6 Warning Signs That Your Business is Just Not Scalable.

Scalability is a term frequently linked to start-ups, yet it is also relevant to established businesses. For instance, if you intend to put your business up for sale in the future, scalability will be a key aspect that potential buyers will examine.

This post examines six typical indicators that your business might not be scalable from an operational standpoint. Business scalability refers to enhancing efficiency and maintaining minimal disruption to daily operations as the workload grows. For instance, your business is considered scalable if it can handle a 30%-50% increase in volume annually without significantly increasing the workforce. Conversely, if you must hire more non-value-added employees, such as those performing administrative tasks, to manage growth, your business is not highly scalable.

Our main clients are family-run manufacturing businesses, where these warning signs frequently appear. They can be readily addressed through Business Process Improvement (BPI) efforts, possibly using your existing technology. The six warning signs listed here are not exhaustive but rather examples you might come across in your daily operations. Check if you can identify any of these signs within your organization.

1. Spreadsheet Mania is Not Scalable (Excel Hell)

For over 30 years, spreadsheets have been utilized in business settings. Consider the amount of effort your organization spends on inputting data into spreadsheets and circulating them via email. Additionally, your data is scattered across various outdated systems patched together over time by different employees and consultants. Do any of the following points resonate with you?

• Spreadsheets with the most recent updates are being emailed throughout the organization all day.

• The spreadsheet creator has left the company, and no one understands its functionality.

• The spreadsheet was once effective, but users have modified, overwritten, or removed formulas over time.

• Various spreadsheets created by users are stored in shared directories on your servers or, worse, on individual local hard drives.

• There is no "Single Version Of The Truth" (SVOT).

Since 2007, in our role as business process improvement consultants, we have not encountered a client who doesn't utilize spreadsheets in some capacity within their organization. For instance, spreadsheets are employed for inventory planning, production planning, product costing, human resources, production execution, finance, sales leads, quality control, company picnics, and nearly every conceivable area.

We have discovered that some companies possess an expensive centralized Enterprise Resource Planning (ERP) business software package that is underutilized or never fully implemented. Consequently, training was neglected, and users returned to using spreadsheets because they are familiar and readily accessible. If your ERP system no longer meets your needs, consider upgrading or replacing its capabilities.

2. Email Overload

Business email, another relic from many decades ago, continues to be one of the most overused business tools today. For your customers and vendors, it is the primary method of communication over phone calls, letters, faxes, and other legacy forms of communication. However, internal communications with your team members are often overused, unnecessary, and unproductive.

When emailing company staff, the first step is identifying the recipient. This can be challenging for new employees, leading them to email others to determine the correct contact for resolving an issue. Once identified, you must clearly explain your objective. The CC: field can be problematic as it often unnecessarily involves others, wasting their time.

Efficient and scalable businesses utilize email primarily for communication with external parties like customers and suppliers, often automating the process. In contrast, internal communications are managed through Workflow Management Systems, which integrate resources, products, customers, documents, and support cases. These systems generally comprise a broader Customer Relationship Management (CRM) system.

3. Tribal Knowledge

Tribal knowledge pertains to informal, undocumented information or expertise that a person or team possesses, which remains unknown to others within the same organization or even within the same team. This knowledge typically exists in the minds of certain individuals and often becomes apparent when these employees leave the company, go on vacation, or are absent due to illness.

For instance, when a customer receives the wrong item and contacts your sales or customer service team, valuable time is lost searching through paper documents in file cabinets, making trips to the stockroom, consulting with staff, and figuring out what went wrong. It might be that the regular stockroom staff, who possess essential knowledge, were absent due to illness when the order was shipped. As a result, replacement staff picked and shipped what they believed to be the correct item. If this scenario reflects your company's typical operations, it is not sustainable. Root Cause Analysis (RCA) can identify the underlying issue, allowing you to implement corrective measures to prevent similar problems in the future.

In the situation described, it's possible that items and bin locations in your stockroom aren't labeled clearly enough for easy identification. Items might be mixed with others. Regardless, there should be a simple method for locating items. A stockroom layout diagram and a locating system can remove the reliance on informal knowledge about "where things are kept."

4. Paper-Based Processes

Printing customer invoices, purchase orders, shipping documents, and paper checks is not scalable. While the term Digital Transformation might initially seem daunting, it means handling your documents electronically. In today's work environments, where working from home or remotely is common, digitizing your paper-based workflows is crucial for survival, not just business growth. Before the COVID-19 lockdowns in March 2020, we transitioned many clients to electronic documents for their daily operations. As a result, when employees began working from home, all vital documents that were once stored in file cabinets were readily accessible.

Review your order processing documents briefly to determine which ones can be digitized immediately. Customer invoices are typically a great starting point. Printing them as PDFs and emailing them to customers is a practical initial step. If you're still issuing paper checks and mailing them to vendors, consider transitioning to electronic payment options like ACH and online banking.

5. Process Variation

Process variation occurs when different individuals carry out the same process differently. This concept is somewhat contradictory since a process, if executed correctly according to the documented steps, should not vary. Such variation often arises when the process owner is absent or on vacation. During this time, a substitute might independently discover a faster or more efficient method to perform the process, unaware of the potential downstream effects.

Thorough documentation of the process is essential to addressing process variation. A properly configured workflow management system can prevent process variation. Your current ERP business software might already include a workflow management system. If it lacks this feature, you should consider upgrading or replacing your existing system.

6. Whiteboard Scheduling

Using traditional whiteboards to schedule customer orders, production tasks, or personal time off is not practical for scaling. Consequently, some businesses have replaced these whiteboards with numerous spreadsheets (refer to #1 above, spreadsheet mania). However, both whiteboards and spreadsheets quickly become outdated. It's not unusual to find them neglected, so the last update can't be erased.

A more efficient way to replace whiteboards is by displaying near real-time information on TV screens by installing a Digital Signage System. These TV screens can be placed in warehouses, shop floors, and customer service areas. The systems can integrate with your current ERP business software and automatically refresh every few minutes.

Summary

Even with technological progress, the six warning signs mentioned above remain prevalent in numerous businesses today. The often-heard phrase "That's how we've always done it" poses a risk to any company. Instead, consider reevaluating your business processes with input from outside your organization.

Champion Business Solutions, LLC, offers ERP Software selection advice and can perform a thorough Business Process Assessment for your software search. For more information, don't hesitate to contact us.

Roger Pujol is a business improvement consultant and founder of Champion Business Solutions, LLC. He speaks and writes about encounters, helping small to medium-sized businesses (SMBs) improve their business operations.

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