We recently covered a book summary of Scaling Up By Verne Harnish for YouExec.com. Below is our entire coverage on how to apply the principles of Scaling Up, to your business or the company that you manage. Enjoy and share your feedback! (For our shorter version of this summary, visit and join YouExec at www.youexec.com. For the audio of our version visit and subscribe to our You Tube Channel! For more information about Scaling Up, visit https://scalingup.com/.)
Every entrepreneur and business professional seeks the growth, expansion, and measureable results of their business. Desire is the fuel behind every plan. And the right tools and ideas, when implemented, will expedite results exponentially. A successful business is utilizing a strategic plan, that is run by an organized team, infused with cash, and led by a decisive leader. Success is based largely on systems. Scaling Up presents a strategic system that incorporates 4 Key Decisions that every business owner or the leading executive of a company, must make. The 4 Key Decisions are; The People In Place, The Strategy Implemented, The Execution Path, and The Cash. Each key decision, when understood and addressed with action, will accelerate the growth and expansion of any business.
Key Decision #1: The People In Place
No matter the size of a business, each employee has a purpose in their given role in the company. With that purpose comes accountability and the direct impact that drives or hinders results and ultimately, success. This makes this decision one of the most impactful and it poses the question: “Would you enthusiastically rehire this person?”. The right people in place are the face of your brand, the experience to your clients and customers, and those that take your goals from the frontlines to the finish line. Outlining the role of each staff member, their Key Performance Indicators, and the direct impact that they are making in the profit and loss, balance sheets, and cash flow for the financials of the business, takes not only a measureable look at who is best suited for their position in the company, but also creates a clear image of where changes can be made or how quickly expansion will be experienced.
Key Decision #1: Actions and Measures:
Understand the Personal Plans and Goals Held Individually. Outline your goals for the 5 F’s: Finance, Fitness, Friends, Family, and Faith. Scaling Up comes with a worksheet that allows this task to be projected for a 90 day, 1 year and 10-25 year time period for each category. When we are happy and successful within ourselves and our personal life, this is expressed as a better quality of life and better work-based decision making.
Use the Accountability Chart. Document company roles of each employee and the leading indicators for their function within the company. Assign lines of your Profit and Loss Sheet, Balance Sheets and Cash Flow documents to each role and state the expected results and success based on their performance.
The personal plan sheets, the accountability chart and the assignment of the operational processes of the business, are all about generating a documented representation of everyone’s contribution.
Key Decision #2: The Strategy Implemented
A strategy creates a rhythm that boasts both the ability to be measured and predicted. The correct strategies always have “growth” built in, by allowing lesser important variables to be changed so that expansion can evolve with the industry currents and climates, while still remaining focused on the goal. Observing the strengths, weaknesses, and trends of your industry, will allow swift changes so that the drive to the finish line continues onward, unhindered. But, it is even more advantageous to design a strategy based on the internal DNA of the company so that the answers are always from within. Scaling Up provides strategic planning tools to lead the goal to always be achieved.
Key Decision #2: Actions and Measures
Address the Drivers of the Brand’s Reputation. The employees, customers, and shareholders are the driving components of the strategy. They collectively showcase who works for the Brand, who the Brand works for, and who puts their money to work for the Brand. The goals of the Brand’s products and services revolve around the Drivers and how they are reached. Build the strategy to complement the actions of the Drivers.
Manage the Production Drivers. Operational systems that manage the Cost of Goods and Services, and the timeline of delivery are not only easier to implement, they produce a system for employee performance reviews, recognition, and rewards.
Outline the Vision of the Brand. It is impossible to miss a target that is clearly seen. Scaling Up provides the toolkit to not only establish the BHAG (Big Hairy Audacious Goal) of the company but the lenses and perimeters to keep it at the forefront of daily tasks and as a focal point on a daily basis, no matter how far projected its future realization.
The Strategic Plan is the oxygen for the company's core, mission, and goals.
