This image is symbolic of the questions surrounding how to scale a service business. It is a picture of a keyboard. The "Enter" key is red rather than grey and reads "Scale" rather than "Enter". Sitting atop the Scale key is a small, ornate bronze key. Part 2 of 2 is written in the lower right corner.

How to Scale a Service Business (Part 2 of 2)

Dave Labowitz Scale

Welcome to part two of a two-part article on scaling your service business! This part focuses on when and how to scale.  If you missed the first part, click here to start at the beginning. The first part addresses the what, why, and who of scaling your service business. 

When is it time to focus on scaling your service business?

As I mentioned in part one of this article, if you haven’t yet figured out how to scale your service business you’re probably struggling with revenue growth-induced stress. Without the proper strategies and tactics, revenue growth is like blowing air into a balloon. As it gets fuller and fuller, tension and stress increase. If the balloon inflates too far, bang! It pops. I know what you’re thinking: revenue growth is good news! Why is my business struggling so much when I’ve solved the hardest part? 

Here’s the thing: you’re right in that lack of revenue is the number one business killer. What you may not realize, though, is that too much revenue is the number two killer of businesses! Booking more business than you can handle can result in a shockingly rapid breakdown of your business operations. In a service business, you and your team are the ones doing the work and delivering value to your customers. If your revenue grows faster than your team’s ability to do the work, your team is absorbing astronomical amounts of stress. In short sprints, this may be ok but if you don’t figure out how to give your team more support quickly they’ll burn out or quit or both. 

In a perfect world, you built your business with scalability in mind from the beginning so your operations grow in time with your revenue. Unfortunately, most service businesses weren’t designed this way, so the implementation of scalability initiatives happens once things have already begun to break down. The sooner you recognize the symptoms of a scalability issue, the sooner you can get them addressed. The symptoms can be somewhat different between solopreneurs and small enterprises. Here’s what to watch out for:

    1. You’re completely maxed out. It feels like you’re working 60+ hours a week but are getting less and less done. You desperately want to be earning more money but can’t figure out how to squeeze new business into your schedule. 
    2. You are too scared to hire anyone or can’t figure out who to hire. You know you need help but feel like the only hire that makes sense would need to be a clone of yourself. 
    3. You’re spending too much time out of your zone of genius. Instead of delivering the service you’re good at, the one you started the business to deliver, you’re stuck spending your time on low value yet necessary tasks, like admin work.
Small enterprises
    1. Your key team members are overloaded with work. They’re working crazy hours and still falling behind. There’s an overall sense of being pummeled all day long every day.
    2. Customer complaints are increasing. You know these problems are easily solvable but somehow can’t figure out how to make them go away. It’s partially a training issue, partially an attention-to-detail issue, and partially the team being overloaded.
    3. Your turnover is up and you’re having a harder and harder time hiring the “right” people. Your job descriptions are complex and each hire is like finding a needle in a haystack.
    4. Despite how crazy things are, some team members seem not to be busy at all. Why isn’t everyone working hard?

If you recognize any of the above symptoms in your business, you have a scalability problem. 

How to scale a service business

Scaling your service business is challenging but it’s far from impossible. The first step is shifting your mindset from working in your business to working on your business. So what’s the difference? 

When you’re a slave to the day-to-day you’re working in your business and this makes it virtually impossible to scale. Your business may grow a bit, but by nature, you’ll be grinding rather than planning. If you spend all your time fighting fires and working on tasks that don’t move your business forward in a meaningful way you are working in your business.

However, when you take a step back, look at the big picture, and think strategically, you’re working on your business. Achieving scalability takes strategy and planning, not just hard work. I’m sure you’ve heard the saying, “It’s better to work smart than to work hard.” Working on your business means working smart. Here are some strategies to keep in mind to make sure you’re being mindful as you scale.

Customer and sales strategies for scaling your service business

Signing and delighting an increasing number of customers is obviously the key goal of scaling any service business. But as you grow, it can become increasingly difficult to continue delighting the deluge of new customers. 

Make sure your process and deliverables are clearly defined

It is critical to set the right expectations with your customers at the beginning of a project. Contrary to how it may feel, your customers don’t expect you to deliver the sun, the moon, and the stars. That is unless you tell them that’s what you’re going to deliver! Most people simply expect you to deliver what you tell them you’ll deliver in the way you tell them you’ll deliver it. In contrast, if you over-promise and under-deliver, you’ve guaranteed your customer will be disappointed. More often than not, mismatching expectations come from poor communication. If you go out of your way to be clear at the beginning you’ll set your entire project up for success. 

