Podcasts
Scaling Smart: How to Build the Foundations for Sustainable Business Growth with Kevin Harrington
Scaling a business isn’t just about adding more customers – it’s about preparing your infrastructure, team, and systems for the next level. In the latest Exit Insights Podcast, Darryl Bates-Brownsword and Kevin Harrington discuss the phases of growth and how to navigate them.
The Triple Revenue Rule
The secret? Every time your business triples in size, you need to reinvest in its foundations. For example:
- £100K to £300K: Add part-time help and basic systems.
- £1M to £3M: Build a management team and implement tools like CRM.
- £3M to £10M: Recruit experienced leaders and professionalise your operations.
Lessons for Business Owners
- Invest in Systems: Tools like CRM ensure consistency and efficiency.
- Build Leadership: A capable management team enables you to focus on strategy.
- Think Long-Term: Scaling often requires a temporary margin dip but leads to greater profits.
Watch the episode here:.
In this episode, we’re discussing the phases to business growth and are there any cheat codes that you need to unlock to help you get from one phase to the next seamlessly. Everyone’s talking about what are the phases to growth and no one’s really giving you any guidelines on what you have to do to move from one phase to the next. We’ve explored it and Kevin and I have a chat today and go, what do we learn after working with SMEs over the last 25 or 30 years or so?
And what have we noticed that businesses do consistently that help them transition from one phase to the next? Specifically, we’re talking in this episode, we’re focusing on the phase from 1 million in revenue to 3 million in revenue. And what we know is that there’s a little known rule and it’s crudely the three times rule. And that is that you need to rebuild your infrastructure, your foundations, your business and review all of your resources and change those every time you triple in size. It’s really interesting stuff and enjoy.
Welcome to the podcast dedicated to helping business owners prepare for exit so you can then maximise the value and exit on your terms. This is the Exit Insights podcast presented by Succession Plus. And your host today, Darryl Bates-Brownsword and Kevin Harrington. Welcome back, Kevin. How’s your week been?
Hi Darryl, it’s been great. Just so the listeners know what’s going on there, it did take us what, five goes to get that intro right? But it’s a good job.
Thereabouts. And we’ve only done about 150 episodes, so you’d think I’d know it by now.
Yeah, it’s a good job that we got a rough idea of what we’re talking about today then, isn’t it? Let’s see how that goes.
Well, I had a rough idea about the intro to I got that all mixed up, but there we go. What we’re going to talk about today is a bit of a secret, something that most business don’t know and around scrolling and scaling their growth. They, no one, no one’s given them a handbook of going, here’s how you get your business from the startup to a hundred mil or whatever it is. And here’s how long it should take. And here’s all the tricks of the trade that you need to do to get from one phase to the next.
Because everyone always talks about the phases to growth, but they never tell you what they actually are. And we think we’ve figured out a secret after 25 or 30 years.
Yeah, it’s an interesting thing that because we don’t just slip along a straight line growing our businesses and a good analogy is climbing a ladder. If you stand still on the step, it’s dead easy, isn’t it? But you never get anywhere and getting up the next step requires some confidence, especially the higher you get. It requires some strength and it requires a desire to do it and sometimes a tool to get you to the next step and that’s pretty much what we’re talking about with the steps of growing a business.
