Tips for Scaling Your Non-Profit Like a Business w/Scott Ritzheimer Ep#162
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Scott: I'm doing great. No worries on the name. When people get it wrong, they tend to add syllables. It's not an easy name to pronounce, so no problem. Happy to be here. I've been looking forward to this - a little later in the day here on the east coast of North America, so I've had some time to look forward to our conversation today.
Anthony: That's awesome. Likewise, I thought I was gonna nail it. But you know, that's okay. Well, what's equally important as how to pronounce your name is all of the great stuff that you've done in the world, in your community, and in your work. So why don't you tell our listeners a little bit about Scale Architects and your previous life that contributed to where you are now?
About Scott, his work, & background
Scott: Yeah, absolutely. One of the most common questions I get asked, and when they hear about what I've done, is "how old are you?" Because I look like I'm about 22 years old. You know, I've practiced trying to make my hair gray or do something. I don't know exactly what to do about that. I've got a young face. But I've had a lot of life that I've had the opportunity of experiencing. I've helped start about 20,000 different organizations, I launched, ran and sold a business over a 13 year period that hit $10 million a year, which was just fantastic for us.
I've had the opportunity for a few years to step into the consulting world, most of that is spent helping folks learn the lessons that it took me a really long time to learn on my own. But some of that is the opportunity to work with some really large, really successful organizations. So in a relatively short period of time, from a career standpoint, but feels like forever from a life standpoint, I've had the opportunity of really getting to see the patterns that exist inside of organizational life. And to feel those firsthand. To be able to walk it and see it happening at scale in real time, was just a fascinating journey for me and one that I've only really recognized primarily in hindsight.
But anyway, a lot in a very short period of time. In light of that, again, having the opportunity to do similar work to yourself and consult with folks. I just have the joy of helping people learn things the easy way, as opposed to learning them the hard way.
Anthony: Yeah, absolutely. So I definitely want to ask you about like all of those lessons learned and working with all of those different organizations, but actually a slightly different question. What drives you? What is the thing - when you woke up and started on this journey - "I want to do this, this is the path that I want to be on, this is the opportunity I see both for myself and the people around me".
We can help you align your team around a clear vision, mission, values, goals and action plans,
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What drives him in the business world
Scott: Yeah, that's something that's been pretty dynamic and has changed quite a lot over time. I would say, one, my faith has a big part in that, so that's a big driver. But by and large, I got into the business world by accident. I needed a job, I found one, and I ended up working for a company that three months after I started got sold. It was systematically but unintentionally destroyed, repossessed and relaunched. What's arguably one of the most painful processes that can happen in the business world, because a lot of people were let go during that time, few people had to declare bankruptcy. It was just a tragic, tragic experience.
But I fell in love with business. What really drives me through to today, and what I've gotten closer and closer to as an individual, is I love building the things that build things. I love getting people to work together to do whatever it is that they do best. What breaks my heart is how often that's not the case, how much resistance there is just in the natural course of getting two people to move in the same direction, let alone 200. So I hate seeing the friction and the delays and the challenges that come when folks who are great at what they do don't recognize the necessity of building the thing that's going to allow them to do that at scale.
Anthony: Yeah. So I'm so curious about that experience and those those reflections. Because in my life, I literally wrote a book called Lessons I Learned the Hard Way so You Don't Have to. So I think there's a lot of that in there. But if we go back just very briefly on that experience of the business that got sold repossessed. What were some of those takeaways or lessons that just stick with you, that is going to be burned into your brain - it might not be a conventional, but it'll be a thing that you never have forgotten.
Key lesson for scaling an organization
Scott: I would say, I could probably come up with a bunch of them. But the one that stands well and above all the others that truly shaped the way - when I had the opportunity to come in and rebuild the organization, that was really my guiding light through the whole thing. The original founder had built a successful business, but he had not built a company. He was the primary asset of the organization. So when he sold the organization and left, there just wasn't really anything left. Sure, there was another dozen or so people, there was a website, there were sales reps, there were all of the things that we think are a company. But the reality of it was he had never built the thing that could do it apart from himself. So when he sold it from day one, it was destined to fail. With what the expectation was of the buyers, with what his expectation was, as the seller, everyone thought this is a vibrant business. But what they didn't realize was he was a vibrant entrepreneur. Those two were still knit intrinsically to one another.