When things change, be prompt and honest

Despite what I just said in the previous point, the reality is that shit happens. Complexities arise, deadlines push, and scope creeps. Sadly, great communication at the outset still doesn’t make you omniscient. No matter how hard you try, you’ll miss deadlines. The key to keeping your customers happy is to tell them promptly what is going on. Be honest. Sure, they may be disappointed, but they’ll be a hell of a lot more disappointed if you don’t tell them until the last minute. 

Make sure there’s a feedback loop

Getting paid doesn’t mean you had a successful project. Having a delighted customer does. Don’t miss out on the opportunity to get some feedback from your customers! Ideally, you’ll want to check in with them regularly during your project and again at the end. If you’re in touch with them all the way through your project, great. Still, check in with them at the end! A great way to do this is to run a Net Promoter Score survey (Bain is credited with inventing the NPS survey)

Productize your service offerings as much as possible

It’s difficult to scale your business when every job is completely custom. Something like writing a custom, detailed proposal may seem simple but can be tremendously time-consuming if you’re doing it for every prospect. Remember, too, that you won’t close all your prospects.  Any time you spend writing proposals for deals you don’t win is a total loss. 

Additionally, custom work can lead to miscommunication with your customers. Most disappointed customers I’ve encountered in my career became that way because they were expecting something they didn’t get. These expectation mismatches can cause huge scope creep due to simple misunderstandings during the sales process and lack of detail in proposals.

Productizing your service means to package, market, and sell things in a standardized manner. For example, if you do custom web design you can still sell small, medium, and large packages with clearly defined components. If you’re repeatedly asked for services outside these packages, create add on packages. Here’s an example so you can better understand what I’m talking about:

Sample Menu of Services – Web Design Business
      • Small ($1,000) – 6 pages or less, contact form, implementation on Wix or Squarespace.
      • Medium ($2,000) – 12 pages or less, everything in the Small package, lead capture header bar and pop-ups, blog configuration, implementation on WordPress using a premium theme.
      • Large ($5,000) – 20 page or less, everything in the Medium package, implementation on WordPress including custom theme development, custom database implementation.
      • Web Server Management Add-on ($100/month) – Monthly server review, update, and backup, 24/7 tech support, 99.99% uptime SLA.
      • Custom logo design Add-on ($300) – Three draft sketches, 2 revisions of the chosen draft, delivery of vector image in .svg and .eps formats.

In this example, you can see it’s easy to put together a mostly templatized proposal with just a few adjustments and customizations for each customer. This way the vast majority of the details are pre-built into the template so you won’t miss them. You also won’t be stuck constantly sending proposals to your development team to ask for their pricing estimates as your pricing will have already been optimized. Productization will save you time, increase your accuracy, and refine your pricing, all during the proposal process.

Team strategies for scaling your service business

Scaling your service business normally means hiring more and more team members. If there are any inefficiencies in your job roles they’ll be magnified by the number of people you hire. Thus, taking a strategic approach to team building is mandatory.

Split roles by skill set

One of the side-effects of organic growth is that you’ll probably end up dropping all sorts of new responsibilities on your best team members. It’s natural. However, after some time passes, you may end up with a project manager who also does technical support and web design. That may be okay for that one unique person who happens to have three completely unrelated skill sets. But it’s virtually impossible to go find a new team member, or worse, four new team members, with that combination of skill sets.

If you want to scale, you need to create roles that have focused, well-related skill sets. Otherwise, you’ll be hunting unicorns each time you hire. It’s a good idea to review your org chart and the roles that have evolved periodically. You may need to trade responsibilities into different roles so that you’re hiring for roles with coherent skill sets. This will make finding qualified applicants far easier. 

Create career progressions

It’s important for most people to have a clearly fined career path and it’s not always clear how to create one for them. Fortunately, most job roles on your service teams end up having different team members with widely varying ranges of skills and experience. In this case, think about splitting roles into multiple levels. Junior and Senior work, as do Level 1, Level 2, Level 3, etc. The goal is to create a progression so your team members have something to work toward other than just a raise. The more clearly you define the definition of success in each role, the quicker your team members will learn the skills necessary to move to the next level.

