Yes, Virginia—You Can Scale a Service Business

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

An award-winning small business attorney in New York City, Nina is a sought-after professional speaker and Entrepreneur Magazine online contributor. She is the go-to counsel for knowledge economy and creative companies, delivering legal services and educational resources that save them time, money, and aggravation.

Posted on July 26, 2017 in All Systems Go!, Planning & Advisors

As seen in Enterprising Women Magazine As seen in Enterprising Women Magazine

Clever people and grocers weigh everything,” said Zorba the Greek.  So do service business owners when it comes to growing revenues.  “Do I want more?” they ask themselves. “Of course!  There’s the mortgage. The kids’ college fund. Mom’s medical expenses. And that bucket list trip to Tahiti!” Yet surely as the sun sets over Bora Bora, their smile droops when they consider the additional time it would require.

But does it have to?

I spoke with Aldonna Ambler, CMC, CSP, an award-winning growth strategist, multiple business owner, and host of a weekly peer-to-peer online talk show for CEOs/mid-size company Presidents at GrowthStrategistShow.com.  Ambler has been immersed in helping mid-sized service businesses scale for nearly three decades.

Why is Scale Important

Many women come to entrepreneurship for one reason: options. They want more attractive career options. Lifestyle options. Creativity options. Financial options.  However, they structure their business operations in a way that makes them the primary service delivery funnel. Or preferred customer service source.  Which means that the company can’t function without them.  In other words, it’s owner-dependent and can’t “scale.” Paradoxically, that curtails their options.

“You want the option to sell the business if you’re tired of it, or if there’s something else you want to do or it’s not making you enough money or other opportunities you want to jump into,” Ambler says.  “If you can’t dump the thing, if you can’t sell it for a reasonable profit, it ties your hands.  The fact that women are usually the primary caretakers for family is even more reason we need to be more ‘presidential’ in our thinking,” she adds.

Ambler knows this first-hand. She was thrust into caring for her husband of 36 years who developed terminal cancer.  For 6½ years, they endured the grueling process of bone marrow transplants, chemotherapy, radiation, hospitalizations. Not to mention $8 million worth of bills.  “If I hadn’t scaled my companies, I wouldn’t have a business now.  I would have lost the clients.  Most women business owners would have been forced into bankruptcy,” she relates.

Yes, Service Businesses Can Scale

A “scalable service” company is not an oxymoron, like George Carlin’s comedy routine about jumbo shrimp.  For many years, Ambler has vetted requests from investors interested in funding service businesses.  In the course of her consulting work, she says, “People from a number of different directions approached me with, ‘You see a lot of business plans.  I have a some money.  If you see a company that could use my money or advice, let me know.’  With all of these requests, I started to wonder if we should create our own fund.”

Ambler also understood the obstacles that service companies face in accessing capital.  “Banks shy away from service companies,” she laments.  “They don’t see the traditional sources of collateral.  There’s little (or no) inventory, tangible equipment, and the like. So they look to personal assets. They want to attach a house, for example. But service company owners may be uncomfortable with that … and even then, it may not enough for the money they need.”  That formed the impetus for starting The Service Industry Fund, which launched in 1997.

It’s not only investors that look for scale in a small business.  Corporate-level clients seek the same elements and expect consistency.

How to Get Scale in a Service Business

A “scaled” business has five elements: recurring revenue, a core process/methodology, resilience (defined as not being dependent on a few top people), sustained profitability, and clear standards for training and quality assurance.  Ambler offers the following suggestions to help get your service business “on the scale”:

  • Be presidential. Get out of service delivery and uplevel to strategy. Yes, this requires different skills sets, like understanding financial statements. But hey, if you got this far in a successful career, you’re smart enough to learn this too.  For example, the AMA has excellent seminars on accounting for non-accountants.
  • Build a team.  Develop “bench strength.” Give people incentives to step up and take on greater responsibility. Consider sharing the risk with high performers who have long-term potential. (They could also become future buyers for your business.)
  • Protect your systems and intellectual property. This can give you leverage when it comes to licensing or “private-labeling” content.
  • Recurring revenue.  Have contracts that repeat and recur (like IT maintenance agreements) rather than earning project by project.
  • Productize your service. If your business has an education or training component, consider creating teleseminars or webinars to deliver the information.

Women are 5 times as likely to dissolve their companies … largely because, as Ambler says, “we wait until we’re so worn out that we don’t have the energy to create value.”  So rather than letting the prospect of working harder (and longer) weigh you down, think about working smarter, and put your business “on the scale”!

 

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