Now, I actually spend a lot of time working with especially younger entrepreneurs, helping them to balance between building the thing that you want to run - building the thing around your strengths, but also building it so that if you do want to sell it or hand it off one day, it can survive without you. Now part of that is just the nobility of I want it to be around when I'm gone, right? For most entrepreneurs, it's like another child, it just doesn't happen to have their blood in it. But even then you know it, you've got enough blood, sweat and tears in the process that is practically related to you at this point. So most of them don't want to just see it fall to pieces afterwards, for obvious reasons. But even if you take the kind of idealism out of it, if you want to sell something and get a premium on it, if you want to get a high multiple on it, you want to sell something that's going to thrive even if you're not there.
So that was really the biggest one, that doesn't happen automatically. Just because you're doing millions of dollars in sales a year doesn't mean that you've actually solved for that.
Anthony: Yeah, absolutely. I think that's the difference. It's humbling as a CEO myself, going through that process and saying, "do I have a good job? Do I have a business? Do I have something that's scaling going to support?" Some people come in and they say, "what's my exit plan?" Some people don't want to exit, like "I want to do this until I'm older and grayer". You can borrow some of my gray if you'd like. But it's a lesson that you have to learn through that process.
Built to Sell is a great book. The Entrepreneur Myth is another great book. I know that you've got books that talk about that. So I do want to touch on that. But building the systems to support you, and being successful despite yourself, because I see a lot of entrepreneurs that have built great businesses, but if they weren't there, it's held together by that little thread. It would fall apart. So if you're listening and that's you, make sure you connect with Scott.
Before I ask you about Scale Architects - faith based organizations. When you're working with Start Church, doing all of that work and helping those organizations, what would you say to somebody who sees it and has an anecdotal? Is it the same as every business? I'm sure there are key drivers, like what makes those businesses special? What makes those businesses unique? To those of our listeners that are in those organizations, whether it's a business or not, what do you want them to take away? So that was a big question, but I think you got it.
Key distinctions between non-profit & for-profit
Scott: Yeah, yeah. So what I would say is that non-profit organizations and for profit organizations are far more alike than either party would imagine. Right? And we actually do ourselves a disservice particularly in the non-profit world by kind of issuing or like saying, "hey, that's business stuff. That's not for us, that's now how we do it." Non-profit, even in the technical definition of the word, does not mean that you don't have profit. It means that your primary objective is not a profit motive. If you're a non-profit with no profit, you will not be a non-profit for very long, right? You have to do it.
Now their sources of funding are a little bit different. They may be engaging in a non-profit activity and receiving funds from the outside. But that's just that activity. That's not the organization. So what non-profits do is they often sell themselves short because of that. I worked with a lot of these organizations as they're getting started. I can tell you that entrepreneurs are entrepreneurs. If they're starting out in the non-profit world, or they're starting out in the for profit world, they use different language. They have kind of different goals, but they go about those goals almost the exact same way. Right?
It's a wasted word in non-profit, but they're highly evangelical about their vision for the organization, right? They are both big dreamers, they're both starters, they actually need an element of risk to move forward. They both have a vision for a better future for a group of people that they're trying to serve. They both have a bigger vision for a better way of doing whatever it is that they do. So they really are, you know, cut from the same cloth, if you will. What tends to be different is their value creation and their their revenue generation are distinct activities. That's the biggest kind of fundamental difference.
Now that actually doesn't show up a whole lot in terms of organizationally and structurally. But what it does do is it complicates the math a little bit. In a business world, you can just say, "hey, if we have a great product, people are gonna buy it". Well, in the non-profit world, that's not necessarily true. You have to be good at your product and you have to be good at an independent revenue generation. Now those two go hand in hand, right? If you give to a non-profit that isn't very effective, you're not going to give to them for very long, but they are more separate than what you'll find in the business world. So that creates a little bit of a difference in terms of language - you don't talk about sales, right? You don't really talk about creating something for revenue generation. You don't really look at your profit margin on your activities in the same way. So there are some mechanical differences, but the structural differences are not there.
Second biggest difference between the business world and the non-profit world tends to be the use of volunteers. What I can tell you is organizationally, that is a distinction without a difference. If you are organizing groups of people to go after shared goals, it doesn't matter if they're paid or volunteers. It matters that you have have sound leadership and management skills, and the right organizational structures to move those people in the same direction. Now, how you motivate them is a little bit different.
The common mistake that non-profits make is saying "I'm not paying them, I can't expect a lot out of them". What I've found is the exact opposite is true. When people are volunteering their time, they would rather do that with a group of people who are gung ho for whatever it is that they're going after - they don't want to give their time with a bunch of slackers. So if you don't have a high standard of excellence, a high expectation, it's not because you have volunteers, it's because you're not leading very well. And that's hard news, but it's just true of the non-profit mentality. If you think of yourself as not profitable instead of a non-profit, you're going to get yourself in trouble, particularly in those two areas.
