There are levels to everything.
Years ago, I had a client in the automotive repair industry. Today he runs a multi-million dollar, national chain of stores and education centers. One day we sat down for lunch and he said, “Taylor — you’re great at this online stuff; but let me teach you about staffing.” And he showed me the law of the step…
When I was running the real estate organization, we noticed there were levels inside of the business.
At 4 houses per month, there was profit. At 8 houses a month, there wasn’t. At 10 houses a month, there was profit again. Business systems usually operate with proportionality — that means, you hire in proportion to your current revenue and trajectory.
The smart ones, usually hire just a bit beyond their current level. If you’re hiring for scale while you’re already at scale, you’re a bit behind. I’ve taught this to clients as the Law of the Step.
When you’re in the red X territory, you’re staffed & resourced for a place you are going, but haven’t quite gotten to yet. Your profits are going to dwindle because you are preparing & scaling. When you are at the green check mark (the top of the step) you are staffed for exactly where you are — which means profits are good and teams feel great.
The only risk, at the top of the step, is you can’t really grow.
Because you don’t have the staff or systems for it — to grow again, you have to staff & resource allocate for the next step. This will put you back in the red X zone, until your revenues jump up.
This is a normal part of doing business, and every business experiences it.
Yesterday on a call with a client, we were talking about this. She’s growing by leaps and bounds — and is feeling a familiar tug of war between “grow more & build the revenues,” and “slow for a bit and take care of clients.”
This is usually a false dichotomy.
You should never, and I mean never, ignore the client experience just to get moreclients. However, usually when a business is getting trapped in the red X territory, it has to do with one of these 3 things:
- Client selection
Let’s hit them briefly.
This can mean your team is bad. Your team is lazy. Your team is unqualified or untrained. Or it can mean your team is too big or too little. Yes, teams being too bigcan break the growth of a business.
Imagine you have two or three really good players on a team. They all are qualified of making great decisions. But they all know the others are qualified — so they want to give people the voice to make decisions. So nobody ends up making decisions.
“Too many chefs in the kitchen” is a legitimate threat.
The buss should be staffed with the right people in the right seats — but it should never be overstuffed with so many people the buss is no longer agile. However, most teams experience this problem in reverse: they don’t have enough decision makers.
My new book goes into great detail about how to select decision makers, train them, pay them, and properly construct an org chart if you’re wanting to grow without the toxicity of “grind 24/7.”
I don’t want to throw bodies at a problem we should be building technology for. You’re going to see this a LOT over the next decade.
I am obstinate and stubborn in this area — and you should be too.
My repeated question is “How can we do 2x the output with half the team?” This isn’t because I don’t like team, it’s because technology is a multiplier. In my book I talk about the 3 levels of team — and you’ll need to read it to fully grasp this philosophy, but I want all T3s eventually replaced with technology.
This allows the effective output of the company to stay high without accompanying costs — but more importantly, it delivers 100% “uptime.” Technology is the same and it doesn’t change unless you program it to change.
Believe it or not, some businesses can’t scale because they’re allowing the wrong clients in. There are two main things that can break a business if you’re in the consulting/training space:
- Bad team
- Bad clients
You can’t build systems to solve for horrible client selection.
Taking money from the wrong people, and then having to work with them, will ruin a great team. No A player wants to work with people who aren’t a privilege to work with. This is classic addition through subtraction.
P.S. Here’s a video about the topic that I think you’ll enjoy.