Nearly all small businesses have considered what it would be like to incur expansion and growth. But without the right internal processes or a business plan, the process of how to scale a business can be daunting and overwhelming. If you’re a small business owner who is looking to achieve sustainable growth, read on to see how our team at Cultivate Advisors recommends approaching the process.
What Does Scaling a Business Mean?
Even though new small business owners might consider “scaling up” to be an overused buzzword, it’s an essential step toward a long-term successful company. Scaling a business refers to when you equip your business to handle more demand without incurring more expenses. This means that you’re bringing in new business and more money while putting forth the same effort. The right scaling strategy is about adjusting your business model in response to growth.
The Differences Between Scaling and Growing a Business
Although “scaling a business” and “growing a business” are phrases that are used interchangeably, they are two different things. If your company grows, it means that you are increasing revenue while also using more resources to do so. For example, you might need to hire more employees to handle the business growth. Successful scaling, on the other hand, refers to an increase in revenue without a significant increase in costs. Scaling a business is often a more sustainable way to achieve growth.
What Does Your Small Business Need to Scale Effectively?
Many business owners don’t know where to begin when it comes to business scaling. Here are some ways to support growth and scaling.
As your business grows, you will grow how many customers you have. This rapid growth requires a different business strategy that consists of more delegation to accommodate growth. A growing business needs to take on new hires and delegate who is taking on what tasks to save time.
Sales scaling, on the other hand, focuses more on automating tasks and workflow automation to make sure that there’s a system behind all activities. Whether you’re onboarding new team members or you need to improve the customer experience, make sure that there is an order to how things get accomplished.
During the growth stage of your company, how well your business succeeds depends on your ability to increase sales and your market share. During this time, you’ll take on new customers and take advantage of your current customers to achieve long-term success. Don’t expect overnight success as this process can take time.
Scaling businesses should focus less on revenue increases and instead focus on the big picture of how you can become a market leader. Make sure that you’re aware of how to carve out the niche for your business and that you have a true understanding of your core values and offerings.
Number of Employees
With more customers comes the need to expand your current team. A growing business requires having an equipped team to take on the big-picture tasks.
A scaling business, however, requires a careful balance between bringing new employees on board while also running a tight ship. Ideally, you will hire a smaller number of other professionals with leadership skills to get more things done.
When Is the Best Time to Scale a Business?
Successfully scaling your business can be achieved anytime, but many businesses are strategic when they choose to take action. Most entrepreneurs hit a point in the scaling process where they are bigger than a startup but smaller than a large corporation. Here are some signs that it’s time for your company to start implementing a scaling strategy.
- Overshooting your quarterly/annual goals: If you are consistently meeting and surpassing the outlined goals on a quarterly or annual basis, this is a sign that you’re ready to successfully scale your business. Aim to push yourself while still being realistic about what your company can achieve.
- There’s minimal risk around business growth: Even if you have one quarter that’s particularly impressive in terms of your numbers, it doesn’t mean you’re ready for a substantial increase in scaling. Make sure to factor in common challenges and risks, only taking actionable steps to scale when you feel ready.
- You have a proven business concept: Maybe you have a new idea that hasn’t yet been tested in the market. This means you might not know how potential customers will interact with your product in the long run. Make sure that you only strive towards scaling until you have proven success.
- Revenue is strong, and sales are increasing: If your business is constantly increasing revenue over a period of at least six months, this growth refers to the ability to begin scaling. You can also prepare for setbacks and ensure you’re safe from bankruptcy.
- You have the right technology: Using technology such as automation can give you the ability to scale. This is also true if you own or develop innovative technology that can set you apart in the marketplace.
How to Scale Your Small Business in 8 Steps
1. Know Your Business Goals and Purpose
How to scale a business begins with outlining your goals and purpose. Without a sense of where you want to be, how will you develop a business plan to get there? Setting lofty yet realistic goals can help you motivate your team to improve their performance and assist in tracking every step you need to take to be accountable for your success. You can even consider making your goals and your purpose part of your company’s culture so your team is aware of the overarching goals and direction toward success. Make sure that you keep both yourself and your team aware of progress toward your tangible goals so you have a clear illustration of what to target.
2. Develop a Business Plan
Now that you’ve outlined your goals, the next step in scaling a business is to outline the business plan that you’ll use to get there. If you aren’t experienced in business scaling, you can think of your business plan as a roadmap that helps align your internal processes with your overarching goals as it ensures that you don’t lose focus during the process. Having a business plan allows you to see the larger picture and helps you to scale systematically. Doing so reduces your risk of falling off track and failing when you’re trying to focus on scaling. Once the plan is created, refer to it often to continue making progress toward your goals.
3. Develop Management Skills
Let’s face it; you won’t be able to handle this process on your own. Even though owners are used to wearing many hats throughout the day, they need the ability to delegate during this process and ensure that they have a skilled team behind them. Businesses that have successfully scaled often take advantage of hiring people with the best talent to take their companies to the next level. In addition, you’ll likely need advice from leadership development consultants who can evaluate strengths and weaknesses to avoid bottlenecks in this process. The more effectively you can optimize your workflow, the more successful companies are in the big picture.