Absolutely. this is something we’ve been working on. You and I have been building this over the last probably two or three years. But the background and the real history is, well, you my engineering background, you’ve also got an engineering background, but you got into marketing a whole lot quicker than I got into business. And, you know, I kept a few more engineering geeky bits, I guess, should we say and what I’ve always tried to do is I’m always trying to understand stuff and why do I try and understand how things work so I can make things easier and make it easier next time I do it. And that’s the way I’ve always looked at business and always gone, why do things happen that way? Why do things happen that way? How do we make it easier if we understood what was going to happen next, then it would make life a whole lot easier. And that’s what we’re talking about today, isn’t it? without, I guess, holding back any further, it’s is the phases to growth. And what we’ve identified is that there’s a real rule to thumb as to what’s going on here. And it works to how your business grows. And that is that every time you triple your revenue, you need to review and rebuild your platforms, your systems, your infrastructure, your processes, that sort of stuff, the infrastructure that holds your business together. So it’s a three times rule. So what does that look like? Well, If I start my first 100 grand, and it doesn’t matter whether it’s 100 grand of pounds or dollars or pesos, every time you triple. So we’ll use 100 grand. So we’ll start with 100 grand. if it’s 100 grand, it’s just one person, and they may have some part-time help, but it’s typically one person to do up to 100 grand. Now, to get from 100 to 300, they need to invest in some infrastructure and resources. And that’s typically when they bring on their first bit of help. you know, so there’s a bit of infrastructure and it’s typically human resource to bring them in. And then you’ve got your, you know, let’s triple that and let’s round it off. So then it’s your next phase of growth is from 300 to a mil. And there’s a whole lot that goes on to 300 to a mil. And you and I have done a number of episodes in the past around what, the typical business looks like with 300 to a mil and it’s that hub and spoke model where the business owner is typically in the center with 10 or so or up to 10 or so helpers depending on the industry they’re in. Then you’ve got the next phase is what do need to do to get my business from one million revenue up to three million revenue? So again, tripling in size and what are the tools and infrastructure and the platforms I need to hold that business together and just to keep it running so that any growth I put in place doesn’t slip back? And I know it’s stable, sustainable growth, and I want to build it effectively to the next plateau or ladder step, as you touched on earlier. And then we’ve got from, and you can see the pattern here. So it goes from 1,310, 1,310 or 1,30, 1,100, there’s the platform. And what we’ve been researching and investigating is, what are all the various platforms you need to put in place? So what about Miss Kevin? Has that summed it up for people, do you think?
Yeah, that’s a good intro to it all. It wouldn’t be a complete podcast, would it, if I didn’t slip in a quick mention about Microsoft. And on this whole issue of a business that’s up to a million, million pounds, whatever, it’s an interesting thing to note that quite often, internationally, globally, the most used platform for invoicing is Microsoft Excel.
When you’re a one man band, it works fine. I appreciate that there’s a big trend these days to people using online platforms because it will deal with their taxation, etc. But still, Excel is the thing for a small business up to up to 1 million. And what we’re talking about is when you get to pass that point, how do you get to 3 million? You’re probably not going to do it using Excel as a platform for invoicing. Probably going to have to create some form of structure around staff and reporting. You’re going to need a whole bunch of other things that help you run your business better. And a thing that sticks in my mind around that kind of transition size with businesses we’ve seen is that with the under one million pound business, if a customer phones up, everyone knows who it is. They know who it is and they can immediately just deal with it. You get into the one to three million, especially towards the three million end, and multiple people could be taking the phone call from a customer they’ve not seen before or heard from before. And that ability to pick up and give the customer a streamlined experience can only be achieved by introducing probably a simple but a CRM system to help you do that.
Yeah, exactly. And it needs to be robust. Whereas with an Excel spreadsheet, as you say, everyone can, you know, if you’ve only got a low volume of customers or information and you, you know, you’ve got a lot of corporate memory, if you’ve got up to 10 people in the business, which is your rule of thumb for a million pounds or, or a million in revenue, everyone can just go, you know, look over the other desk or or a quick Teams chat or whatever platform you’re using now with lot of people working away from the office. What’s going on? Where are we up to with company XYZ?
Once you get a bit beyond that, you can’t just look over the desk or just quickly ping one or two people because the chances are that the person you need is not available. So we need those robust systems and partly because of the volume and the accuracy and you’ve got greater, more people involved now, you’ve got greater chance of error. So you need also some systems and training rather than just looking over at someone’s shoulder. So we’re talking about that business that’s gone from 300 to one mil, the businesses that go on the next step of the ladder after one mil are the ones who, where they’re moving up to the one mil, they actually built a management team in place and were developing the next layer and probably built some sort of functional structure where they’ve got a finance expert and a marketing expert and a marketing and sales expert and probably, I guess, an operations expert as well with a view to the owner extracting themselves out of any functional responsibility. And the only way they can do that is make sure they’ve got the systems and platforms and processes in place and everyone knowing how to use them and when to use them and using them consistently and reliably is the way to do that. Now there’s other things, we’ve got our systems and platforms and we’ve probably reviewed our pricing.
But we also need to start looking at what are our management platforms, our marketing platforms rather. What are we known for in the marketplace? Have we started to build our marketing machine as a piece of infrastructure or are we just doing a bit of spray and pray with our marketing? we just throwing messages out to the marketplace with whatever the latest fad or idea comes to mind and we just have a go at that?
Is it a structured marketing machine that we can delegate and train someone to use? Or are we just having a bit of a spray and pray?
