How to Avoid the Pitfalls of Growth: Scale Your Business Wall
Okay. Issues of scalability I call mo' money, mo' problems. Something that works super well when you're selling five things at a craft fair might not end up being systems that work really well when you need to make 100, or 1,000 of them. So what are some of these problems? (sighs) There's a lot of them. A lot of people get lulled into thinking, "If I could only just sell more, "my problems would be fixed." No they wouldn't. Typical growth problems are storage. Where are you going to store the hundreds of bolts of fabric you need to produce 1,000 thingies a month? Inventory and cash flow. If you have to order thousands at a time to get the price that you need, where are you gonna have that-- You know, are you gonna have that cash available? Dependence on regular labor. It's totally different if you have someone come over a couple hours a week just to help you out. If they don't make it, no biggie. Work a little late on Saturday. If you have multiple people helping you with production an...
d something happens, like a widget breaks, or a couple people don't show up because it's a holiday, you now have a really serious problem. Or if you have an employee who gets ill. Like if half of your workforce just went out, you have a major problem. Because you're reliant on that level of work now. Insurance and compliance issues. One thing that happens a lot. Maybe you dye yarn. Maybe you manufacturer some small thing and it's no biggie to do it in your sink when you're just starting. It's a whole different kettle of fish when you have employees in your house. You may have to comply with environmental regulations once you pass a certain threshold. And those are all things you have to worry about. A higher variability in orders. So let's say you place an ad to magazine, because now you're in the big time. You might get 1,000 orders tomorrow. And you have to be prepared to turn that around in a short amount of time, and that's a really big ask. This one, it doesn't look like a big deal. But you will lose your small business shine with your customers. When you're a small business and, "Oh my gosh. I'm so sorry. "This is gonna be a couple days late "because, like, I broke my ankle," or whatever. Most customers with small businesses are like, "I understand. It's fine." The bigger you grow, the more you become this anonymous giant monster behind this website curtain, and you've lost a little bit of that small biz shine. And people get cranky, really cranky. Another huge problem businesses face is a difficulty finding peers or relevant advice. So when you were starting you could go to a forum, be like, "Hey, what's the best beginner camera?" And someone would be like, "This one. It's not expensive." Well now if you're a top level photographer, how many people in the world are there that you can get real serious business advice from? And so these are just a couple of the typical growth problems. The biggest business-- Sorry. The biggest problem a lot of businesses run into is the bottleneck problem. So there's lots of different bottlenecks in business. And I'll be showing you all of the ones I ran into with mine. But one really key bottleneck a lot of us have is us. So us is the CEO, or the founder, or whatever. We create these businesses organized around us because it was just us for the longest time. And now no one can do anything because everyone has to come ask us for some help. We've become the bottleneck. So these are really important delegation issues. And all of the steps that we've talked about and gone through. Creating manuals, creating systems that you can hand off to people are really important ways to avoiding the bottleneck problem. And so even for those of you who aren't this far along in your business yet, I want you to always be thinking about this. Because you never want to get to the point where you're the only one who can fix everything in your business. Because there's not enough of you. There's really not. So I'm gonna talk to you more about the Kit Club. So remember this. I showed you this earlier. Gonna talk about streamlining, streamlining, streamlining. But then ultimately getting to the point where I knew this business model couldn't go any further. Because you gotta know when to hold them, know when to fold them. So this was me winding balls of yarn at my kitchen table. This is a hand winder. Let me demo it for you. So for every single one of these. I remember the first shipment was 120 packages. It took me 18 hours to get together. I remember it was a very, very, very long day. So to wind all of those balls of yarn. All right, so then the first shipment. I didn't have any way to print international postage. So I took it to my local postman. That's Steve. Hi Steve. And I spent 2.5 hours there. It's actually a record for the post office at that particular location. So then, no worries, I can fix it. I got a label printer. So the label printer, which I showed you-- I think I showed you photos of the software earlier. It was $300, which felt like so much money. And it costs $15.95 a month for the service. But now that I was shipping this amount, it was really worth it. Okay, done. And I bought stickers. Look how cute those stickers are. Everything is more beautiful. Those are some boxes in my house. I got the automatic ball winder. So this is a setup where it's a machine ball winder. So you just push the button start, and it goes. It also automatically meters. So I would type in I need 40 yards, go. And it would do it, and then stop at 40. So all I would do is cut it and take it off. This machinery was over $1,000, so it's not cheap stuff. But you saw what I was doing. You would have bought it too. I got to the point where I was buying yarn directly from the mill. A mill, if you don't know. Sheep have wool. Someone cuts it off. It turns into yarn. I bought it from a mill that dyed it-- They do all of the