain. If you just accept the fact that when you start scaling that, you should just make sure you understand that it's not going to be exactly the same kind of work that you produce. It's going to be a version of it, an 80% version. And this allows you to set up your expectations and understand that's the cost I'm going to have to pay. That's something I have to swallow. It's still going to make my customers happy, it's still going to deliver on my promise, but it's the cost I have to pay so I can scale my business and be independent from the production of the service that I'm promising my customers. Because eventually what you want to do really is to have other people delivering the service. And you run the business right. You make the big strategic decisions, you focus on other ways to bring in customers and it's not relying on you. It's also not time sensitive. You're not part of the sprints and the timelines and the deadlines. Now that we nailed that mindset, let's make sure we have some step by step plan to scale our business. So the first thing we're going to do is that we're going to make our first hire. Okay? The first person. And this person is going to take off what's on your plate right now. Anything that deals with delivering the service. Because right now you're delivering the service, you're managing the business, you're doing invoices, you're doing sales, you're doing marketing, doing everything. But we're talking about delivering the service, actually creating the websites and hosting them and dealing with customers on that level. You need somebody to do that work. Okay? Now a lot of people believe this is the first hire. They say the first hire is to replace the skill that you are doing with somebody else who could do that skill. That is one theory. I am not a believer of that theory. I don't think that should be your first absolute hire. I believe your first hire should be an admin hire, an administrative assistant, Somebody who can take off all the busy work you do. Invoicing and emails and scheduling and scheduling pre calls and all that kind of stuff. Somebody who's doing $5 tasks all day long for you rather than you doing it. You might look at your calendar, look at your day, you might notice, wow, I actually spent a good portion of my day, 30, 40% of my day doing admin. And you should take off your plate, that kind of work so you can free yourself up so you can Start finding great talent. This is my opinion. Your first hire should be an administrative assistant. Any kind of assistant that can take off all this admin work that's sucking away your time. This person is going to give you time to find great talent, and that's your job as a leader. If you want my advice, I would say your first hire is an administrative assistant who's going to take away all the admin work from you so that you have 30, 40% of your time back. You're going to feel a little bit better about your time and your stress levels. And now you have that creative space to find great talent. Now you're going to find your first person that knows the skill, knows the craft. You want to tap into your network, the groups, the forums, and find that person. Because this person might be right under your nose. Somebody that is a contributor to a Facebook group you're part of, or somebody that you see on Twitter constantly. So what you want to do is start with a simple job description. Put that up, post it on your website, and then share that link in your groups, in your discussions on Twitter, on Facebook, on whatever it is that you frequently and say, we're looking to expand. I'm looking for somebody who can fulfill this job description. Do you know somebody? Or maybe that person is you. You want to find somebody that is solid, that has done this before, that is a good cultural fit. Now, when this person gets hired, their job is not only going to be to actually do the work to do the service that you hired them to produce. Their job is also to document everything they do in what we call standard operating procedures, SOPs. And they basically document what they do all day long. Why? Because your next hire needs to be trained and your first hire is going to train them. And it's a lot easier to train them if they document all their procedures. How do they produce an invoice or request an invoice from your admin assistant? How do they, you know, what are some of the things they have to cover in a conversation with a client? Where can they find the templates for, you know, the branding guide that you produce for the customer? This needs to be documented. So every time they learn something new as a new hire, they document it in an sop. This is not only for the new hire, it's also for them. Because there are things that you do frequently, but there's some things you do on, off, or you do maybe every once in a while, every few months, and then you forget what the procedure is of how to do it. Instead of wasting time, you just go up to the sop and basically it's a document in Google Docs that they can search for and it's super, super simple. And that's the basic building blocks of scaling a service based business. You find somebody that can do the job, you document what they do or they document it for themselves. And then when the next hire comes, they train them and give them the SOPs and say, hey, this is how you do what you do and that's how you scale one by one, one by one. As you get revenue, you hire your next one. In my opinion, your third hire should replace. So therefore you have two people working on the service and your job is to manage that team and make sure they deliver on the outcomes. You need to remove yourself out of the equation as soon as possible. And I know it's kind of like a chicken or egg thing, like when I make more money, I'll be able to hire, but I need to hire to make more money. What's great about the services is that you can get deposits from customers in advance. So you could say, hey, we can do this for you. We can't start another project for another four weeks, but we'll need 50% deposit to lock it in so we can secure you as client. And in those four weeks you could definitely find new talent, train them up and get them working on that new client so that hire pays for itself.

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Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at capella.

Edu to wrap up today's lesson. Today's question from Justin how to scale a service based business is a solid one. It takes a bit of time. It takes a step by step strategic approach. As I explained, taking the admin portion of the workload out of the equation, hiring a great first hire that can document their procedures and what they do and how they do it. Get them in the understanding that you're going to be training the next hire. And that next hire places you and you start managing the team. And it doesn't end there. As you start to scale, as you start to grow, somebody else will manage the team and that person can just report to you and discuss high level goals you're trying to achieve with your service. Something to really look forward to, guys. That wraps up today's lesson. But if you have a question, just like Justin did in today's Q and A Wednesday, you can ask it and I'll answer right here on Q and A Wednesday. Just go ahead and email me@omar00mba.net with your question. And of course, don't forget to hit that subscribe button on whatever you use to listen to podcasts. Whether it's Apple Podcasts, Spotify, Stitcher Radio, Himalaya. We're on every single platform. So make sure you hit subscribe right now. By hitting subscribe, you get the episode as soon as it's out of the oven, as soon as it's ready for you to listen to, and it'll be right on your device. That simple. No headaches. Before I go, I want to leave you with this. Replacing yourself in a business is not fun. It's not easy. It's hard. It's something that you have to adapt to because you get comfortable in your role. You know this works. You know that this is what brought in the money right now. But understand, every stage in your business is a different challenge and requires different things. What got you here won't get you there, right? Won't take you to the next level. You got to change what you do to get different results, better results. And I love the question from Justin because it shows that he understands that. Thanks so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the courseroom to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Eduardo.