Scaling Up: How a Few Companies Make It...and Why the Rest Don't (Rockefeller Habits 2.0)

by Verne Harnish

Additional Praise for Scaling Up “There is no one in the business of the business world like Verne Harnish.

The best leaders have the right questions, but turn to their employees, customers, advisors, and the crowd to mine the answers.

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Climbing Everest Scaling up a business is like climbing a mountain. To use a simple analogy, many people dream of summiting Mount Everest (or its equivalent in their life). Those who do it create a plan. Prepared with a set of inviolable rules and a passion for the journey, they head toward the summit. Along the way, they aim for a series of camps: intermediate waypoints normally marking significant changes in terrain. Then it’s a matter of focusing on the next day and, more important, the first and subsequent steps, making adjustments along the way as the mountain conditions dictate. Those who have made such personal journeys report that it’s ultimately about staying acutely aware as you push to take just one more calculated step.

There are roughly 28 million firms in the US, of which only 4% ever reach more than $1 million in revenue. Of those firms, only about one out of 10, or 0.4% of all companies, ever make it to $10 million in revenue, and only 17,000 companies surpass $50 million. Finishing out the list, the top 2,500 firms in the US are larger than $500 million, and the top 500 public and private firms exceed $5 billion. Data indicate that there are similar ratios in other countries.

Business leaders need great people both inside the company and out — investors, suppliers, customers, partners, advisors — as well as a great support network at home. All of these people are critical to the business.

A three- to four-hour interview is appropriate for a middle or senior leader; one to two hours might be more suitable for entry-level or less experienced candidates with limited work history.

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type of aircraft (reducing the number of repair parts needed and giving it more flexibility to swap pilots), utilizes second-tier airports to reduce landing fees, favors point-to-point

Employees: Happiness and engagement scores (TINYpulse and Atlassian have simple systems for tracking these) Customers: Kept Promise Indicators and Net Promoter System scores Shareholders: Cash and company valuation Make/Buy: Speed of processes (Lean), costs, and quality measurements Sell: Close ratios, sales cycle, and revenue metrics Recordkeeping: Relevance, speed, and accuracy of data

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titled The Customer-Funded Business: Start, Finance, or Grow Your Company with Your Customers’ Cash.

Pay many of your own expenses with a credit card so you can play the float. Get your own customers to pay by credit card, so they can pay you quickly even if their cash flow is slow.

CFOs to read Thomas A. Stewart’s classic book Intellectual Capital: The New Wealth of Organizations.

www.cashflowstory.com

The Power of One and the 7 Levers Managers adjust the 4 drivers by tweaking the 7 main financial levers available to them to improve cash and returns in the business: 1. Price: You can increase the price of your goods and services. 2. Volume: You can sell more units at the same price. 3. Cost of goods sold (COGS)/direct costs: You can reduce the price you pay for your raw materials and direct labor. 4. Operating expenses: You can reduce your operating costs. 5. Accounts receivable: You can collect from your debtors faster. 6. Inventory/work in progress: You can reduce the amount of stock you have on hand. 7. Accounts payable: You can slow down the payment of creditors.

People, Strategy, Execution, or Cash