This is the first installment of a free, 3-part evidence-based course first published as an email course that reveals the 3 critical factors in scaling a service-based business from 6 to 7 figures in revenue. To learn more about why we created this course, click here.
You will learn:
– WHY service based businesses are so difficult to scale;
– The first and most critical step you need to take to scale your service business
– How to reduce complexity in your business
– Why you don’t need to “ dumb down” your work in order to scale
– Why conventional scaling advice can under-serve women entrepreneurs.
Module 1: The Critical First Step
The first and most critical step in scaling your service-based business from 6 to 7 figures is to dramatically reduce the amount of time you personally spend in service delivery.
Until you reduce the amount of time you spend in service delivery, you will not have the capacity to lead and sustainably scale your company to 7 figures. Period.
The Early Stage “Dollars for Hours” Model
Most early-stage service-based businesses are built around the founder’s ability to personal ability to deliver the service.
You provide a service that takes time. You are paid for that service. This is what we call a “dollars for hours” model
You can grow by charging more – which we encourage! And another common way to grow is to spend even more time deliver more of your services.
Thus, under this model, more money = more of your time. At this stage of your business journey, you are likely be booked solid with little space or time to think strategically. You are stuck and overwhelmed.
The Delivery Trap
At Safi Media, we coined a term for what this experience: The Delivery Trap. Common for early-stage service businesses, the Delivery Trap happens when the founder is so busy delivering the service that she has no space or time to grow her company.
Think about it: your entire business model is built around your personal ability to SUPPLY TIME TO SUPPLY THE SERVICE.
You become so busy SUPPLYING TIME TO SUPPLY THE SERVICE (leadership coaching, change management consulting, structural engineering, architectural designs, content marketing strategy, HR policies etc.) that there is no space left to SUPPLY TIME to develop a growth strategy, building and leading a team, forging high impact relationships, or growing yourself as a leader.
So, your business growth stalls.
Signs You Are Caught in The Delivery Trap
Most service providers can “grit it out” and cope with the Delivery Trap for a few years. But if you don’t dramatically reduce your time spent delivering the service, things won’t change on their own. We have found that a woman founder will remain in The Delivery Trap for anywhere from 1 to 10 years or longer unless she makes the shifts we recommend in this course.
Without these shifts, you will begin to experience one or more of the following:
– Your relationships suffer because you don’t have time for them
– Your income plateaus
– Your wellbeing suffers
– The work you once loved loses its lustre
– Quality and consistency plummet
– You get overwhelmed and start dropping balls
– Your reputation takes a hit
– You want to quit your business
– You are procrastinating on seizing business opportunities because you just don’t have the bandwidth to pursue them
If you are experiencing ANY of these symptoms, then it’s time to begin cutting back on your time spent in service delivery so you can grow your company.
This brings us to the next question…how? HOW do you cut back on service delivery so you can grow your income, impact and freedom?
Why Traditional “Scaling” Solutions Don’t Work for Women-Founded Service-Based Businesses
This is where a lot of well-intended business advice – anchored in manufacturing and technology industries where women founders are largely absent – will be massively unhelpful. This advice generally falls into 3 misguided categories.
· You just need to clone yourself by hiring people who do what YOU do!
· You just need better systems!
· The biggest thing holding you back is “access to capital!” You just need an investor or a big bank loan!
While there are specific circumstances in which the above advice is helpful, it is NOT helpful for women founders looking to scale from 6 to 7 figures in a service business.
Alas, a good tool applied to the wrong problem is the wrong tool. To understand why these common but misguided solutions don’t work, keep reading.
Why It’s So Challenging to Reduce Your Time in Service Delivery: The Complexity Trap
As a service provider under half a million in revenue, complexity creeps into your business in each of the following 4 places:
1. Scoping the work, pricing and crafting proposals
2. Doing the work
- Actual delivery of service
- Communication with the team
3. Managing the client relationship
4. Task switching between the 3 components of service work AND multiple clients.
Items 1-3 become geometrically more complex as you take on more challenging service-based projects (which is what service based businesses tend to do as they become more experienced and well known!)
But Item 4 creates EXPONENTIALLY MORE COMPLEXITY as you take on more and different projects for more and different clients. Research published in The Journal of Cognitive Science found that task switching cuts down personal productivity by 40%. And the more you introduce task switching, the more it costs you.
If you are working on Project A, and then switch to Project B for 15 minutes, it will take you a full 15 minutes AFTER you switch back to Project A to recover the same level of focus.
