BooksTime  ➞  Articles  ➞  How to Scale a Business

September 20, 2022

How to Scale a Business

Reading Time 6 mins

Every startup and small company dreams of skyrocketing growth. But without a bit of planning, business owners can get bogged down in day-to-day tasks and tasks and may not have enough time to get outside to work on their business growth strategy.

If you dream of expanding your business, develop a plan to scale it smartly and sustainably over time.

What Is Scaling a Business?

Even though some people think that «scaling» is just a buzzword, it is a necessary step that growing startups should take.

And it makes sense: it’s when you prepare your business to handle increased demand without incurring additional costs. Essentially, when you expand, it means you bring in more money with less effort.

It’s about responding to growth and adjusting your company model accordingly. Google is the most famous example of a corporation that has scaled as it has attracted many new customers with little additional investment.

The Difference between Scaling and Growing a Company

People often use the terms «scale» and «growth» interchangeably, but although they are related, they are two different things.

Business growth means more revenue, but you’re probably also using additional resources (like hiring more employees to handle more clients or trying to generate more leads).

Scaling is when revenue increases without a significant cost increase, which means you can sustain further growth – you can view it as a sustainable way to grow.

No More Bookkeeping Stress

Keeping proper financial records is time-intensive and small mistakes can be costly. BooksTime makes sure your numbers are 100% accurate so you can focus on growing your business.

When Should You Scale a Business?

A business that is established and has a stable cash flow scale to great heights. A company with unstable earnings may not be reliable enough to launch a scaling strategy successfully. And a new company often focuses on rooting and may not be ready to scale. There is a list of critical signs that it’s better to start scaling:

  • If employees can not cope with the load. Even though you have a strong cash flow through recurring sales, you may turn down new opportunities or let customers down because your team is overwhelmed.
  • If long-term business goals are unattainable. You may have broken your short-term goals, but what about the future? If long-term success seems impossible because you don’t have resources, it’s time to think about scaling.
  • If the leads increase sharply, increasing leads is excellent news, but if you leave your leads hanging in the air, those leads will quickly evaporate.

Entrepreneurs planning to scale a business must carefully consider whether their companies are ready to grow, as this takes time, money, and effort. Statistically, 74% of startups fail due to premature scaling, so you must pick the perfect time to take the plunge.

Mistakes that Often Occur When Scaling

Growing companies often make mistakes when scaling. Keep this in mind to avoid them. Most often, companies face such troubles:

  • Scaling too fast: rapid growth seems optimistic, but if your business isn’t ready, you could hurt your brand. Consider a small company that appeared on a popular TV show and found its web servers couldn’t handle the tens of thousands of hits their websites had.
  • Too many revenue streams: potentially new revenue streams boost sales and create havoc if you stray too far from your brand’s core offerings. It is better to own your niche and gradually and strategically expand from there than to collect too many sources of income without understanding what your audience needs.
  • Not updating your business plan: suggest you didn’t see your business plan since you first wrote it years ago. Scaling is the perfect opportunity to go back and update it to reflect the new direction your business is headed.

Your organizational skills may need to be adapted as your company grows. You may need to hire managers to oversee employees while focusing on the big picture. Consider working with mentors to help you through the process.

How to Scale a Business

What does a Business Need to Scale or Grow Successfully?

Unfortunately, there is no clear path how to scaling or growing a business successfully – if there were, building a million-dollar company would be far less impressive – however, a few things to keep in mind if you plan to expand your business.

The Number of Employees

A growing company needs to increase its workforce to cope with expansion. You build your team to ensure the main tasks are completed in this step. As these tasks grow and become complex, you will find that additional staff (and more extensive facilities) are required.

On the other hand, in a scalable company, you will already have recruited additional staff during the growth period. Still, scaling balances bringing experience on board and managing a cohesive team. Ideally, you will hire just a few inspiring people who can do a lot.

Focus Features

During the growth phase, the success of your business is measured by how well you can increase revenue and market share. You will attract new customers and use potential ones to earn more, and during the first few years, this growth will be steady.

To scale your business, you are more likely to challenge the competition and become the market leader instead of focusing solely on revenue. You may do this by carving out a niche for your product or service, which includes understanding customer needs and crafting the right messages.

What Business Needs to Be Optimized

As your company grows and you take on more customers and orders, you change your workflow to improve efficiency. The founder must delegate responsibility and promote some team members to leadership roles.

On the contrary, scaling is about more than optimizing workflows — you have to look at the big picture and ensure all processes are systematized to achieve maximum performance. Your team also needs to have the correct mindset for scalability.

6 Stages of How to Scale Business

There is no one right solution for company scaling because every business – and founder – has unique strengths and challenges. But there are several essential things to keep in mind. Consider the example of Cathy and her sister Amanda creating Pantee, a line of lingerie and bras made entirely from recycled t-shirts and t-shirt fabric. It was launched in February 2021 and has only grown since then, adding new products and seeking additional investment.

  1. Plan your future: if your company started as a hobby as Katie and Amanda did with Pantee, you might have been going with the flow up to this point. However, to scale sustainably, you need a good business plan. It helps you understand your business, but it’s also something you need to show if you seek outside investment.
  2. Assess your supply chain: scale a business means more sales, and your supply chain needs to be ready for it; what works now often does not work at scale. Pantee, for example, was initially inspired to make underwear out of frugal T-shirts. They then turned to T-shirts from dead stock, which may actually be processed slowly. It takes more time to cut and evaluate finished shirts, which is why the brand has since expanded its source materials.
  3. Hire strategically: expansion means you will no longer be able to do everything on your own or with someone you’ve hired. Katie tells Pantee has been running for the last year or so; only she and her sister have been working full-time with the support of contractors. With several investments, Pantee is about to hire its first full-time employee to take care of brand and community management.
  4. Outsourcing for efficiency: if it doesn’t make sense to hire your employee, there are ways to outsource tasks to streamline your business as it scales. Katie, for example, has no full-time employees. Instead, he uses an agency to manage all of the marketing.
  5. Look for new capital: scaling costs money, and you need to determine the right time to seek outside investment to realize your plans and keep your cash flow going. Such timing is critical. Capital is what you want to secure before you act on your growth plans, not when your company takes off, and you have to fight for funds to support it.
  6. Automate where you can: getting things done faster and efficiently at scale can be easier with tools designed to automate your workflow. These can be simple fixes, such as how Katie created response scripts to handle a high volume of support requests.

Scaling a business means growing it slowly and steadily to sustain that growth over time. A company is scalable if it can handle an increase in customer demand without significantly increasing its spending to meet the demand.

Conclusion

Scaling a business may seem impossible once you’ve reached a plateau. The truth is that learning to scale a business is never impossible, but you may need to change what you do if you want to scale successfully. When was the last time your business focused on innovation? When was the last time you assessed what is holding your company back and overcoming those barriers? If you don’t grow in business and life, you die. Don’t change your company just for a change – scaling your business will be accessible when you strategically align your choices with your end goal. Take your time and do it right.

Share This Article

Rate the article
Rate the article
(0 voted) 0 / 5

Author: Charles Lutwidge

Read previous article

Talk To A Bookkeeping Expert

A bookkeeping expert will contact you during business hours to discuss your needs.

bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime
bookstime