Stair Step Growth

Want to massively grow your business? You need to understand the "stair step growth" concept.

I've learned the hard way growing our auto repair business from 6 locations to almost 30 in the last six years. I'm going to teach it to you in 5 minutes.

Capacity Constraints

Every business reaches a capacity at some point. It can only produce so much with the given resources. To grow, you need to invest. Once you make those investments, the capacity expands.

You continue to grow until you hit the ceiling again. Again you come to the decision point: invest to grow or stay put.

Stair Step Growth

Level A - You start with 1 location. You hire an experienced manager in place to run the day-to-day operation. You are learning the business, building the culture, and understanding the financials.

You look for expansion opportunities once you understand what it takes to succeed. You open a 2nd location. You repeat the process of hiring a manager, building the culture, and driving profit.

With 2 locations, you take on the "District Manager" role. You are working with the store managers, hiring, training & ensuring they are performing.

You can handle more, so you keep looking for locations to open. You repeat the process until you have ~5 locations.

At 5 locations, you're stretched thin. You still have all the responsibilities of an owner plus your role as District Manager. It's time to make that first investment.

Level B - You hire a District Manager to take over direct management of the locations. This investment will cost you $70-80k per year. You must grow to get a return on this investment.

You now can shift to focusing on acquiring more locations. You buy 4 more.

At 9 locations, your DM is starting to feel stretched thin, and your back office is overwhelmed. As the owner, you're getting pulled in both directions and have hit the ceiling. Time to invest again.

Level C - You hire a second District Manager and multiple people in the back office. $170k in additional payroll. If you don't grow, profit drops.

So you keep growing - adding 5 more locations

14 locations in total. You've reached another capacity limit. You continue to invest or stay put.

Level D - You hire a 3rd District Manager and more back office support. $120k in additional payroll.

You now can acquire 6 to 7 more locations.

To Infinity!

These stairs keep going up. Next, you look at hiring a COO that all your DM's will report to instead of you directly. Then a CFO who will ensure we're maximizing our profitability.

You may need a bigger office or warehouse space. Those increased fixed costs need to be covered by increasing the profit of each store or adding more locations to offset it.

At a certain point, you will decide enough is enough. For some people, you may be happy at Level A, B, or Z!

Real-Life Application

We currently operate 29 locations with 5 District Managers. For us, 7 locations per DM is optimal.

5 DMs x 7 locations = 35 max

We could add 6 more locations with almost zero incremental overhead costs.

At 35 locations, we hit the ceiling on store-count capacity. We’ll decide to either stay put or hire to grow.

Location growth is excellent, but profitability is more important.

Our best locations produce 4X more sales than the worst locations. We could increase company sales by almost 50% by getting all shops up to that standard—a tremendous growth opportunity without having to increase overhead.

TLDR;

• Growth happens in steps

• If you hit the ceiling, you need to invest in additional management

• You must grow to get an ROI on that investment

• Drive profitability once you have the “optimal” number of locations

• It’s okay to stay put if you’re happy

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Cheers

Brian