7 Mistakes Scaling Companies Make

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7 Mistakes Scaling Companies Make Presented by Craig Vodnik @CraigVodnik

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Nuclear Engineering Degree @CraigVodnik

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Recovering Programmer @CraigVodnik

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Launched Chicago Tribune 1996 @CraigVodnik

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Founded 2005 @CraigVodnik

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HPA Member 2013 @CraigVodnik

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About cleverbridge ● ● ● ● ● ● ● Founded in 2005 with 3 partners Headquartered in Cologne, Germany Bootstrapped with our own money No outside investors Profitable within 2 years 300 employees Chicago home at 350 N. Clark St. @CraigVodnik

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What is scaling? May be hazardous to your health @CraigVodnik

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What does scaling mean to me? Scaling is growing your business in alignment with demand, resulting in a larger, stable business.* *More than revenue and people growth, with or without a hockey stick curve @CraigVodnik

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What are other’s definitions? ✓ A replicable system for delivering goods and services allows businesses to increase their customer base without having to increase their overhead at the same pace. x Scalable growth is all about pairing exponential revenue growth with incrementally increasing costs. http://www.inc.com/jason-albanese/how-to-scale-a-business-4-growth-tips-from-actual-experience.html @CraigVodnik

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Why not scale fast? Scaling too quickly can kill you @CraigVodnik

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GoodEggs Blog - Sept 2015 The single biggest mistake we made was growing too quickly, to multiple cities, before fully figuring out the challenges of building an entirely new food supply chain. We were motivated by enthusiasm for our mission and eagerness to bring Good Eggs to more people. But the best of intentions were not enough to overcome the complexity. @CraigVodnik

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HomeJoy Forbes Article - July 2015 “Looking back, it’s like, that didn’t make sense — if your core business doesn’t work here, why expand in new markets?” said another former employee. “I think they were sort of fooling themselves with this exciting top-line growth, and they had cash in the bank so it wasn’t really a concern, immediately, getting to profitability.” @CraigVodnik

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Premature Scaling Can Kill Startups that scale properly grow 20 times faster than startups that scaled prematurely. @CraigVodnik TechCrunch article 2011

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Brad Feld on Premature Scaling Co-Founder Techstars @CraigVodnik Hiring any substantive number of sales or marketing people before there is customer adoption is premature scaling. All the early hires should be technical or product focused.

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My personal scaling mistakes Learned over 11 years @CraigVodnik

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Who should I hire? College Grads ✓ Inexpensive ✓ Trainable ✓ Enthusiastic ○ Unfocused ○ Need mentor ○ Inexperienced Experienced ✓ Knowledge ✓ Leadership ✓ Track Record ○ Has opinion ○ Career path ○ Expensive Scaling requires hiring decisions for max 3 years out @CraigVodnik

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Perfect person wants to join my company! Ability of Employee ✓ High performers hard to find ✓ Want growth opportunities ✓ Need to continue challenging Need of Company ✓ Align with growth trajectory ✓ Salary 70% of costs ✓ Who’s in charge? Scaling requires the right balance of ability & need @CraigVodnik

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Who should manage a team? SME ✓ Gets hands dirty ✓ Task focused ✓ Owns/creates information ✓ Leads by example Manager ✓ Leader ✓ Mentor ✓ Connector ✓ People skills ✓ Professional Scaling requires professional managers @CraigVodnik

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How much should I share with team? Control ✓ In charge ✓ Makes decisions ✓ Clear accountability ✓ Top down approach ✓ Employee fear Trust ✓ Owner, not driver ✓ Information flow bottom up ✓ Executive fear Can’t scale well without trust @CraigVodnik

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We’ve never done this before?! ✓ Decision making and implications ○ ○ ○ ○ Adding an executive Removing an executive Organizational changes Peers vs. Hierarchy ✓ Roles and Responsibilities Scaling requires executive team growth @CraigVodnik

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Scaling Takeaways 1. 2. 3. 4. 5. 6. 7. Scaling not the same as growth Scaling too quickly can kill you Scaling begins with first hire Scaling balances ability/need Scaling requires professional managers Scaling only lasts with trust Scaling involves management self-reflection @CraigVodnik

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Thank you! Good luck scaling! @CraigVodnik

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