(0:00) Are you building a business that grows through systems or are you just adding (0:03) bodies to fight the chaos? And if you're the bottleneck, the firefighter or the one (0:08) everyone still relies on, it's time to start building your machine.

(0:13) This is The Margin Method, where I help ambitious founders build businesses with real financial (0:18) margin, operational efficiency and leadership freedom. The foundation for a company that (0:23) grows sustainably and actually builds value. I hope you share and enjoy.

(0:28) In the last episode, we unpacked the cash flow problem. So if you haven't listened to (0:33) that one, go back and check it out because revenue means nothing, right? Nothing. If (0:38) you're always stressed about payroll.

(0:42) So today we're going to shift gears a bit, but staying in the same lane of real scalability. Let me start with a statement that might sound (0:48) a little harsh. If your only way of handling growth is hiring more people, you're not (0:53) scaling. You're just expanding the chaos.

(0:58) Now, don't get me wrong. I'm all for building a great team, but if every new customer means you have to hire someone else just to keep (1:03) up, that's a fragile model.

(1:09) So in this episode, I'm going to talk about why systems, not just headcount, are the key to scaling without burning out. So let's go ahead and jump in.

(1:15) So many founders fall into this pattern. Revenue grows, workload grows, workload grows, (1:21) stress grows, stress grows, they hire. Hiring grows, overhead grows, overhead grows, profit (1:29) disappears, and suddenly growth doesn't feel so good anymore.

(1:35) It's actually terrible. I call this the growth spiral. So you're moving forward, but everything feels heavier with each step.

(1:41) You built a business that's only as strong as the number of people carrying the weight. (1:45) And that's not scale. That's just more bodies, more complexity, more stuff to manage.

(1:51) And I talked about this in a previous episode where a CEO wanted to scale his business. He hired a bunch (1:56) of people and he thought, okay, I'm going to bring these people on. They're smart, they're (2:00) qualified. They're going to build out the systems and then voila, we're going to grow.

(2:04) But it didn't work out that way. They lost a ton of money, right? And almost went under. So I don't want (2:10) that to happen to you.

(2:10) Let me share another story too. A few years back, I was working with a (2:15) service-based company. They had grown fast from six people to over 40 in just under two years.

(2:20) So on paper, it looked like success. But the CEO, he was fried. He was on 10 plus calls a day. (2:27) His leadership team couldn't make a decision without him. In profit margins, they were (2:31) slipping fast.

(2:31) It was a very bad situation. And when I asked him about systems, he said, (2:36) yeah, we have SOPs, standard operating procedures. We have a Google drive full of checklists. People (2:42) can find what they need, right?

(2:42) But when I asked his team, they said, we're not sure where anything (2:47) lives. We just asked Dave. So this is a classic example.

(2:54) Oftentimes, and I'm not saying SOPs and checklists are bad. I'm a big advocate for them. But if people aren't using them, then it's just (3:01) a complete waste.

(3:01) So like I said, classic example here, they weren't scaling, they were just (3:06) surviving. And Dave, he was a system. It wasn't the SOPs and the checklists that were the system.

(3:13) So maybe you feel the same way. Maybe, maybe not. Maybe you're good. But here's the thing.

(3:17) Hiring people is easy. Building a machine that works without constant human input, (3:22) that's hard, but that's scale.

(3:29) In fact, with key man risk, that's when the entire business relies on one person or a group of key people. That can be really problematic. And the way to solve that (3:35) is through systems, is through scalable systems.

(3:41) But the truth is oftentimes leaders, they just want to hire more people, but people can only solve your problems up to a point. Beyond that, (3:46) if your processes are a mess, if knowledge lives in people's heads or performance isn't even (3:53) tracked, you're just multiplying the mess. You're just scaling the problem.

(3:59) More people doesn't necessarily mean more progress unless you have the systems in place first. That's the key.

(4:05) So here are three signs that you're scaling the wrong way. So we'll get practical here and I'll (4:11) share with you the red flags that you might come across that indicate that you're scaling through (4:17) head count, not systems.

(4:17) All right, so here's number one, red flag number one. You're stuck (4:21) in decision fatigue. If every single issue lands on your desk and you're the bottleneck for approvals, (4:28) answers, or directions, and trust me, like I've been there before in my role as a CEO running a (4:33) business, I can tell you that's a systems gap.

(4:38) So that's number one. If you find yourself in the spot, everything's flowing through you and you're the bottleneck, that's a big problem. (4:42) That's a giant red flag. That's not a pink flag. That's a giant red flag.

(4:47) Or maybe it's somebody else in your organization. Everything has to flow through Sarah or Dave or whoever it may be.

(4:52) Number two, your onboarding process is just figure it out as you go. So if every new hire (4:58) has to shadow someone or ping teammates for info, that's not onboarding. That's called tribal (5:04) knowledge.

(5:04) So having a system for onboarding is really key.

(5:10) Number three, your org chart is top heavy. It looks like an inverted triangle. So if you keep hiring managers just to keep people (5:15) accountable, it probably means your processes aren't doing the heavy lifting.

(5:20) And this is what I often say to owners too. Too many companies, they don't spend the time to build the systems, (5:27) so they're hard on the people. And the way that I prefer to run a business is build the processes (5:34) and be hard on the processes and soft on the people.

(5:39) But like I said, companies don't have processes, so they're soft on the process, but they're hard on the people. That's backwards. (5:44) That's how you create burnout and you destroy morale and you create high turnover.

