Scale Your Business, Leverage Yourself, Or Just Grow?: Kitces & Carl Ep 125
Nov 16, 2023
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In this episode, Michael Kitces and Carl Richards discuss the challenges and misconceptions of scaling a business, and the importance of leveraging systems and processes. They explore the possibility of scaling a business without hiring more staff, and highlight the success of large financial firms with a scalable business model. They also discuss the importance of advisors and generating revenue in a scalable business.
Scaling a business involves increasing revenue faster than headcount, requiring efficient use of resources to generate more output with less input.
Leveraging oneself in a service-based business entails prioritizing high-profit clients and delegating tasks effectively to maximize efficiency and income.
Deep dives
Differentiating between growing and scaling
The episode explores the difference between growing and scaling a business. Growing involves increasing headcount proportionally to revenue growth, while scaling involves increasing revenue faster than the increase in headcount. The hosts emphasize the misconception that scaling means not having to hire more staff, highlighting that scaling requires efficient use of resources to generate more output with less input.
Challenges in personal leverage
The hosts discuss the challenges associated with achieving personal leverage in a service-based business. They emphasize the need to remove oneself from the middle of everything and delegate tasks effectively. They also suggest the importance of hiring people to manage the growing team and investing in systems and processes that can handle the increased complexity that comes with scaling a business.
Leveraging oneself and maximizing efficiency
The episode highlights the concept of leveraging oneself by focusing on the top 20 to 30 clients who generate the highest revenue. By prioritizing these clients and not taking on lower-profit clients, advisors can maximize efficiency and income while reducing time spent on lower-value clients. This strategy allows advisors to leverage their time and efforts effectively.
Understanding growth, scaling, and personal leverage
The hosts emphasize that growth, scaling, and personal leverage are not synonymous. While growth involves increasing revenue and headcount simultaneously, scaling focuses on increasing revenue faster than headcount. Personal leverage, on the other hand, is about maximizing efficiency and income by focusing on high-value clients and delegating tasks effectively. They highlight the need for advisors to clarify their goals and understand the distinctions between these concepts to build a more successful and profitable business.