Five Most Important steps to Scale Your Business
So you have decided to scale your business – congrats! Your journey has just begun. Next, you’ll need to know how to sustain your business, maintaining the same quality of services/goods on a larger scale.
Most entrepreneurs think just because the orders are coming in, they can expand. However, this is not the case. Scaling your business isn’t just about expanding to another region, multiplying the sales or opening a new branch. Your company must be ready with all the necessary resources to support the change.
Scaling a business is all about capability and capacity. Can the available resources sustain growth? Does your business have enough ability to scale?
If the answer to either of those questions is no, then you and your business will be in trouble. Orders will fall through cracks; you’ll have inadequate manufacturing capacity which will necessarily lead to dissatisfied customers.
For you to set the stage for scaling right, follow this process.
Five Important Steps to Scaling your Business
1) Evaluation and Planning
Take a hard look inside your business to see if you are ready for growth. You can’t know what to do differently unless you take stock of where your business stands today.
Start with creating strategies to increase sales. Then assume a scenario where your orders tripled overnight. Does your business have the capacity to sustain such increment without getting a huge black eye? This is why it is critical to plan accordingly.
The best way to start this is by creating a detailed sales growth forecast. Break this forecast into a number of orders, customers and revenue expected. Create a spreadsheet or use whichever other tools that will breakdown the figures monthly. Be specific and allow room for a 1% error.
Once done create a similar expenses forecast this should be based on the additional technology required, people, systems and infrastructure needed to handle the new sales.
Evaluate every single item on your P&L to determine how they will be impacted. With increment in sales through orders nor price, it is expected that expenses will rise. Create a spreadsheet or use whichever other tools to breakdown every single expense surge expected.
Take your time to research, go through and update every expense. Without knowing your numbers, you can never scale successfully. The first step is done, let’s move on.
2) Find the Money
Growing a business isn’t free. Your plan will require additional staff, new technology, systems and even facilities. You will also be required to increase your reporting systems capacity to measure and manage changes and results. With all these changes, money is involved.
Remember the expense sheet we created in the previous step? Well, that’s your guideline in acquiring the needed capital.
The question is, where do you find the extra money?
There are so many places to start. First, determine whether you want to employ debt or equity financing or both. Debt financing is where you acquire a short term or long term loan that is repayable at a specified interest.
Equity financing is where you value your company and receive money for a specified amount of shares. For example, if you ask for $10,000 for 10% equity, you are valuing your business/company at $100,000 and are willing to give 10% ownership out to whoever is willing to pay you $10,000.
Read more on when to choose debt or equity financing here.
In some cases, it may be advisable to both financing options. One of the ways is through convertible notes. Convertible notes are short term debts which are issued with the intention of later converting into equity after certain conditions have been met. One of the conditions could be to have a proper evaluation after a future financing round or after analysis of growth rate and numbers. It may sound complicated, but it isn’t.
Read more about convertible notes here.
3) Secure the Sales
Scaling the business will result in you selling more. You need to find out if you have a stable sales structure in place to boost more sales. Answer the questions below:
- An efficient lead flow to attract target sales?
- Robust marketing systems in place to manage leads?
- Do you have a good number of sales representatives to identify and close leads?
- Do you have a flexible system that can manage orders?
- A strong billing system that updates automatically and ensures all invoices are collected in a timely manner?
4) Technology Needs
Technology makes things easier. One of the significant benefits is the economies of scale achievable if you invest in tech wisely. Here are some features to consider:
Automation – to run your business functions smoothly reducing manual work and costs.
System Integration – All systems in your business must work together to be more efficient. If they don’t, the management and communication problems will multiply as your business grows.
It is a great time to evaluate the new tech-based products in the market that save money and time at the same time accommodating high volumes of your business. Look at marketing automation, sales management, accounting, manufacturing, HR, technology systems and shipping.
Analyse the networks, hardware required; printers, servers, computers, telephone e.t.c as well as the software.
5) Strategically Outsource of Hire Staff
You won’t be able to do it all by yourself. Technology reduces the work, but at the end of the day, you will need the human resource.
Answer the following questions to find out what you need:
1) Do you have a strong customer service support system? Evaluate your industry’s benchmark on how many people one service representative can handle at a go.
2) Do you have enough people to manufacture, sort inventory and deliver your services and goods? Based on your industry benchmark on average how many are needed according to your sales forecast? Do you have the minimum?
3) Do you have recruiting and hiring systems in place? In case you need to hire people urgently have you set up a strong foundation to support this? Where will you source impromptu staff if the need arises?
4) What management do you have? Do they have the capacity to oversee everything even after you grow?
Once you answer these questions, you will know whether your solution is to look for outsourced partners or hire internally.
It may, however, be easier to source a third party to partner with as they may already have the systems and functions your company needs in place. Replicating the structure internally may take a lot of money and time.
Those are the five main factors every business owner should consider when scaling a business. Let us know what you think in the comments.