The interesting point here is that the thought process of business owners, when they’re getting to these stages where changes could or should be happening, it’s not immediately obvious to people, you we managed okay last week, we’re going to manage this week, and those incremental pressures in the business are being absorbed somehow. And the inefficiency of using or not having a system or having inadequate systems and structures in place, the pain of it doesn’t really come to the fore. And when businesses are advised to invest money in structure, processes, platforms, etc., it initially just sounds like a cost.
Why would I do that? My margin’s gonna reduce, my margin’s tight already. Well, the reality is you’re not gonna triple the business without sorting these things out. You don’t have to do them all in the same half year or quarter or whatever, but there has to be a plan to do it because when the business triples, if you’ve done nothing about it, there’ll be so much chaos. There’ll be so much customer dissatisfaction and there’ll be so much inefficiency going on that your business becomes uncompetitive. So there has to be a plan to grow to be the business you want to be, not manage to stay the same like you are.
Yeah. And one of the big ones there is that as the owner, you won’t be as close to the, the coal face as you once were. And there’s a chance that there’s a lot of rework happening. There’s mistakes being made. Everyone’s doing it differently. So there’s a lot of time wasted trying to find the information because everyone’s put the information in a different space or a place. And just, you know, mistakes because of human error or a lack of understanding because you do it your way and someone else does it another way. So it has to be reworked. And that just, as you say, takes time and it’s inefficient and it actually adds more costs. But this time it’s invisible cost. It’s easy to see the cost of well, if I have to implement or invest in an HR platform or a workflow platform or an information systems platform, I can see that cost. But I’m not seeing the stress cost or extra hours cost or working late cost of people who you’ve got a fixed cost in the business.
Yeah, and the business owner, which is this is a positive statement, they love to be in control. And that’s really easy up to 1 million with nine or 10 people, dead easy to be in control. If you don’t make these changes on the one to 3 million pound phase, you actually lose control because there is no control in place because you’re not talking directly to the people doing the work, etc. And so the way a business owner stays in control is having a CRM system that can be interrogated. How many, what’s the pipeline looking like? What have our customers been doing? Who have been talking to the most and who’ve been talking to the least and why? And it gives that business owner the ability to quickly analyse the good and the bad of what’s going on to make, to build on the good and to mitigate the bad things that are happening. And the same with an accounting system that does a better job for you. It allows you to stay in control by very quickly working out product profitability, channel profitability, whatever. That was dead easy when it was one man band, you just knew it. When you’ve got other people executing for you, you need those tools in place to help your team do a better job and for you to stay in control and grow. And the ultimate thing that makes the money is actually helps customers have a better time with you.
Yeah, and yeah, they just have a better experience and enjoy working with you and you’re dead right there. And as you’re speaking, Kevin, one of the things that came to mind is, you know, entrepreneurial businesses love to feel in control. They love to also sometimes, you know, the ones that get stuck, you know, want to make sure that everything’s happening the way they would do it themselves. They like to, you know, they’ve got a preferred way of things happening. So when they delegate, they’d like to have a sense of, here’s how I do it. How do I know that people are doing things the way I would do it? And the best way is to have some sort of monitoring system in place, you know, so that they can keep their finger on the pulse of what’s happening without having to get involved and interfere and get in the way and disrupt the operations of people. And what that can lead to is them feeling untrusted or, you know, just yeah, it affects the efficiency when the owner is getting involved and interfering all the time. So we need some sort of monitoring dashboard or feedback system that shows them how things are happening and that things are happening the way they hope they’d happen. So that’s the right combination of lead and lag indicators, isn’t it really?
It is and the by using these tools and the new structures in a in an informed way, it helps prevent helps prevent disasters, it helps your business be compliant, it helps you work to probably the standards of your industry that are requirements ISO levels, whatever they might be. And that becomes more and more important as your business grows. And the impact of getting things wrong becomes more and more expensive. It’s dead easy to fix if you if you’re a one man band, and something goes a little bit wrong, you can fix it with a quick conversation with a client. If things are going systemically wrong, and you don’t notice it because of poor procedures, the end result of it can be so costly, it can be the downfall of the business.
Yeah. Now growing from one to three mil is fantastic because it’s getting that stage where you’ve appointed a management team and embedding them in and you’re getting really comfortable with having delegated processes and getting off the tools yourself away from the cold face and spending more time on strategy and looking forward in the business. But there are some, I guess, warnings.