processing and dying. I was ordering such large quantities that they had to custom die the colors for me. They no longer had that many thousands of yards of orange, or whatever, in stock. So now, good news, I was buying it in cones. Like really big cones. I had to order six weeks in advance because that's the amount of time that the mill would need to take my order. They need to have enough white yarn on hand to dye. Make it for me. Ship it to me. So I was getting thousands of yards. I'd get like four giant boxes of yarn. One time, I remember this very keenly. My daughter was 2.5 months old. The yarn arrived 36 hours before my shipment was scheduled to go out. Because the mill was running behind. I and my husband took shifts. We wound it throughout the entire night to get it out the next day. I have no other choice about where to get yarn from because I was ordering such large quantities. What are you gonna do? That's my Forester. This is not a small vehicle. I got to the point where the empty boxes would no longer fit in my car. I used to live close enough to a ULINE to pick them up. The number of boxes I need to do a one month shipment would no longer fit in the car. So we're getting really big, really problematic. Along the way I got a new website. I started eliminating customer service questions. I put up new frequently asked questions. I'm not buying a new car. That's it. I draw the line somewhere. So then I moved to envelopes because envelopes are smaller. They would all fit in my car. People were a little cranky about the envelopes. But it also lowered the shipping costs, so they were a little less cranky once they figured out it was cheaper. I got to the point where I stopped advertising the club. So this is like red flag number one. I didn't want any more people to sign up because I didn't want any more boxes to do. There was loads of customer service time. This was becoming the life I did not want. Then I hit all these other bottlenecks. I could have hired someone to come in and wind yarn for me. I only had one ball winder set up. I could have bought another one. That's expensive. We talked about that. I only had one label printer. Okay, sure. Maybe I should have three label printers in my house. I didn't have insurance to have workers be in my home. So if someone is working on your premises it's super important to have, like, workman's comp-- Your homeowner's policy needs to cover working activities. I already didn't know where to-- Could hardly get the boxes to my house. So I could have them delivered. And then like, where am I keeping all these boxes? Where was I gonna get more yarn from? And then we talked about cost of holding inventory. Sure I could order months and months in advance, but then I have a few thousand dollars of yarn sitting in the corner of my room. So the business needed to change somehow, and was gonna cost money no matter what. So I thought about it and I said like, "This shipping stuff has to downscale." So what I did was I basically scrapped it and turned it into a digital club. So right now I run Ami Club, which is a digital subscription service. So what people were getting before was a pattern, crochet instructions, with the yarn and the eyes. What they get now is an exclusive pattern digitally every month. And they get a discount on eyes, and if they want the eyes they can order it themselves. And go find your own darn yarn. The system has completely changed in a way that's now scalable. I'll now advertise about this because I can handle 500 more. I can handle 1,000 more. 20,000 people want to sign up, rock on. Go ahead, tell 20,000 of your friends. It was a real growth problem. And all of the advice-- This sounds really obvious now. Back here, at envelope stage, all of the advice I got was hire someone to package the boxes. Everyone said all you need to do is hire someone to help you with the boxes. That's obviously the problem. And it's not always about hiring a person to help you do manual labor. So that was a bit of what I was trying to get at last time. If it's not working for your life, it's not always the case that growing bigger in this one dimension is going to solve your problem. I also added the functionality of forums. So another problem I was having was a customer interaction problem. So people would tag me on Instagram. People would be on Facebook. My Facebook group, it's like 580,000 people or something ridiculous. Then there's Ravelry, which is Facebook for knitters, we call it. All of my customers were just everywhere. And someone would come to me and be like, "Hi I want to crochet. "How do I show you what I made?" And I'd be like, well, you can sign up for this site, or tag me on this site, and it just felt very disconnected. So I created the forum on my site. So now the customer path is very clear. It's like, "Oh, join the club. Chat with us there." This is the one thing I tell people. And it's just made it all easier. I'm gonna talk an eensy about how I pitched it. Because at first you might think, "Oh. She got rid of her bestselling product. "Weren't the customers cranky?" You don't always have to be super up front about the rationale behind it. You don't have to say, "I can't grow any bigger, "and I'm tired of working this many hours, so..." What I did tell people is I can't fit any more boxes in my car. But now there's a new opportunity for us here. So this is a digital club. And in fact it was solving a customer problem. I had a lot of international customers, and the shipping prices kept going up to the point where some people, like in Australia, were paying more to have it shipped than the product. And that's silly. Like, that's ridiculous. Think of what you're solving for your customer. And I think, especially for me starting from the solopreneur root, you feel like you have to tell everyone everything, and you don't always. You can just say this is the new product I'm offering. I really hope you join me for that.