The last thing a CEO wants to have is the reputation of choking on success:

“We’re dealing with a class A problem – more sales than forecast,” Robert Meers, chief executive officer at Vancouver-based Lululemon, told the company’s first conference call with analysts late yesterday.

. . .

Mr. Meers referred to inventory snags at newer stores in New York and Chicago. But the troubles are even more widespread, John Currie, the company’s chief financial officer, said in an interview later [as reported by the Toronto Globe and Mail].

The buzzword is “scalability”, the ability for a system to expand quickly and easily as a company grows. The idea is that the same system that was effective and affordable when you were a small company can grow with you as you expand, so you never have to go through the pain of a conversion. In my experience, there are four dimensions to scalability:

  1. Software – Obviously the choice of system is critical
  2. Hardware – You need to be able to increase not just your head office database size, but also add local servers where required
  3. Design – How you set up your departments, chart of accounts, inventory items, customers and vendors has a huge bearing on how easy it is to grow. Also consider the way you report on the key drivers of your business. Will your management reports still give you the information you need to make decisions if the company triples in size?
  4. People and Processes – You should be able to expand the business with minimal growth of the administration. At the same time, you need to know at what point to add new staff. Having all of your procedures written down is extremely valuable when looking at adding satellite offices or expanding your operations. Also, make sure you minimize manual processes at month end so that growth does not slow down your reporting.

I know how unimportant the accounting system can seem when you are planning the big push into a foreign country, but a few hours spent on system design during the initial planning can reap HUGE rewards when those sales materialize. After all you don’t want to be called a “Lemon”.

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