If you’re going from one to three mil, you’re sort of in that no man’s land. You’re kind of in the middle. You’ve got a bit of a management team in place. You’ve invested in that infrastructure. But the problem is that I’m alluding to is at that one to three mil phase, you’re really not in a position to take full advantage to leverage that structure of having some managers in place. They really are like helpers. But if you’re going to go to and continue to grow from that one to three mil, you really want to have your eye on that next phase as well, that 10 mil, because once you get to 10 mil, then you’ve really got a leadership team in place. You’ve got a full leadership team that typically the difference being is that you’ve appointed or recruited directly into your business, a specific leader with the skills and experience that you’re looking for rather than just promoting someone up who’s just grown and got their experience within your business. So you’re attracting professional expertise and management. And that’s the difference between when you go from one to three and then three to 10 is that you’ve also got a wider management team. You’ve now got a full management team in place where you got that full leadership team, probably is better language, that have the experience to drive the business because they’ve done it elsewhere. And they can build on the momentum that you’ve started. now you’re in that stage where you’ve got a professional management team, you’ve got a lot more robust systems and you can really take your hand off and focus on the next phase of the business.
That’s a good point. And the thing is there, if you’re starting to appoint people from outside to join your team, which is frankly essential for growth at some point, and we’ve dealt with companies where pretty much the entire sales and marketing team have only ever worked for that one employer. So the breadth of knowledge and understanding and fleet of behaviors you need in the marketplace are very limited.
So if you want to get those new people in that new blood with other people’s experience that you can capitalise on, if you don’t have the CRM system, if you don’t have the right structure and the processes and the monitoring and reporting in place, many people won’t join your business. They’ll think this is amateur hour. If I can’t do that, if they haven’t invested in that, where’s this business going? And if it is in place, it reduces the risk for talent joining your business if they can see it’s been professionally set up. If there’s a framework that they can flourish within and there’s an understanding about how things should get done, it makes it a great business to work in for people.
Yeah, you’ve just reminded me there, Kevin, that even the most self-reliant, focused, experienced, capable leaders that you bring into the business, they still crave good leadership. They want to know the framework. They want to know the guide rails that they’ve got to operate within. They’ve got to go, what are the parameters that I’ve got to work with that I can take this business forward? What’s the span of my control, my leadership, my authority that I can work within?
They’re craving good leadership as well. So you raise a really important point there. As the founder of a business, you’ve really got to step up your leadership skills if you’re going to attract those right key people to come into your business and help you take it to the next level. You’ve got to continue to learn and develop your own skills because otherwise people, you’ll bring these people in, but they just won’t last. They’ll move on because they don’t feel respected. They don’t have the authority.
But once you’ve built that leadership team that are true and aligned and they’re aligned to the culture and the vision and the purpose and they understand the direction of the business, then you’re in a position where you can start thinking about acquisitions and you know that you can bring in some other, you know, can acquire businesses and integrate them into yours knowing that you’ve got a strong culture in place, knowing that everyone’s clear on the roles and the span of what they’re trying to achieve. And they can integrate that new business a lot cleaner and a lot smoother than they would otherwise if you don’t have a strong aligned culture and everyone working towards that.
The thing is, growing a business is optional. You don’t have to, can plateau, you can contract. that’s fine contracting, if that’s what you wanna do. But if you want to grow your business, it’s a positive choice you have to make. You have to say, yes, I’m gonna grow. And one of the things that some people listening to us talking today may be thinking, yeah, Darryl and Kevin, all the things they’re talking about are more costs.
Yeah, that’s a good point.
Yes, it’s a fact. As businesses grow in general terms, their margin reduces. It’s just a fact. Now the secret here is to not get emotionally hooked just on the margin, which is driven by the costs in this case, because we’re talking about adding costs into systems, into doing business. It’s taking a complete view. We’re going to triple our revenue and the margin is going to come down a fraction.
So actually the absolute amount of profit that the shareholders make goes up substantially. And yes, of course, we’ve got to always keep our eyes on cost, but the costs we’re talking about are allowing the business to grow, to triple. And the same thing for the next tripling and so on. That the margin will slightly eradicate and the cost should be seen as a requirement as an investment even to get to that next stage. You can’t do it without improving these things.
