Entrepreneurs: How to scale up

What started as tinkering became a career. Things are going well. Now what?

JONATHAN HAMMEL and his crew go into their workshop with a bunch of raw materials and an idea; something strange and never-before-constructed from their clients. And they emerge with spectacular creations. “Whatever our clients dream up, we do,” says the Nashville-based owner of Madefirst, a custom design and fabrication shop. The company’s portfolio includes stage designs for Miranda Lambert, a five-metre music note that drops every year for Nashville’s New Year’s Eve bash and the flashy props in a lot of those increasingly slick and elaborate brand lounges for companies like Samsung.

Hammel, who started out building Mardi Gras floats in New Orleans, launched Madefirst the way wise old business mentors say you should: small, and, in his case, working out of his kitchen (and SUV). In its eight years, Madefirst has grown from R2,1 million in annual revenue to more than R25 million in 2015. Hammel now has eight fulltime employees and a growing arsenal of magnificent tools – a CNC router, plasma cutter, 3D printer and saws of every bite and capability – which has him desperately searching for a new space.

Such a dizzying upswing has made finding the sweet spot of sustainable growth a challenge. “I used to worry about when the phone was going to ring,” Hammel says. “Now, I wish it would just stop for a bit.” He shares a few of the lessons he’s learnt.

LET DEMAND DETERMINE SPACE

I started in my kitchen because that’s all I needed. Soon after I was in an 80-square-metre shed. Then I got a warehouse space. And then another. Ideally, I’d like to have another 1 000 square metres somewhere that I can rent out for music videos, commercial shoots and photography.

GROW ORGANICALLY

The fastest way businesses die is by growing too quickly. If you don’t have the infrastructure, how can you take on bigger jobs? You can’t just prop yourself up with money. To buy everything and staff up at one time with a big cheque is just setting yourself up for failure.

OWE NOTHING

I have zero debt. My philosophy is if you don’t have it, you don’t have it. For me, it’s pride. I don’t want to owe anybody. If somebody called tomorrow and offered to buy me out of this business, I could make a big profit. I am super proud of that.

PREPARE FOR HIGHER EXPECTATIONS

There’s obviously a big difference between a $5 000 job (about R65 000) and the jobs we’re doing now that are often 100 grand (about R1,3 million). When somebody drops that kind of money, the expectations are high. We can provide drawings, but if we can’t actually be dialled in, produce and finish, they’re going to be upset and our reputation will suffer.

KNOW YOUR LIMITS

If we’re seven jobs deep and I take another rush job – even though I know that we shouldn’t do it, but I want the money – we not only mess up that job, but the other jobs, too. And then we’re done. I’d rather say we’re just too busy, but please try us again next time. Chances are that guy is going to come back.

ADAPT YOUR PRICING

When we bid local jobs, we’re competitive. But when bidding against big companies from out of town, I know I’m going to be 20 to 30 per cent lower. I’ll still make money because the cost of doing business is less here, but the client often wonders why I’m so cheap. They’re thinking the work must be poor quality. I’m not going to raise my prices just so I can compete with those guys, but it is something I’m aware of when bidding.

SUBCONTRACT

It’s a great option for businesses that are in the middle of a growth spurt, but might not have the infrastructure or employees to handle the growth. This is our problem. We have more work than we can handle until I get a bigger space. I’ve invested heavily in tooling to be able to do as much as possible in house. But when we’re super busy, we occasionally use select subcontractors. I trust them, but still, always build in a couple extra days in case something goes wrong.

REMEMBER MORALE

Our hours and travel schedule can be gruelling. We might have a beer after a long day. I’ll bring lunch in occasionally, or we might play basketball in the paint shop. When we are on site doing an installation, I’ll take all the guys out for a steak.