The Key To Scalability: How To Work On Rather Than In Your Business

One of the most common pieces of entrepreneurship advice young founders get is to work on rather than in their business.

“If your business depends on you, you don’t own a business – you have a job. And it’s the worst job in the world because you’re working for a lunatic!” – Michael E. Gerber

The importance of realizing this is even greater for tech startups because most stakeholders expect that these businesses should be able to grow very quickly (and becomes nobody wants to buy and invest in a job).

When you’re working on an IT product scaling up happens easier compared to e.g. physical product manufacturing. Yet, this shouldn’t give you a false sense of comfort if you are a tech startup founder. There are many aspects of your business that wouldn’t be easy to scale. Yes, you wouldn’t need new factories for manufacturing, but you would need to grow your team significantly in order to scale up your sales and marketing efforts, your development capacity, your capacity to support your customers, etc.

If any of these aspects of the business rely on your skills alone, then you are in big trouble. If you drop the ball even in just one of these areas, you’d choke the growth capacity of your business.

This is much easier said than done – in the early startup stages the success of your business is mostly driven by your own skills and work ethic. The problem is, however, that your personal experience and qualities are not scalable.

In his book “The E Myth”, Michael Gerber proposes that the solution to this problem is to start applying a franchise mentality to your own project.

To illustrate – McDonald’s is not just in the business of producing and selling burgers. They are in the business of producing a system for a successful burger restaurant. Because of this, the success of any single McDonald’s restaurant isn’t determined as much by the individual skills of the franchisee and staff working there, but more so by the robustness of the whole Mcdonald’s system.

In other words, as a founder, it’s your job not only to craft a great product but to create a great system for producing and delivering this product to customers that allows you to easily plug people into it and equally importantly – to plug yourself out of it.

Gerber defines three business inner personalities that each founder manifests:

• First, the entrepreneur is the one who has the vision and ambition of what could be.
• Second, the manager is the one who focuses on bringing the vision into reality by working through people and systems.
• Third, the technician is the one who does the actual work – building and selling.

Every founder has all three personalities in them. Yet, in the early startup stages the two that are most active are the entrepreneur and the technician – after all, you are the one defining and doing the work, so an explicit easily-repeatable system isn’t really required.

However, once you go past the discovery and validation phases and enter the efficiency and growth startup phases, the managerial work becomes crucial. This is why it is relatively common for VCs to urge startups to onboard professional CEOs that have more experience managing and scaling a business than the original founders, who are often technicians turned entrepreneurs.

Delegating work as a startup founder is the right choice on many occasions – after all, the whole point of hiring (or outsourcing) is to find people who are better at a specific job than you.

However, abandoning managerial work as a founder is usually a bad choice. The importance of the case-specific domain knowledge of the founder for the process of getting the business ready to scale shouldn’t be underestimated.

External hires could easily fail even if they are highly skilled if they are not intimately familiar with the intricacies of your project. This is why it’s crucial for the founder to participate in the job of building the systems that would work best for your case.

In a few words, your goal should be to translate your technical work process in every area of the business into an algorithmic system that any person can take and apply to achieve similar results.

The success of this process would define if you would have a scalable business, or “the worst job in the world”.One of the most common pieces of entrepreneurship advice young founders get is to work

on rather than in their business.

“If your business depends on you, you don’t own a business – you have a job. And it’s the worst job in the world because you’re working for a lunatic!” – Michael E. Gerber

The importance of realizing this is even greater for tech startups because most stakeholders expect that these businesses should be able to grow very quickly (and becomes nobody wants to buy and invest in a job).

When you’re working on an IT product scaling up happens easier compared to e.g. physical product manufacturing. Yet, this shouldn’t give you a false sense of comfort if you are a tech startup founder. There are many aspects of your business that wouldn’t be easy to scale. Yes, you wouldn’t need new factories for manufacturing, but you would need to grow your team significantly in order to scale up your sales and marketing efforts, your development capacity, your capacity to support your customers, etc.

If any of these aspects of the business rely on your skills alone, then you are in big trouble. If you drop the ball even in just one of these areas, you’d choke the growth capacity of your business.

This is much easier said than done – in the early startup stages the success of your business is mostly driven by your own skills and work ethic. The problem is, however, that your personal experience and qualities are not scalable.

In his book “The E Myth”, Michael Gerber proposes that the solution to this problem is to start applying a franchise mentality to your own project.

To illustrate – McDonald’s is not just in the business of producing and selling burgers. They are in the business of producing a system for a successful burger restaurant. Because of this, the success of any single McDonald’s restaurant isn’t determined as much by the individual skills of the franchisee and staff working there, but more so by the robustness of the whole Mcdonald’s system.

In other words, as a founder, it’s your job not only to craft a great product but to create a great system for producing and delivering this product to customers that allows you to easily plug people into it and equally importantly – to plug yourself out of it.

Gerber defines three business inner personalities that each founder manifests:

• First, the entrepreneur is the one who has the vision and ambition of what could be.
• Second, the manager is the one who focuses on bringing the vision into reality by working through people and systems.
• Third, the technician is the one who does the actual work – building and selling.

Every founder has all three personalities in them. Yet, in the early startup stages the two that are most active are the entrepreneur and the technician – after all, you are the one defining and doing the work, so an explicit easily-repeatable system isn’t really required.

However, once you go past the discovery and validation phases and enter the efficiency and growth startup phases, the managerial work becomes crucial. This is why it is relatively common for VCs to urge startups to onboard professional CEOs that have more experience managing and scaling a business than the original founders, who are often technicians turned entrepreneurs.

Delegating work as a startup founder is the right choice on many occasions – after all, the whole point of hiring (or outsourcing) is to find people who are better at a specific job than you.

However, abandoning managerial work as a founder is usually a bad choice. The importance of the case-specific domain knowledge of the founder for the process of getting the business ready to scale shouldn’t be underestimated.

External hires could easily fail even if they are highly skilled if they are not intimately familiar with the intricacies of your project. This is why the founder should participate in the job of building the systems that would work best for your case.

In a few words, your goal should be to translate your technical work process in every area of the business into an algorithmic system that any person can take and apply to achieve similar results.

The success of this process would define if you would have a scalable business, or “the worst job in the world”.