Yeah, it’s why I raised the point earlier about going, if you’re going to move from one to three, one mil is a fairly profitable business, inflection point size of business. You’ve got some leadership teams in place. You can delegate. You can get some time out of the business. The business isn’t sucking you in every hour, every spare hour of the day. You’ve got a leadership team in place that you can delegate to and they’re quite capable and they’ve got some functional responsibilities. And you can plateau there. And that’s a, if you make a conscious plateau at about a mil, no problem. That works because you’ve still got a bit of a span of control. Once you start getting to three mil though, and that’s the no man’s land, please. And, but by the time you get to 10 mil, then you’re at another point in the business where it’s quite profitable again. Three mil is as you touch on that, that, gap between what I’m calling no man’s land between one and 10, you know, really in broad parameters is you’ll still be profitable, but they’re not the highest profit points that you can be. And if you go through that and you go, well, if I’m going to scale between one, then I want to commit to going all the way through to 10 and doing it as fast as I can and getting as clear as I can on what I have to do to get from one to 10 and you’ll know the journey you’re going to go on. And look, it’ll still be full of bumps and potholes and what have you. But at least if you know where you’re going, you can eliminate or reduce the impact of some of the issues that you’re going to have or some of the pains, shall we say.
Yeah, and emotionally, what would you rather have the 5 % EBIT on 3 million turnover or 4 % on 10 million turnover? That’s for those that are blunt around numbers. That’s sort of thing we’re talking about.
Yeah. Yeah. So what are we taking out of today’s? If you’re going to grow this, what’s the secret is that you need to, if you want to keep growing and scaling your business from one phase to the next, those phases roughly align and correlate to one, three, 10 as a formula. Every time you triple your revenue, you triple the size of your business. You need to rebuild and reinvest in your platforms and infrastructure that will support your business. These are like the foundations of your business and you need a new set of foundations to support the next phase of growth. And there’s the formula if you want to keep taking your business to the next level. We’ve done a whole lot of research in this and we’ve analyzed what are the areas that you need to focus on for each of the phases. What are some of the platforms you need to invest in? What are the strategies? What’s the experience the owners are going through? What are they feeling and experiencing? What are some of the staff issues and the structural issues that you need to address? we’ve put together some research on this. If you’re interested to find out more, the best thing is we haven’t published this research yet. But if you want to find out more, look, just ping us an email and get in contact through the podcast and we can make a copy available to you.
I think we should call it a comprehensive white paper.
I think we should finish it off and build it into a comprehensive white paper. Absolutely, Kevin. So nothing like a bit of pressure to get that done.
Well done.
Alrighty, I think that’s it for today. Any final thoughts from you, Kevin?
I think the only thing I’d end up by saying here is that if you want to keep your business level just fine, do what you’re doing. If you want to go up those rungs of the ladder, you have to work at it. And we can talk to people about the tools and the systems to do that. Just ping us a message, we’ll talk about it, we’ll share our draft white paper with anyone that asks for it.
Yeah, sounds good. And if you want to get some first information, I guess the first thing to do is to find out, hey, if you’re planning to sell your business, if you’re hoping that one day you will sell your business, then check out the business sellability score. We’ll put a link to that in the notes as well.
Excellent.
Thanks Kevin, we’ll see you next week.
Yep, thanks Darryl
About Kevin Harrington
Kevin Harrington- Succession Plus UK Partner
Having worked in technology, telecoms, consumer electronics, payments, media and publishing, Kevin has enjoyed an interesting career history that embraces product and services businesses at all stages of their journey.
Before joining Succession Plus he was CMO with The Panoply plc, a digitally native technology services company, founded in 2016, with the aim of identifying and acquiring best-of-breed specialist information technology and innovation consulting businesses. He joined The Panoply from Tungsten Network where he was Chief Commercial Officer.
Previous roles have included working with SMEs and large international businesses. Some highlights are Managing Director at the Emerging Payments Awards and the Prepaid Awards; Managing Director of Gx; Director of Sodexo Motivation Solutions; Global Marketing Director at BBC Worldwide; Product Group Marketing Manager with Sony UK.
His career started out in a completely different direction. His first two full-time roles were as a junior in an architect’s office and a civil engineering technician. Some of his drawings and designs were constructed and are still standing.
If you would like to learn more about how to start preparing your business, then you can get more information here: https://page.succession.plus/it-all-begins-with-insights-exit-insights
Get started by knowing how sellable your business is right now. Check out our Business Sellability Scorecard to find out.