Additionally, by segmenting skills and responsibilities into different levels, you’ll have a much easier time hiring entry level team members as the required skills and abilities for the junior-most position will be more narrow. It will also be easier to give relevant performance reviews as you’ll be able to benchmark Level 1s against other similarly skilled Level 1s, as opposed to against a much wider range of skills that occur without levels.

Formalize training

In order to make leveling work, it’s critical that you give your team members adequate support and training so they can earn their promotions. Consider creating a trainer role of some sort for one of your most skilled team members. In the beginning, this person will have the responsibility of training team members on new skills and serving as support when they have questions. 

Over time, however, this role should focus less and less on ad hoc one-on-one training and more on developing training programs that ensure a smooth and consistent educational experience for team members at various levels. These programs should include a clear curriculum, videos and screen shares, reference materials like scripts and step-by-step instructions, and some form of evaluations to gauge progress.

Stamp out single points of failure

One of the scariest drawbacks of having lots of unique job roles on your team is that if you lose one of those team members it can leave your company crippled. Sometimes it can be even worse: you can end up with a troublesome team member who is too valuable to fire. This scenario can be an absolute disaster for your culture. The problem team member’s behavior will chip away at morale while your other team members lose trust in your leadership because you’re not addressing it adequately. 

There are a few ways to avoid this. First, if you have the budget, work on cross-training wherever you see a single point of failure. That way if you lose or have to replace someone there’s always another team member to pick up the slack and help train a replacement. 

Unfortunately, there are some skill sets and responsibilities for which it will be too expensive to create redundancy. In these cases, focus instead on having these team members create as much documentation as possible. That way if they suddenly disappear there will at least be a trail of breadcrumbs for the next person to follow. Good ideas for documentation are:

1. Standard operating procedures (SOPs)

Clear explanations of workflows, with step-by-step instructions or flow charts, will help anyone learn. Just make sure the team member in question keeps them up to date when things change.

2. Save sample/template deliverables

If the role produces deliverables which look similar each time, have them save some samples. Knowing what the end target should look like is a great help for a new team member.

3. Proper file storage

This one is easy to overlook but critical to get right. You can have all the SOPs and sample deliverables in the world but if they’re on a laptop that goes missing they’re of absolutely no help. Make sure these files are on network storage of some sort. If you’re of sufficient size that you have your own file servers, ensure that each team member has their own space, access, and training on how to work from network locations rather than their local drives. If you’re a bit smaller setup Dropbox, Google Drive, OneDrive or some other sync/backup software so that files get duplicated and synced to a location you control. 

As a recent example, a company in which I was an executive was acquired by another company a few years ago. As part of the deal, the acquiring company escrowed some of the purchase money until an extended diligence period was complete. It turned out some of the records for software licenses had gone missing and they were attempting to bill back almost $1 million because of the “oversight”. 

Fortunately, I had been allowed to keep my laptop when I left and still had the files… which I had failed to leave copies of on network storage. It’s a little embarrassing, as I was the senior operations executive and had failed to follow my own rules. But at least I had the files when they needed them! But what if that hard drive had died? Here’s the moral: watch everyone, especially your non-redundant executives who have an annoying tendency to do things their way (guilty as charged)!

Establish KPIs (Key Performance Indicators) and metrics

As your service team scales, it gets harder and harder to keep track of who’s doing a great job and who isn’t. You may have a gut feeling but it can be shockingly inaccurate. Some very popular, highly competent team members fail to produce adequate work while some quiet, “head down” types churn out amazing volume and quality. The only way to see the true picture is to use KPIs and metrics. For more on how to leverage KPIs, feel free to check out this article.

Cliff Notes Summary

Scaling a service business is clearly a complicated job and no article on this broad a topic is truly comprehensive! Nevertheless, we covered a fair amount of ground so here is an abbreviated summary to help you more easily capture the take-aways.

  • Customer and sales strategies
    • Make sure your process and deliverables are clearly defined
    • When things change, be prompt and honest
    • Make sure there’s a feedback loop
    • Productize your service offering as much as possible
  • Team strategies
    • Split roles by skill set
    • Create career progressions
    • Formalize training
    • Stamp out single points of failure
    • Establish KPIs

If you want your company to be wildly successful, figuring out how to scale gracefully is mandatory. Otherwise, the best you can hope for is survival with high stress and long hours. If your business is starting to show symptoms of one or more scalability problems, let’s talk. The best time to address scalability is yesterday. The next best time is now! I’d love to help. Click below to send me a note.