Key Decision #3: The Execution Path
The Execution Path relies heavily on the leaders, the team, the managers in place, the strategy and the metrics patterns of the business. The business metrics slowly labor the instructions for the business and eventually the algorithms, that will establish and expand business growth. The Execution Path is the truth of the core values and identity of the business, put to work. Scaling Up presents the directives to create a system that leverages employee and organizational performance, enhancements, and expansion, simultaneously.
Key Decision #3: Actions and Measures
Who, What, Win! The Execution Path is tailored to address the performance of the employees to do their given tasks, when scheduled, to win at the intended result. By implementing The Rockefeller Habits Checklist, a focus is given to make sure that the team is at peak performance at all levels of operations. All employees are given the goal, the opportunity to express their voice, and a rhythmic system of accountability.
Record and Analyze the Data of the Frontlines. Employees share not only their own insights, obstacles and opportunities, but also the contribution from customers and clients that they’ve encountered while on the frontlines.
The Company Core is Established, Known and Nurtured. Every employee knows and understands the BHAG, core customers, the Company Mission, and the heart of the Brand. Key Performance Indicators are tracked and accountability is in place for executives and managers, through coaching.
Performance Visibility is Everywhere. The Company’s Performance Markers are clearly visible and plans are gauged for the alteration of priorities within the mission.
Metronomic Meeting Schedules. The meeting schedule is created to align and realign the internal focus of the organization and the employees. Its stability and continuity provides a “silent managing partner” for the business and an established hypnotic rhythm for the staff.
The Execution Path, when implemented, strengthens as the sinew, the actions of the people with the mission of the Company.
Key Decision #4: The Cash
Cash equals fluidity. Increasing cash flow is best addressed through the strategy of Cash Acceleration. Scaling Up presents Cash Acceleration Strategies by addressing multiple ways to amend the Cash Conversion Cycle (CCC) through the channels of sales, production, delivery, and billing and payments. Answering pertinent questions of the sales operation can significantly determine where adjustments will lead to increased cash flow. What tasks can be expedited without decreasing quality? How can efficiency be increased to eliminate and avoid costly mistakes? Can the framework stand an entire overhaul? It is through answering these questions, along with others, that the current channels of cash flow can be opened even wider before additional channels are created.
Key Decision #4: Actions and Measures
Knowledge. Profitability must be maximized beyond industry value. The Earnings Before Interest and Taxes (EBIT) determines profitability by the numbers. Revenue - Operating Expenses=" EBIT." Know the profitability, gross margin and revenue of all factors, locations, product lines and employees, then regularly observe these metrics.
Accountability. The lines of the financial data sheets of the business (Profit and Loss (P&L), Balance Sheet)must be assigned to employees and the results must be accounted for. Cash is fluid and the fluidity must be managed.
Projection. Have a visual framework constructed of the financial forecast for the next 12 to 18 months. Address and alter as needed on a monthly basis.
Reserves. A substantial , 3x-10x cash reserves of the industry standard, must be kept on hand.
Calculate the Power of 1%. Based on the net cash flow and EBIT of the business, take stock of how a 1% increase in price and volume would affect your cash. Next calculate how a 1% decrease in COGS (Cost of Goods and Services) and Overhead measures. Configure the impact of a 1% reduction in Debtor Days (The speed in which cash is collected from debtors.) and Stock Days (Inventory Management that prevents dated and unsellable stock.) would have. Lastly, determine how a 1% increase in Creditor Days (The speed in which you pay your debts.) would affect the fluidity of cash.
Noticing the impact that 1% has on cash flow and EBIT, will provide insight into the current perimeters that the Cash Conversion Cycle has in place. Cash flow increases when strategies are created and implemented.
Scaling Up addresses the importance of systems. The best strategic systems ensure the placement of the right people, prioritizes the importance of nailing results, provides visuals of the goals at all times, creates and provides the tools for productivity, growth and expansion, sustains a rhythm of accountability, open communication and financial management, and keeps cash in a constant state of fluidity. Scaling a business to the next level is more than simply growth and expansions. It is longevity and formulating equitable processes that an individual company will be able to measure and base results upon. Scaling Up gives the numerical components and organizational tools that will inaugurate the equations that ultimately become the algorithms that are written to expand and grow the business...every single time!