Show Notes
Jake asks: "I finally got the growth I wanted, and now everything is harder. More leads but I'm dropping half. More revenue but cash flow is a mess. More deals and every new one creates new issues. What should I have put in place before I scaled?"
In this episode, Scott delivers a counterintuitive truth (growth is not always the goal), explains why you cannot scale chaos, and shares two stories—his own company nearly shutting down, and a multifamily investor whose back office collapsed at scale. You'll learn the doubling test (can you handle 2X before 10X?), why scaling is like building an airplane in flight, and why slowing down is sometimes the fastest way forward.
The bottom line: Before you hit the gas, slow down. Make sure your systems can handle double. Then scale. You cannot scale chaos.
Got a business question? Ask Scott here: https://scotttodd.net/ask
📜 Full Transcript (Click to expand)
Scott Todd (00:00)
Welcome to Fix My Business, the show that helps you fix your business. And we're going to do that by answering other people's questions so that you can learn where other people are stuck. And when you do that, you can know what to avoid or how to navigate around that situation if you're experiencing it. I'm your host, Scott Todd. And today's question comes from Jake. And Jake has a good one. He says, so here's the thing nobody warned me about.
Uh-oh, uh-oh, nobody warned about it. Here we go. I finally got the growth I wanted. Well, that's a good problem. And now everything is harder. More leads, but I'm dropping half of them. More revenue, but cashflow is a mess. More deals and every new one creates new issues. I feel like I'm running faster than some, let's see, I don't know what to say. I feel like I'm running faster.
on a treadmill that someone keeps speeding up. What should I have put in place before I scaled? ⁓ Jake, this might be shocking news for everybody. Everybody listen up, get ready to write this down. Growth.
is not always the goal. Okay? And if you don't do it right, it will destroy the foundation that you're creating. All right? And this is what I really want you to write down right here. Okay, ready? More revenue. The more revenue you have, the more transactions that you have.
It's going to show the weaknesses. It's gonna show the chaos within your system. And you cannot scale chaos. It's not scalable. You can't do it. If you already have chaotic systems and you just add more to it, you're gonna have chaos times 10. Scaling before you're ready ⁓ is a disaster. And that's what we need to try to avoid here, is that we wanna try to avoid that disaster, okay?
So a lot of people will then ask, okay, well, how do I know when I'm ready to scale? And a lot of people think, a lot of the business owners I talk to, when they talk about scaling, because they really want to scale, or they're trying to keep up with somebody else, and they're worried about that vanity metric number of revenue, when they're trying to get there, what's happening is that they're in a hurry, and they just want to go faster. They want a 10 exit tomorrow.
Maybe they read a book that says 10X is, I don't know, super easy. And look, it can be. But at the same time, before you 10X, you need to make sure that your systems can double, can support double the transactions. So many people, they can't support double, but yet they're trying to 10X it. I found this out myself. We had a company where, man, we just got handed
I mean, we lived this scenario. We were growing faster than ever. The problem was, is that our systems could not support it. Our internal systems could not support that deal flow. It was impossible. Things were breaking. I mean, it was a nightmare. I just, at one point I thought, this isn't worth it. Let's shut it down. And we had to go back and we had to rebuild systems. We had to design the way that work flowed through the system.
And that's when I talk about building systems, that's what I'm talking about. How does work flow through your system? We had to deal with all of that stuff because our business couldn't support it. We couldn't keep up. So whenever I see problems like this, the first thing that I think of is that you've reached the limitation of your systems. You've reached the capacity of your systems. It's never about people. It's never about, you know,
Anything else, it's about how much capacity your individual systems can support. I also know another investor. He used to do, he was in multifamily and he was doing a few deals a year. And then he decided he was gonna, know, 10 accent. He was gonna go from two deals a year, he was gonna go to one a month. And he's like, I can find all these deals, I can find all these deals. No problem, I can do this. I can raise the capital. Okay.
That's fine. But you know what he found out? He found out that his back office structure was a mess. each one of these properties went into their own LLCs. Each one of these LLCs required their own accounting. Each one of these LLCs doing their own accounting required different types of reporting because they had different deal structures and all this other stuff. It was a mess. It was a mess. And so the one thing I want you to remember is that before we go hit the gas pedal on our business, we want to slow down.
We want to just make sure that we can support more transactions. Do we have everything in order? Does a few transactions, think about this one for a second, does a few transactions, the ones that we're doing now, do they make it through our entire system, our pipeline, our infrastructure? Does it make it from point A to point Z? Does it do that in a way that is seamless and flawless? If you're doing that at a small scale,
then add more, maybe try to double it. And if it still holds, then you double it again. And then if it holds, turn on the valves, man, let it roll. But yeah, you can't do that. In fact, one of my favorite Wharton professors, ⁓ Elon Moloch, loves to say that scaling a business is like building an airplane in flight.
you're trying to bolt on the wings and the seats and the engine all while you're still in the air, all before you crash it. So before you take off, maybe tighten down the bolts and make sure you're there. Okay. So that's what I would do differently, Jake, is I would slow down, even though you want to speed up, slow down a little bit, slow down, fix what needs to get fixed, and then hit the gas pedal again. And that's how we're going to plan.
our growth and our scaling, we're not going to get slammed by it. All right, Jake, thanks for the question. If you have a question, I want you to head over to scottodd.net forward slash ask, ask the questions they keep rolling in. I'm always excited to answer them and I will see you in our next episode as we keep growing. Take care.