If you then switch from Project A to work on Project C for another 15 minutes, it will take you a full 30 minutes again to recover the same level of focus. Two task switches for 30 minutes of work resulted in an EXTRA 45 minutes of unfocused, unproductive time. You spend more time recovering focus then actually focusing. This is the silent but heavy cost of not focusing on ONE THING.
Let’s walk through an example.
Entrepreneur A works on 3 consecutive projects in a single week – a simple project, an advanced project, and a complex project. Each of these different types of projects is for a different type of client. The “slightly different projects for slightly different clients” are a VERY common mix for a service-based firm. If you run a service business, you likely work this way yourself.
Let’s take a look at how this business model impacts both complexity as well as revenue.
The table below breaks down the workweek of Entrepreneur A. It captures what work she’s doing, how much money it brings in and how much complexity is involved in BOTH the work itself, AND the amount of task switching required.
We’ll assign a “complexity score” to each working element in the following table. A complexity score of 1 means: a smart, competent person could complete this task.
A complexity score of 5 means: you need to be an experienced professional to do this task.
We will assign one “complexity point” per “task switching” unit each time Entrepreneur A switches between a type of work, i.e., from pricing to service delivery.
Because task switching becomes more onerous the more you do it, we will double the points assigned to task switching, from one TYPE of project to the next (i.e., task switching from one simple project to another simple project “costs” 1 point. Task switching between a simple project and a complex project “costs” 2 points, and so on.
As you’ll see in the table below, Entrepreneur A’s complexity level score starts low but goes up steadily for each project.
ENTREPRENEUR A’s WORK WEEK
Project A: Simple Project
Fee: $2,000
Complexity Calculator:
- Scoping/Pricing/Proposal: 1
- Doing the Work, Deliver:1, Team Communication:1
- Managing Client Relationship: 1
- Task Switching: 4
TOTAL COMPLEXITY: 8
Project B: Advanced Project
Fee: $6,000
Complexity Calculator:
- Scoping/Pricing/Proposal: 3
- Doing the Work, Deliver:3, Team Communication:3
- Managing Client Relationship: 3
- Task Switching: 8
TOTAL COMPLEXITY: 20
Project C: Complex Project
Fee: $10,000
- Scoping/Pricing/Proposal: 5
- Doing the Work, Deliver:3, Team Communication:5
- Managing Client Relationship: 5
- Task Switching: 16
TOTAL COMPLEXITY: 36
TOTAL WEEKLY REVENUE: $18,000
TOTAL WEEKLY COMPLEXITY: 64 points
Now, let’s divide Entrepreneur A’s total weekly revenue to the amount of complexity in her business to get a “Revenue Per Unit of Complexity.”
(Revenue per Unit of Complexity is an emerging measure we are developing at Safi Media to help founders understand where complexity is holding them back from scaling sustainably.)
In this scenario, Entrepreneur A’s Revenue Per Unit of Complexity is roughly $281.
Now, let’s compare this to Entrepreneur B who ONLY DOES ONE TYPE OF PROJECT with ONE TYPE OF CLIENT. She ONLY takes on lucrative but complex projects. But because she ONLY does one type of project with one type of client, she dramatically reduces the complexity associated with each task, because she and her team repeat the same process over and over.
Therefore, she also reduces the amount of task switching that happens from one project to the next. As you’ll see in the table below, Entrepreneur B’s complexity score starts high, but steadily goes down even though she is working on highly paid, complex projects.
Entrepreneur B’s Work Week
Project A: Complex Project
Fee: $10,000
Complexity:
- Scoping/Pricing/Proposal: 5
- Doing the Work, Deliver:5, Team Communication:5
- Managing Client Relationship: 5
- Task Switching: 4
TOTAL COMPLEXITY: 24
Project B: Complex Project
Fee: $10,000
Complexity:
- Scoping/Pricing/Proposal: 4*
- Doing the Work, Deliver:4, Team Communication:4
- Managing Client Relationship: 4
- Task Switching: 4
TOTAL COMPLEXITY: 20
*These scores are all lower than with Entrepreneur A because Entrepreneur B is repeating the same type of work with the same type of client, thereby reducing complexity – this phenomenon continues for each similar project and client.
Project C: Complex Project
Fee: $10,000
Complexity:
- Scoping/Pricing/Proposal: 3*
- Doing the Work, Deliver:3, Team Communication:3
- Managing Client Relationship: 3
- Task Switching: 4**
**Task switching stays equal as the company is still switching between different “modes” of work.
TOTAL COMPLEXITY: 16
TOTAL WEEKLY Revenue: $30,000
TOTAL WEEKLY Complexity: 60
When we divide Entrepreneur B’s total weekly revenue by the amount of complexity in her business to get a “Revenue Per Unit of Complexity, we get a total of $500.