Anthony: I can't overstate how great a distinction that was, it was super clear. I really appreciate it just in terms of the directness. I think that it's a misnomer that a lot of non-profit organizations go into, and especially when people have their board hat on, and then their entrepreneur hat on if they're in various organizations. It's not different, the drivers are different. Some of the things you have advantages pros and cons. On the one hand, you know, you have very well intentioned people in the non-profit world. But also it means that they especially need that leadership. So I just really love that.
Then you hear the term family business a lot, especially with smaller entrepreneurs, like "we're a family". No, you're not - and having that distinction in there. But it can get even more blurred with community. Here's a couple key takeaways that I really appreciated. One is just reframing that whole perspective for profit, not for profit. I think both should be more like the other.
But if you're running a non-profit or mission based organization, reframing how people think about it, the idea or the thought that people are selling themselves short. I absolutely agree, and I couldn't emphasize that more. And that the value creation and revenue being distinct activities, I think that's critical. Like, we don't necessarily sell something, and non-profit people don't even like the word selling. But from my perspective, the ability to actually create more value and sell helps you do your mission more. So if you're really mission focused, you want to be doing that.
Then the use of volunteers - they want to be used, they want to create an impact. If you don't have that direction, you're selling them short. So yeah, anything else I missed?
Leadership styles in the non-profit, for-profit worlds
Scott: That's good. The other dynamic that happens is less organizational, it's more people driven. One of the things we spend a lot of time - with both worlds on, are the multiple leadership styles that show up. What you tend to find in the non-profit world is a lot of a style that we call the synergist. These are very 'who' driven people. They value consensus. They're kind of the Bill Clinton's of the leadership world where it's very much like I hear you, I see you, and just his overall persona, taking the politics out of it, but just the way that he shows up.
Most non-profits have less than 10 employees, and most of them even have less than 10 volunteers. So the vast majority of that world are very small organizations. And one of the things that's true in both non-profits and for profits is that synergists are not the ideal leader for those environments (small organizations). Whether non-profit or for profit, there are actually other leadership styles that will get a bigger return. The reason that we see us being soft on volunteers, the reason that we see a deemphasis on revenue generation in the non-profit world, is less to do with the structural realities, and more to do with the leadership styles of the people - particularly the founder.
So our founders typically tend to be visionary types, right? They're the ones who who are willing to take the leap and make the thing happen. But we see these smaller organizations succeeding with greater regularity in the for profit world because they more readily embrace what we call the operator style. That ruthless finisher, get stuff done, right? Walk through walls to make it happen. That tends to run kind of cross-grained to this non-profit ideal of consensus and mutuality. And we create a false dichotomy between the two of them.
So what you have in the non-profit world, especially early on, is an overabundance of synergist types, and an underrepresentation of operator types. If we were to make just that one adjustment, if you're starting a non-profit, if you're leading a non-profit, and you start to look at "am I getting people who are consensus driven, or or completion driven?" Just getting more completion driven individuals on board isn't natural in the non-profit world, because we've built this thing around consensus. It's gonna take a little bit time, it's a little awkward at first. But if you can drive toward completion driven individuals, you will find that a lot of that other stuff is actually just byproducts of that imbalance. You'll find those people have no problem going out and generating revenue, because they believe in what they're doing. They don't have that same conflict that a more synergistic, kind of idealistic individual may have.
So what's really at the root of it in the non-profit world, faith based and not faith based, but non-profits in general, is that they overvalue consensus, and they lose their operator leaders because of that. Or they never create a place for them in the first place.
Anthony: Yeah, that makes tons of sense. So as a as a facilitator- we facilitate strategic planning, we look for alignment. So I am a consensus based person, that part of me, the other part is a project manager, a finisher who loves to get stuff done - making sure it gets across the line. So getting that alignment is critical, because it does speak to that leadership style that you talked about earlier. If you're not leading, you're just going for a walk. So you need to make sure that people know where they're going.
But you also need to be making progress. If you're not making progress, even the most ambitious and highly driven people, in fact, the most highly driven people are going to get frustrated, because nothing is going to move and they're going to wonder, "what the hell are we doing here?" For lack of a better word. So we've talked so much about like, what you've seen, what you've learned, and I so appreciate it. So what I'd really love to ask is, what are you doing now? I talk to a lot of people, and I'm so convinced that you get it, you see it, you understand it.
