The journey of a fast-growing business can be summed up in one sentence: Cross that bridge when you come to it.
For startups and fast-growing businesses, things move fast. Slow-growth businesses can expand gradually and tackle each round of expansion with thought and strategic planning, but fast-growing businesses live on the razor’s edge, scaling operations and evolving strategy in the moment on account of fast growth. There isn’t time for always looking five steps ahead; handling the challenges of the day is the name of the game.
There’s one area where fast-growing businesses should not be riding the razor’s edge, however: backend IT systems.
That’s because many parts of a fast-growing business can be evolved on the spot, but a growing company needs a solid operational foundation for effective business scaling.
“We had buy-in from the founders and the leadership very early about needing to invest in a strong foundation in the infrastructure to support the customer experience and growth,” says Ulion Riebe, head of finance for one such company with explosive growth, trendy woven shoes maker, Rothy’s (case study). “We wanted to make sure we didn’t get too far out over our skis; that the wheels didn’t fall off later.”
Build a Foundation for the Future
That’s why Rothy’s invested early in enterprise resource planning software. ERP is end-to-end business software that handles all aspects of a company’s operations from sales, operations, logistics and fulfillment to accounting and human resources. The software serves as the nerve-center for a business, housing all of a company’s data, connecting with third-party software solutions such as ecommerce and supplier systems, and delivering both standardization and near-limitless automation potential.
Rothy’s used a hodgepodge of technologies stitched together for its first few years of rapid growth, but it was clear that the company would top-out without a better foundation for long-term growth.
“It was a fine process if we were going to be a $10 million business forever,” says Riebe. “But we just knew that it wasn't going to pass.”
At the time Rothy’s began looking at ERP, the company had just 15 employees and was three years old (one year later, it now has more than 100 employees). But the company was growing at breakneck speed, and to continue its scaling it needed a foundation that could grow with the company.
Even 10 years ago, this would not be possible. Almost every large business uses ERP software, whether Coca-Cola or 3M. There’s no real replacement for software that can handle millions of transactions and unify the operations of a complex business; ERP is essential kit for large organizations.
Until recently, however, ERP systems took years to roll out and millions to purchase and implement. Fast-growing businesses graduated to these systems, but they couldn’t run them early in a company’s development. And this both hampered these smaller businesses, and delayed growth.
With the rise of cloud-based ERP, however, fast-growing businesses such as Rothy’s no longer have to settle for inadequate tools or put the break on growth once they reach a certain scale. Startups and fast-growing businesses now can set their IT foundation early with a cloud ERP such as SAP Business ByDesign, and expand their use of the software as they grow. When they reach large enterprise status, they then can seamlessly migrate to something even more robust such as SAP 4/HANA. At every stage, a company like Rothy’s has the infrastructure it needs.
“The attitude was that we didn’t want to step into a new ERP or accounting system every five years,” says Riebe. “That’s not sustainable. We wanted to pick a system that we could see ourselves using for the rest of our time as a company, one that satisfies all of our needs now, but also could satisfy all our needs in the future.”
When to Make the Transition
For Rothy’s, the move to ERP began in its third year as a company. Rothy’s has blown up fast, though, almost from the first day it began operations.
While there’s no one-size-fits-all timeframe for migrating away from small business point solutions to all-in-one ERP, a good rule of thumb is that a business is ready for ERP when its annual revenue exceeds $1 million and it operates with more than 10 employees.
Businesses such as audio electronics maker Skullcandy, with $266.3 million in annual revenue, and medical device manufacturer CeloNova BioSciences, with roughly $3 million in annual revenue, both use the same SAP Business ByDesign software adopted by Rothy’s. The main difference is that each business uses different amounts of the solution’s functionality based on the company’s specific needs.
“We don't use the whole SAP Business ByDesign suite-in-the box,” notes Riebe. “But having access to the modules that we can turn on whenever, and just not have to worry about a whole new integration, is huge.”
So while fast-growing businesses live on that razor’s edge, they shouldn’t take that approach for their IT systems. There’s no need. Fast-growing businesses can set a solid foundation early, even before they reach massive scale.
To learn more about Rothy’s ERP journey, see our story Move Fast and Don’t Break Things.