(5:50) So like getting in somebody's face and yelling at them because your system is terrible and it's not (5:54) well-documented, that's on you. So you shouldn't be doing that. So you should be looking internally (5:59) and I've had to do that myself.

(6:04) That's why I could say this. There have been times where I'm frustrated (6:05) with people and then I look at my system and I'm like, no wonder why I'm so frustrated. It's my (6:08) system. It's not the people. So that's a side note.

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

(6:20) So that means designing systems at scale, creating structure your team can plug into, building dashboards, (6:26) not doing data entry, setting outcomes, and not just managing tasks.

(6:32) So when you shift from an operator to an architect, I can tell you everything changes. You stop reacting and then you start (6:38) engineering and that's what your business needs.

(6:44) So let's break this down into a framework. So I'm going to give you three pillars that I focus on when helping a business scale with systems.

(6:49) Pillar number one is process. Every repeatable task needs a clear documented process, (6:56) but don't overcomplicate this, right?

(7:01) Start with the stuff that happens most often, like sales, client onboarding, delivery, billing, et cetera.

(7:07) Or what you could do is you could ask yourself, you say, all right, if I left, if I went on vacation, turned off my phone, nobody could get (7:13) ahold of me, what would break first and what would be the most problematic thing to break?

(7:18) And then start documenting that.

(7:18) So just use a simple SOP structure and SOP stands for standard operating procedures.

(7:24) So begin with what is it? Who owns it? What triggers it? What's the step-by-step (7:31) and what tools or templates are needed?

(7:31) And even better, you can record a Loom video (7:36) walking through it and it's fast and your team can then watch it anytime.

(7:42) And I think Loom has a new AI capability because I was talking to my brother about this the other day at lunch, (7:46) and he's really good at putting together like operating guides and whatnot for his business.

(7:50) He's like, you could record the Loom video and then AI will transcribe that and it will create (7:56) it into a checklist and a step-by-step. So check that out if that's interesting to you. That's (8:00) Loom, L-O-O-M.

(8:00) Okay. Pillar number two is performance. You can't improve what you don't (8:06) measure.

(8:06) So set up simple dashboards that show, are we doing the work? Are we hitting the goal? (8:13) Is the process creating value?

(8:13) So for example, how many leads do we convert this week? How many (8:18) customer tickets were resolved on first touch? And what's the average time to delivery?

(8:25) So you don't need a hundred KPIs, just track the ones that are right, that are consistent.

(8:30) Like at Coltivar, that's what we have. We have software for our clients and all of our clients are on the (8:35) software and they have access to core KPIs.

(8:35) So we measure things like LTGP to CAC, lifetime gross (8:41) profit of a customer to CAC, customer acquisition costs. We measure gross profit, revenue per (8:46) employee, return on invested capital, just to name a few.

(8:53) And all these KPIs are in one place on a very easy to read dashboard. It's graphic. You could click on it. You could look at trawling (8:57) to a month, but a tool like this has been extremely valuable for our clients.

(9:02) And you could have something like this too in your business. Just make sure you have some type (9:06) of dashboard so you know what's going on in your company.

(9:11) All right. Pillar number three, people in the right roles. So systems don't replace people. They empower people.

(9:17) But for that to work, your team needs clear roles, documented responsibilities, authority to make decisions (9:23) within their lane, and success measures.

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

(9:35) We use a system where we just score these success measures, green, yellow, red. (9:38) Green's on track, yellow's slightly off track, red's like a major problem.

(9:44) So when employees have success measures, they know what does success look like in their role and what's expected of (9:49) them, and it makes all the difference.

(9:53) All right. So check that out.

(9:53) All right. When you get this right, people stop bringing you problems and start bringing you results.

(9:58) And that's when the flywheel starts spinning.

(10:04) So here's a quick story. One founder I worked with was convinced, okay, she was convinced she needed to hire three new people to handle growth.

(10:09) So instead, we documented her customer onboarding process. We automated the intake form. We built a simple checklist, (10:14) and we added a shared calendar.

(10:14) Then we hired one person with the right skills and trained them to (10:20) own that entire system.

(10:20) The result, they doubled capacity with fewer errors, and they didn't need (10:26) the other two hires.

(10:26) And that's huge. That's huge leverage. That's the power of process, (10:31) people, and clarity.

(10:37) So let me ask you, are you building a business that grows through systems, or are you just adding bodies to fight the chaos?

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

(10:49) Okay. So just start small because it could be overwhelming. Trust me. I've been there.

(10:54) Pick one process, document it, train your team, track performance, and let it run without you.

(11:00) 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? It's about designing a business that works with or without you.

(11:13) All right. So in the next episode, we're going to get into the five metrics every founder must know (11:18) cold.

(11:18) Okay. And this is going to be really critical because systems give you control, (11:23) but metrics give you visibility.

(11:27) So you're not going to want to miss this one. We're going to talk about return on invested capital, return on labor, cash velocity, and the numbers that (11:32) actually move the needle in a growing business.

(11:37) So if you haven't subscribed yet, be sure to do that. So you get notified every time I drop a new episode and share this with a founder who is (11:43) hiring like crazy and still stuck.

(11:48) So that's one way you could be a part of this movement is just help share this with other individuals who are also trying to scale and sell their business.

(11:53) Be sure to message me down below, send me some comments. If this episode hit home for you (11:59) and just remember, you're not just a CEO, you're the architect of a business that lasts.

(12:04) So let's build it right. And if you need help with any of this, you can always connect at (12:09) coltivar.com and we have a ton of resources there. So be sure to check that out.

(12:14) All right, I'll catch you in the next one. Take care of yourself. Cheers.