I don't usually say plug yourself explicitly, but I'm happy to because I just know you get it. So who are the people that you love working with? What are some of the projects you're working on? Without giving any details just so those that this is resonating with can easily like get in touch. Then we'll use that as a segue to finish up today.
Helping organizations grow & scale
Scott: So the whole dream behind Scale Architects was to help organizations to recognize what they need to do to grow at each stage of the journey. Where my organization got stuck, and we named these stages, but in the third stage called 'Whitewater', that happens to all successful organizations, my business got stuck there. I saw a lot of the organizations we started get stuck there. I was seeing it happen, but I couldn't figure out why it was happening or what to do about it. We were stuck there for several years, it costs us several million dollars. It cost me having to fire some of my best friends - this was this is a painful experience. It made a second guess whether or not we should just wrap it up and you know, go to half the size that we were and just make it easier. Again, it made us wonder if we really could grow to the extent that we wanted to.
All of these, I now know, we're symptoms of just being in this normal states that everyone goes through. But all of them felt like we had failed, or we were on the cusp of failing all of them. It felt like we have just gotten lucky, we didn't create the success we had, we just got lucky with it. So that stage is called 'Whitewater'. What I now know that I didn't know then is it's not the result of doing something wrong. It's actually the result of doing all the right things in earlier stages. But it's not recognizing that the game has changed. About half of our work is in the church and non-profit world, another half in the business world.
What we do is help people to recognize which of the challenges they're facing are systemic, part of this lifecycle and have to be addressed, and which are the ones that we can actually ignore for a moment, because there are other things that we can focus on more. So by doing that, by focusing specifically on the right things at each one of these stages, we can help organizations to grow and scale with way less energy expended, way less of tumult and heartache, and help them to really grow as an organization.
So we're not doing a lot of work on maintenance type organizations, we're not helping tune the finely tuned machine. We're going in and turning speed boats into warships. We're going in and helping folks to make those kind of internal transformations as an organization to build the systems and structures that are needed to scale those organizations up.
So if you're a church going from one campus to five, or if you're a coffee shop going from being a coffee shop to being a chain, if you're a manufacturer in the southeast going nationwide and exporting - those scale up kind of 10x movements are the types of things that we help organizations to create. It's not just kind of polishing the apple or, or shining up the machine. We recognize that what we're trying to do is so much bigger than we are today, that we can't possibly get there the way that we are right now. But we don't really know how to get there. We've got a map for that, and that's what what we do. I spend my time about half working with organizations to do that, and half training other coaches on how to do that as well.
Anthony: I love that, man. I think that's so cool. It's just a way to create impact in the world. So it's great to see people approach the visionary, because it is very visionary when you get to that place, but you got to have the meat behind it to be able to say, "how are we going to move this forward", and understand that balance is critical. And then teaching people to reflect on where they sit in that, and to have people come in and build a support system around you to complement.
Because there's no problem being a visionary, and there's no problem being an operator. The thing is, if you have one or the other, you're going to miss out. So Scott, where can people get ahold of you? Where can they connect with you?
Learn more & get in touch
Scott: All over social media. I wish I could say I was the only Scott Ritzheimer but my dad stole that title first. So you'll have to figure out which one of us is us. I'm the one who looks like he's 22, we'll put it that way. But if you got to scalearchitects.com we've got everything there. We've got a couple of free assessments that are super, super powerful. We use it with all of our clients and go deep, but you can use it absolutely for free right there on the website. There's one that'll tell you what stage your business is in. There's another one that will tell you what leadership style you have. So it's not like a lot of others where you pay $100 to get some, you know, fancy report. We just get right down to brass tacks and you can use that for yourself, for your entire team.
What you'll find if you take those two assessments, you'll see how those two need to line up. A big question that folks are asking is "what leaders do I need to move forward?" And those two quizzes together will solve that problem for you. That's fantastic.
Anthony: Awesome. Thank you, Scott. It's been a personal pleasure. So much info today - I really appreciate it. And yeah, I hope you have an awesome rest of the weekend. Thanks for the time today.
Scott: Absolutely. It was my pleasure. Thanks, Anthony.
Anthony: Folks, my guest today has been Scott Ritzheimer, who is the CEO of Scale Architects. Connect with him, take an assessment. And as you go on your journey of creating impact, whether that's in the for profit world, the non-profit world, or somewhere in between, recognize you need to build the great team around you to complement you, so that you can do great things in the world.
So I appreciate you listening today. This has been the Strategy & Leadership Podcast.
My name is Anthony Taylor, thanks for watching. I'll see you next time!