Scaling: How to Allocate Resources, Find Bottlenecks, and Enter New Markets with UrbanStems’ CEO, Seth Goldman

How to face the challenges of scaling head-on

In recent years, UrbanStems has grown from operating its online flower ordering and delivery business in a few markets to processing and delivering orders from coast to coast. It’s a DTC success story, but it was by no means an easy road to get to where the company is now.

Scaling is one of the most challenging parts of running a business. Where do you allocate your resources? How do you enter new markets? And what do you do when disaster strikes in a way that could topple your business?

Seth Goldman had to answer those questions and more when he took over as the CEO of UrbanStems in 2017. When Goldman joined the team, UrbanStems had just gone through a disastrous Valentine’s Day, during which the company’s operations broke down and customers were left without their orders. If UrbanStems was going to scale successfully, its processes were in need of an overhaul.

“We were better at marketing than we were at executing that year,” Goldman said about what he knew coming into the company. “We learned that we needed a more sophisticated plan and that plan needed to be backed by data.”

Data drives everything that Goldman and the team does at UrbanStems, including finding out where the bottlenecks were in the system that were causing backups. While everyone had an opinion about where they thought the hold-ups were occurring, anecdotal evidence was not nearly as useful to Goldman as hard data.

“The bottleneck is basically where your business chokes, what’s the slowest part of your operation,” Goldman said. “People kept telling me things … and then I would say, well, how long does it take to do this? And I would write down the answer, and the numbers they gave me did not match with it being a bottleneck, which either meant that it wasn’t the bottleneck, or that it took a lot longer than what they thought. The key thing was keep digging, keep trying to understand, because at the end of the day, the math will be the truth that you can use. But if your assumption is based on faulty math, then it’s just garbage math. So, you have to look at the operation in action.”

In the case of UrbanStems, there were a few different areas of need that had to be addressed in order to avoid another disaster. But whether it was adding headcount, or bringing in new technology, Goldman said that there was always an emphasis on maintaining balance between giving people what they want and what they actually need. At the end of the day, resources are slim, and money is not endless — especially when it comes to scaling, there are a lot of hard choices to be made.

Many companies, UrbanStems included, have to decide what scaling actually means. Often, it involves entering new markets. But that is easier said than done, too. Goldman said that when expanding your business into new markets, understanding the ROI of moving into those cities is the first step. It’s not enough to figure out if there are potential customers, other factors such as supply chain, cultural considerations, and non-financial benefits also need to be taken into account. And once again, Goldman leans into analyzing the data to guide the way.

“[When thinking about expanding] in terms of which cities we’d prioritize next, we rely on data,” he said, “That data would help us understand what would be the revenue opportunity, how quickly we might get there. From there, we would also layer on supply chain and we would try to figure out if that city was easier or more complex from a supply chain standpoint. Finally, we’d overlay the brand and we’d try to understand if there were any idiosyncrasies of that city that made it more or less attractive. Then finally, we look at if that city has any sort of non-financial strategic importance to our business.”

A year after UrbanStems’ Valentine’s Day snafu, the company had a successful holiday season and boasted 98–99% on-time delivery rates. But as the company continues to grow, there is more work to be done and more data to analyze. To learn more about how Goldman and his team are going about the scaling process, tune into Up Next in Commerce, here.

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