Welcome to Fix My Business, the show that helps you fix your business. And we're going to do that by answering other people's questions so that you can learn where other people are stuck. And when you do that, you can know what to avoid or how to navigate around that situation if you're experiencing it. I'm your host, Scott Todd. And today's question comes from Jake. And Jake has a good one. He says, so here's the thing nobody warned me about.
Uh-oh, uh-oh, nobody warned about it. Here we go. I finally got the growth I wanted. Well, that's a good problem. And now everything is harder. More leads, but I'm dropping half of them. More revenue, but cashflow is a mess. More deals and every new one creates new issues. I feel like I'm running faster than some, let's see, I don't know what to say. I feel like I'm running faster.
on a treadmill that someone keeps speeding up. What should I have put in place before I scaled? ⁓ Jake, this might be shocking news for everybody. Everybody listen up, get ready to write this down. Growth.
is not always the goal. Okay? And if you don't do it right, it will destroy the foundation that you're creating. All right? And this is what I really want you to write down right here. Okay, ready? More revenue. The more revenue you have, the more transactions that you have.
It's going to show the weaknesses. It's gonna show the chaos within your system. And you cannot scale chaos. It's not scalable. You can't do it. If you already have chaotic systems and you just add more to it, you're gonna have chaos times 10. Scaling before you're ready ⁓ is a disaster. And that's what we need to try to avoid here, is that we wanna try to avoid that disaster, okay?
So a lot of people will then ask, okay, well, how do I know when I'm ready to scale? And a lot of people think, a lot of the business owners I talk to, when they talk about scaling, because they really want to scale, or they're trying to keep up with somebody else, and they're worried about that vanity metric number of revenue, when they're trying to get there, what's happening is that they're in a hurry, and they just want to go faster. They want a 10 exit tomorrow.
Maybe they read a book that says 10X is, I don't know, super easy. And look, it can be. But at the same time, before you 10X, you need to make sure that your systems can double, can support double the transactions. So many people, they can't support double, but yet they're trying to 10X it. I found this out myself. We had a company where, man, we just got handed
I mean, we lived this scenario. We were growing faster than ever. The problem was, is that our systems could not support it. Our internal systems could not support that deal flow. It was impossible. Things were breaking. I mean, it was a nightmare. I just, at one point I thought, this isn't worth it. Let's shut it down. And we had to go back and we had to rebuild systems. We had to design the way that work flowed through the system.
And that's when I talk about building systems, that's what I'm talking about. How does work flow through your system? We had to deal with all of that stuff because our business couldn't support it. We couldn't keep up. So whenever I see problems like this, the first thing that I think of is that you've reached the limitation of your systems. You've reached the capacity of your systems. It's never about people. It's never about, you know,
Anything else, it's about how much capacity your individual systems can support. I also know another investor. He used to do, he was in multifamily and he was doing a few deals a year. And then he decided he was gonna, know, 10 accent. He was gonna go from two deals a year, he was gonna go to one a month. And he's like, I can find all these deals, I can find all these deals. No problem, I can do this. I can raise the capital. Okay.
That's fine. But you know what he found out? He found out that his back office structure was a mess. each one of these properties went into their own LLCs. Each one of these LLCs required their own accounting. Each one of these LLCs doing their own accounting required different types of reporting because they had different deal structures and all this other stuff. It was a mess. It was a mess. And so the one thing I want you to remember is that before we go hit the gas pedal on our business, we want to slow down.
We want to just make sure that we can support more transactions. Do we have everything in order? Does a few transactions, think about this one for a second, does a few transactions, the ones that we're doing now, do they make it through our entire system, our pipeline, our infrastructure? Does it make it from point A to point Z? Does it do that in a way that is seamless and flawless? If you're doing that at a small scale,
then add more, maybe try to double it. And if it still holds, then you double it again. And then if it holds, turn on the valves, man, let it roll. But yeah, you can't do that. In fact, one of my favorite Wharton professors, ⁓ Elon Moloch, loves to say that scaling a business is like building an airplane in flight.
you're trying to bolt on the wings and the seats and the engine all while you're still in the air, all before you crash it. So before you take off, maybe tighten down the bolts and make sure you're there. Okay. So that's what I would do differently, Jake, is I would slow down, even though you want to speed up, slow down a little bit, slow down, fix what needs to get fixed, and then hit the gas pedal again. And that's how we're going to plan.
our growth and our scaling, we're not going to get slammed by it. All right, Jake, thanks for the question. If you have a question, I want you to head over to scottodd.net forward slash ask, ask the questions they keep rolling in. I'm always excited to answer them and I will see you in our next episode as we keep growing. Take care.