Scale and growth are not synonyms.
Does it really matter?
Only if you want to increase the value of your business.
Company valuation is closely tied to net profit.
The higher the net profit consistently over time, the higher the company valuation.
Companies that are built to scale drive rapid increases in net profit.
Growth companies do not.
Growth is when revenue increases year over year, and expenses also increase in order to generate that additional revenue. Perhaps this was a new hire, increase in COGS, or investment in new technology.
Scaling means a company’s revenue increases while its expenses stay the same (or decrease).
This indicates that the company generated more revenue with lower expenses, due to efficiencies and/or reductions in staff and/or overhead.
Growth or scale is not a competition.
All companies can grow if managed well, but not all companies can scale due to their nature.
Knowledge driven firms are well positioned to scale.
They can increase revenue with the associates they already have, They can design more efficient processes. They can increase fees.
But too many do not scale because of the way they think.
If you think you sell time or deliverables, you’re depriving your firm of revenue and profit.
If you think you sell IMPACTss, your runway is long and far.
The IMPACT Factor
If what you sell has a small, short term, or fleeting impact on buyers, it is likely viewed by buyers as a commodity. You need huge volume, and you compete on price.
Unfortunately, there are too many knowledge driven companies who act like commodities and deprive themselves of the opportunity to scale.
I’m talking about:
- Tax prep factories.
- Law firms that provide one size fits all contracts or documents.
- Coaches who put clients through a predetermined process for a specific period of time.
- Fractional CXOs who charge for their time.
I’m talking to you.
Knowledge driven industries should be scaling
CPAs, lawyers, specialty consultants, coaches, designers, fractional CXOs–all of you can scale your companies if you choose to.
Adopt IMPACT Based Pricing
The knowledge and expertise in your firms can create a range of impacts without limit.
The costs of creating these impacts do not increase as the impacts grow increasingly significant.
We in knowledge driven industries can apply more of our most impactful expertise to help clients with big needs. Fees increase proportionally to the significance of the impacts.
In short, when you customize to create impacts the client’ wants, your fees will increase while costs remain the same.
Focus on increasing revenue and net profit increases accordingly.
I have clients who have reached 80% net profit in a few short years because they adopted IMPACT Based Pricing and kept their costs steady.
Is your knowledge driven firm built to scale and to increase its valuation?
If not now, when?
