Is your business ready to scale? At some point, every business is faced with this decision. Things are going well – you have survived the first few years and now have decent repeat business with some profitability. So you wonder, is there more?
There are many factors to consider – here are three key ones:
- Is your business really scalable? Can you grow your sales significantly without a large increase in costs? By expanding will your cost be unit decline allowing for greater profitability? Is automation a likely resource you can use? These are a few of the factors that really need to be examined closely. Take your time in this process. Deciding whether to scale is a make or break decision – the landscape is littered with failed companies who scaled too soon. Scaling too soon has the potential for alienating your existing customers by delivering a below par product or shoddy service.
- Scaling your business involves more than expanding sales…you need to expand your reach without negatively impacting profitability. Typically this expansion will involve leveraging technology and expanding staff. As with any business inflection point, having a business plan will greatly increase the chances of success. If you used the lean startup method to launch your business, now would be a great time to revisit the Business Model Canvas. Special focus should be paid to Revenue Streams, Cost Structure and Channels – these are the areas where automation can play a big part. Testing assumptions is always important but critical if you are planning to scale by expanding sales into new areas.
For many companies at this stage, additional funding might be needed to facilitate the expansion. As with any investor presentation, a solid business plan with financial is a must. Since investors will want a percentage of the company in return for capital, this has to be weighed against the expected sales and profit growth from scaling.
- Scaling your business will most likely result in additional staff. It is essential to get the staffing right—be aware of workload and needed expertise….you will need some new thinking and skills from your existing staff as well as the new hires. It is a poor idea to rush the hiring decisions since hiring the wrong people can damage your company by derailing momentum and hurting the existing culture. Reassessing all roles in light of the planned expansion is important. Have the right people doing the right jobs and streamline and automate as much as possible. Scaling a business can be stressful for the existing employees – be sure to do enough internal marketing to keep all your team engaged.
Most companies (especially tech based) want to maximize their growth and dream of becoming unicorns. However, not all have a structure that supports scaling their business in the traditional way. As with most key business decisions, weighing the risks and returns correctly is the hallmark of a great entrepreneur. There is nothing wrong with growing organically and evolving into a successful and profitable small business – after all these companies form the backbone of the country.