A lesson on scaling (based on my failures)

In this newsletter I’m going to share a personal lesson that I’ve learned this year about scaling businesses.

The truth is that not all businesses can scale all of the time.

Here’s the quick backstory of business #1:

During COVID I moved in with 2 mates. We wanted to build a massive company together. We tested a few things but ended up at pet supplements.

We scaled to $800/d in sales within 30 days. Then realised we needed to raise capital to keep growing a business of this type.

This is where it got complicated for a number of reasons. Firstly, because we didn’t have our own product, we just put our label on a private label product.

Therefore it wouldn’t really be an attractive investment for capital allocators.

Secondly, it was COVID. Wasn’t a great time to be raising capital.

So we pivoted.

One business partner dropped off, leaving 2 of us to continue. We moved into educational products in the pet care space instead.

This is what happened with business #2.

We tested the first summit. It looked promising so we continued.

We added extra backend products and by month 6 we did over $100k in revenue.

We didn’t take a single $ from the business for the first 12 months and poured it all into marketing.

While it did work for about a year, eventually we hit a threshold where spending more money just wasn’t the right strategy.

We were brute forcing our way into a tiny niche market.

Since we were pushing so hard, I was working 6 days a week, we had a team of 9 people and our overheads were huge.

The business model was shake-y at best.

And when we made 2 bad decisions in a row we nearly lost it all.

At this point we had 2 options, walk away from it all with basically no benefit from the previous 2 years.

Or dig my heels in, level up as a business owner and leader, and figure out how to turn it around.

When I had this realisation we were burning $10k per week, and had been for the previous 6 weeks.

I had to stop that burn within a few weeks or we were done!

The first step was firing most of the team, which was the worst day of my entire entrepreneurial career.

Then we had to simplify everything we were doing.

And cut anything that wasn’t producing us profit.

We lost basically 80-90% of our revenue for the next few months.

But we began building from the ground up again.

Focusing less on top line revenue, and more on simplicity and profit.

For the entire 6 months of last year we broke even.

But this year…

Well it worked!

I turned the business around.

We are now a team of 4.

My business partner and I work 1 or 2 days per week on this business.

Our 2 virtual assistants take care most of the day to day work.

And we’re turning over profits that are the same as 12 months ago when we had a team of 9 and when I was working 6 days a week.

My lesson is this…

Some businesses have a threshold where they sit just nicely.

Where you don’t need to brute force your way every month.

Where less is more.

Where it runs smoothly.

Our business model is not built for scale, not all business models are.

And if you can identify that sooner, rather than later, you can save yourself a whole bunch of headaches.
– Mitch