Whenever a startup takes off and begins to grow its revenue, entrepreneurs often feel that the business can accomplish more in terms of product offerings and the number of clients served. However, entrepreneurs face the constraints of time and money. They also need a healthy work and life balance. This makes scaling a business a delicate affair.
The strategies applied by a startup as it seeks to scale are what sets apart businesses that continue on to become million-dollar companies from those that fail.
Scaling a business is different from business growth. Business growth simply means increasing business revenue while facing increased costs of production. For instance, when a business hires additional staff in order me meet expanding demand for a product, that is growth.
Scaling on the other hand means building the business’s capacity to meet additional workload without compromising on quality. Scaling is about avoiding pitfalls that come with greater demand including miscommunication, missed order deadlines, and understaffing.
Why Is Scaling Important?
Scaling helps businesses achieve sustainable growth especially when they are still young. Attaining sustainable growth means that a business does not expand too fast leading to cash-flow problems and does not grow too slow to allow competition time to take over untapped markets.
Having the ability to scale properly helps the business to attract investors who are confident that the business will expand fast. Being able to demonstrate scalability impacts the valuation of a company whether they are seeking to raise capital from private investors or through an IPO. For instance, having the ability to tap into a new country successfully shows the ability to do it in more countries which greatly increases company valuation and investor confidence.
Scaling the Right Way
The odds of succeeding in scaling a business are often stacked against entrepreneurs. Statistically, young businesses are more likely to fail than to succeed. However, there are a few pointers that perhaps when applied properly, significantly tilt the scales in favor of young businesses.
Finding the Money
Scaling the business requires the entrepreneur to inject money into the business. This may involve hiring additional staff, acquiring, and launching new technology, opening new offices, and putting in new systems to measure performance.
Some entrepreneurs might prefer bootstrapping but that requires a lot of time. Many great businesses have died a natural death owing to lack of funding. Proper scaling requires that the entrepreneur finds the right amount of money and from a proper source. A bank that extends a line of credit to a young business can enable the entrepreneurs to aim for bigger revenue targets because they will now have the capacity to take on bigger orders.
Allowing Employees to Share Your Goals
Young companies at the rapid expansion stage must allow their employees to be feel emotionally invested in the prospects of the company. Such things as bonuses, paid leave, college tuition reimbursement, among other perks greatly affect the level of attachment employees have to a company. Additionally, appreciating current employees help to retain great talent while attracting new talent. Both are important for any company that seeks to scale.
As a young company scales, it is also crucial to have a discussion regarding what the company’s values are. These need to be communicated to the employees and firmly adopted by the company. It is easier for employees to develop an attachment to the company when they know what the company stands for.
Let Your Spending be Guided by Data
When attempting to scale, any spending must be guided on hard data. Data will reveal such things as what your customer pain points are, what customers already love about your product, and where new leads are in the sales funnel.
Such data is what should guide marketing-spend. Failure to rely on data can lead to a start-up blowing cash fast with little impact on their revenues and market share. Focused spending is crucial in preserving company cash-reserves while increasing conversion rates. For instance, there are circumstances where content marketing is more likely to work better than traditional ads. You can only find this out through insights from data.
Hiring and Outsourcing Smartly
A young business looking to scale must look at the industry in which it operates and determine whether they have the capacity to deliver the quality of service or product customers expect. If not, the entrepreneur must develop a plan to hire quickly when the need arises.
As such, a hiring system must be in place. This could mean engaging a third-party recruiting firm to speed up the process. The business managers must also assess the impact of additional staff on the payroll as well as benefits scheme. The business has to be able to absorb both of these. Sometimes, the assessment may reveal that the business is better off partnering or outsourcing some work to another firm instead of recruiting just yet.
Closing Sales to Justify Scaling
As highlighted, scaling is all about putting in capabilities and capacity to do more as a business. Such structures reflect confidence that the business can generate more sales.
Before investing in structures, the business should have a significant number of leads to project increased sales. With this, the business must also develop marketing systems to track those leads. What channels will the business use? Are there enough sales representatives to follow up on leads?
The business must also put in place a system to deal with increase orders. A billing system should also be in place to ensure accurate invoicing and follow up on receivables. Part of the structures will include having the right technology for the various functions including customer relationship management.
The Importance of Planning when Scaling a Business
Scaling without a proper plan is a classic set-up for business failure. Ideally, planning should begin with sales projections guided by proper figures. Then, based on those projections, the business managers or owners must determine what structures need to be in place to properly handle the additional orders, customer requests, and so on.
If you are looking to build your business’s capacity to scale through technology, check out Transcendent Software’s services. We are a software consulting and development firm with over 20 years of experience helping businesses use technology to solve problems.