Principles for Scaling Your Business, with David Robinson

Last month, resident Growth Expert Daniel Lohrmann from ikaros facilitated an AMA with David Robinson, seasoned investor & Managing Director of Green Island Advisory

David is one of the most experienced marketing and digital change agents in Australia, with experience across global brands as well as start-ups across the apparel, grocery, financial services, FMCG and franchising sectors.

In the intimate session, David offered candid advice based on his experience scaling businesses both in the trenches and at an advisory level as an investor & consultant.

In David’s eyes, scaling a business can be boiled down to 4 key principles.

1 – Understand Your Operating Model Inside-out

  • Set an operating model from the beginning, including your product-pricing model & product margins
  • Separate your P&L into variable P&L and fixed costs; this is the only way you will be able to bootstrap effectively

For early-stage companies in his portfolio, David has had great success by grounding them in this first-principles approach.

‘We were able to achieve an average order value of $100, at a cost of $50 for marketing/product. Any money above $25 profit went straight back into marketing; over years of optimisation, we had self-fulfilling growth.’

2 – Focus on Variable Profitability

Variable profitability was the core mantra of David’s AMA, which he highlighted as the core lever driving a successful bootstrapped company. 

‘You need to make sure your variable profit is self-funding. Your runway should cover your fixed costs, not your whole business.’

For the founders in the AMA, the sentiment was echoed in their own anecdotal experience, as they discussed the difficulty of balancing brand-building with driving sales. At the end of the day, generating cash is how businesses survive, and then scale successfully.

‘For every bootstrapped business that succeeds there will eventually be an opportunity to target investors for cash, and you should always be in a position of strength – which means variable profitability.’

3 – With Marketing, Focus on one Thing at a Time

David underlined the importance of experimentation, with an important focus on optimisation & navigating within the guardrails of principles 1 & 2.

‘You will have to make bets and not be afraid to test & learn. But keep yourself laser-focused. When you find something that works, optimise and push. Do not get distracted.’

4 – When Prioritising Growth Strategy, Work Within Your Constraints

David reflected on common pitfalls he’d seen, many of which spanned from ambitious expansions or strategies that opened up a wormhole of fixed costs.

‘Look at your existing assets and operating scheme. Where can you fractionalise your fixed cost? If these go up a little, what is the bottom-line impact on sales & profitability?’

A case study David described was a direct-to-consumer scale-up in his portfolio. During their growth phase, rather than investing aggressively in an expansion into a new region, they experimented with their operating hours & delivery terms. This ultimately had an enormous impact on sales & profitability, with a negligible impact on fixed cost.

Parting Advice

‘It is incredibly tough setting up and growing a business. Stories you hear about overnight success are great – but it’s important to remember that success is never linear.

The two biggest problems are usually the operating model or marketing strategy.  Staying grounded in your approach & principles is the key to navigating the pitfalls.

At the end of the day, it takes a great idea, hard work and an enormous amount of luck.’

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