4. Hire Strategically
In addition to hiring the right personnel, you’ll want to consider the potential partners that you have in the marketplace to take your company to the next level. Many business owners recognize the importance of expanding their professional network, but you’ll also need to take advantage of other people’s talent and expertise when you are scaling. For example, consider your current team and whether you have the right person to help with marketing or high-level finance. You can even work with talent acquisition consultants to assist you in this process.
5. Automate and Standardize Processes
One way to produce less labor within your workforce is to automate and standardize as many processes as possible. Any day-to-day strategies or workflows that take up too much time should be streamlined before you take the next step in scaling a business. For example, you can consider using technologies and new software to free up time on the nitty gritty so you can focus on the bigger initiatives. The right software can automate areas such as inventory management, accounting and payroll, appointment scheduling, and customer relationship management. You can also leverage business process improvement consulting for additional help.
6. Leverage the Power of Marketing
Attracting more customers requires the right marketing techniques and tools. You should be leveraging content marketing, social media, paid advertising, and even podcasts to gain traction. The goal is to establish your company as a leader in your industry so you can attract more clients and customers. Make sure that you are keeping a close eye on the results; what avenues are bringing in the most return on your investment? This is where you’ll want to spend more money. If needed, lean on product marketing consultants who are experts in your particular field.
7. Expand Your Brand’s Reach Online
How to scale a business depends on the volume of people you can get to purchase your products. Chances are high that your site is where most people are where you are selling your offerings, but consider expanding these avenues to Amazon or Etsy (if applicable) so you’re able to reach a larger audience. Of course, where you should expand depends on where your customers are spending their time online.
8. Connect with Your Customers
To scale your business, you’ll need to connect and communicate with your customers. One way to do so is through social media; here, you’ll be able to engage with your current audience while also attracting the attention of new customers. Some companies prefer to use customer relationship management (CRM) software as a hub for how they connect with their audience. Customer experience consulting is another way to go about this process.
Common Mistakes When Scaling a Business
It’s tempting to rush into the scaling process as quickly as possible, but doing so can do more harm than good. Our experts have outlined some common mistakes.
Scaling Too Fast
You will never cause damage to your company by not scaling fast enough. Consider the example of Mark Zuckerberg and his friends when they first launched Facebook. It started as a small company that was only accessible at Harvard. Over time, they expanded to users beyond Harvard. Even though it may seem as though the company scaled quickly, in reality, it was slow growth. If you notice that your sales are only increasing, you might be tempted to start to scale based on your financial projections. However, anticipated sales don’t usually happen as fast as you think they might. This could result in higher employee overhead costs with a shrinking cash flow. Avoid this mistake by only expanding when you need to bring on more employees to manage your existing sales instead of your projected ones.
Not Leveraging Technology in Your Business Scaling Strategy
Technology is constantly evolving, even a solution that worked for you a year ago might not be the best fit anymore. If you aren’t constantly looking at how you can better utilize technology to achieve a lower cost in how you operate, you are falling behind. Before you know it, you could be at risk of closing your doors for good. Make sure that you aren’t old school when it comes to leveraging technology that can save you time and money (not to mention stress!). Even though it could take some time to implement the new technology and fully understand its capabilities, it will be well worth it in the long run.
Not Designing a New Management Structure Following Growth
To successfully scale your business, you will undoubtedly run into obstacles that threaten your success, one of which is how you structure your team. For example, the management structure that you implemented when you had 20 employees might not be suitable for the company when there are 50-100 people. As you continue to grow and expand your team, you’ll need to make the needed changes to how you structure your business, including your leadership team. Ideally, you’ll be proactive in this process and take action as soon as you have proof that a change in structure is needed. Consider professional change management consulting services to assist you with this process.
Scaling a Business By Competing on Price
Scaling a business solely operating on the premise that you can increase production while cutting prices won’t get you very far. While sometimes you might be able to remain profitable by offering the cheapest product on the market, more often than not, this scaling strategy is only a race to the bottom. Rather than lowering your prices, consider competing on experience, quality, and value. These are propositions that your customers will like and it means that you need to focus less on your price points and more on the value that you’re providing.
Focusing on Short-Term Sales Rather than Long-Term Demand
Although short-term sales are great, it isn’t a sustainable way to think about your scaling strategy. Focusing too much on turning a short-term profit without putting the required energy into your product or service offering can be detrimental. Regardless of the volume of sales you achieve, if your customers aren’t happy with the value you’re providing them, it can detract from your long-term goals. Make sure that you focus more on what you can do to achieve long-term demand, as it is far more important than your short-term sales.
Mismanaging Your Money
Business owners typically either spend too much or too little money. While it’s not ideal to see money lying around and not being put to use, there is a fine line between spending strategically and overspending. Consider if you’re the type of person who is always spending more on new software, marketing tactics, or unnecessary office items. Make sure you’re only spending money when it’s justified to do so, and it will immediately positively impact your business. Before making a purchase, consider whether you can wait longer before investing. For example, if you give your employees outdated computers that are constantly crashing, this is a good area to spend.
Scale Your Business with Cultivate Advisors
We understand that scaling a business can be daunting as there are many moving parts to consider. Rest assured that our team of savvy business experts at Cultivate Advisors can help you through the ups and downs of how to scale a business so you can achieve success. Our team has over 500 years of combined entrepreneurial experience, and we have helped over 2,000 business owners with their varying needs. Schedule an initial call with us at no cost to get started!