Entrepreneur B – who takes on mostly complex services, generates almost TWICE as much revenue as Entrepreneur B – who takes on a variety of projects for a variety of clients.
The lesson: focusing on a clear niche INCREASES your revenue per unit of complexity.
Now, let’s see what happens to each woman’s business as she scales. Let’s say each Entrepreneur doubles the number of projects her company takes on in a week.
Entrepreneur A continues taking on a variety of different projects for a variety of different clients.
Entrepreneur B does ONE type of project for ONE type of client.
As Entrepreneur A takes on more work to grow her company, the Revenue Per Unit of Complexity plummets 65% from $281 at 3 projects to $92 at 6 projects.
Is she making more money? YES. But while her income DOUBLED, the total volume of complexity in her business went up by 470%.
How To Scale Revenue AND Simplicity at the Same Time
Entrepreneur B, who focuses on ONE type of project for ONE type of client, the revenue per unit of complexity goes up 25%, from $500 to $625.
In this scenario – where Entrepreneur B reduced complexity not by choosing less complex work but by niching down instead, the following happens:
Revenue per unit of complexity increases to $625 (compared to $92 for Entrepreneur A, who didn’t niche down.)
Revenue doubles, while complexity increased by only 60%.
Compare this to Entrepreneur A who didn’t niche. Her revenue doubled but complexity went up by 470%.
This is what we mean when we say you can’t scale complexity. By focusing on a clear niche, Entrepreneur B reduces complexity, which allows her to create repeatable processes and results that she can a) either hire and train other folks to deliver or b) create some form of group offering based on her standardized offering.
THIS is why reducing complexity FIRST is the key to decreasing your time spent in service delivery.
Yeah but…why don’t you just hire people?
Our in-depth research and experience working with hundreds of women founders has revealed that The Complexity Trap is a “First Principle Problem.” A “First Principle Problem” needs to be fixed before any other problem otherwise you are wasting your time.
Example: my son has braces to fix the “presenting problem” of crooked teeth. But for the braces to permanently fix the problem of his crooked his teeth, we had to fix the “First Principle Problem” first. And the “first principle problem” he had was…” over-crowded teeth”.
The PRESENTING PROBLEM is crooked teeth. The FIRST PRINCIPLE PROBLEM is over-crowded teeth.
We solved the First Principle Problem FIRST by pulling some teeth. Then and only then could we solve the problem of crooked teeth.
It is so critical as a woman entrepreneur that you understand “first principle problems.” The most common “First Principle Problem” for an early to mid-stage service business is TOO MUCH COMPLEXITY.
Because complexity is a “First Principle Problem” – it must be addressed FIRST. You need to simplify your business before you “clone yourself” and hire people to deliver the service on your behalf.
Yeah but…why don’t you just get more access to capital?
Ah, the tech-bro mistake of thinking money is the solution to all business problems. While money can solve a lot of problems, injecting capital won’t help much at this stage of your development. Without dramatically simplifying your company, you’ll simply be throwing good money after bad.
Yeah but…why don’t you just make stronger systems?
Excellent question. The most robust system built on top of an overly complex business model is a diligently documented plan for ruin. Simplify first.
An elegant way to reduce the amount of time you spend in service delivery
Over 7 years, hundreds of clients and thousands of data points gathered, we have determined that one of the single most helpful tools in bringing massive focus, and reducing complexity is…
Niching reduces complexity and increases revenue. But this concept is misunderstood. Over the course of hundreds of clients, and 7 years, virtually all our clients who dramatically increased revenues did so not by doing more, but by “releasing more.”
Your niche is a filter you lay over your current “dollars for hours” service-based business to identify and release:
– Project types that are simply too complex to be done by others, and
– Clients that aren’t profitable
– Messaging or offers that – simply by existing – confuse your most valuable clients or cause them to believe that your service isn’t for them.
When you use your niche as a filter to release elements of your business that aren’t suited to scale, you create a company that is more compact, sleeker, lighter, and less complex.
It is MUCH easier to hire and train employees for a company like this. It is easier to created packaged services that can be delivered by others, or that you can deliver to multiple people at a time versus one on one. And once your company is built to scale, money and systems can accelerate your growth.
But you need to simplify first. And the most effective way to do this is with a clear niche.
When you do, you’ll have the space to move on to the NEXT critical factor in scaling a service based company from 6 to 7 figures, which I will cover in the next installment of the free course.
