How to scale your business

The best way to grow your business is to scale up or replicate your business without adding in top-heavy overhead. Here are some things to consider when you're thinking about a strategy for sustainable growth from scaling.

4min

The difference between scaling and growth

Scaling a business and growing a business are different things.
 

Often growth refers to an increase in sales volume with the corresponding bump in infrastructure to manage market demand. For example, professionals charging by the hour usually need to employ more people to grow larger to do the work for each new client, and they only have 24 hours in a day. Retailers will open more stores as there are only so many shoppers they can physically serve. Manufacturers may need to move to larger premises or upgrade the output of equipment because they can only produce so much an hour.
 

Scaling a business, however, usually involves taking on an increased workload in a cost-effective manner. To do this, you need a strategy to scale your business that focuses on new revenue and efficient systems. For example, sending a company email to one person or your whole database takes the same amount of time. Good examples are tech companies (Google, Facebook etc.), where their expenses for serving each incremental customer are almost zero because the raw material is software. Also, the same overhead can handle delivery to 1 million customers or 100 million (accepting that more customers mean an increased need for customer service).
 

Your path to success lies not in just growing your company but in scaling it. When companies scale, they add revenue faster than they take on new costs. For the successful scaling of your business, follow these steps:

Step 1. Check products or services are scalable
 

Start with your business plan and sales and marketing strategy to determine whether business scalability is viable for you. Sounds obvious, but if you're the local café with limited seating, your company won't be increasing revenue tenfold with the current business. However, this raises the business scaling opportunity to investigate different, profitable business models. For example, your company could wholesale coffee to other cafes, license recipes, sell online to shoppers around the country, or sell franchises.

Step 2. Adopt the technology
 

Technology will make business scaling easier and more efficient while lowering costs, as it tends to remove the need for human intervention to deliver immediately.  Some things you can do include: 
 

  • Use software for invoicing, sending receipts, tracking delivery, customer queries or complaints, FAQs, and inventory management. Clear the decks of any distractions or unnecessary tasks.
  • Integrate processes, so you have one primary way of tracking what's going on. List all the software, physical inventory, job costs or ordering procedures you currently run and find a way to cut down the clutter.
  • Automate your sales funnel (prospecting, qualified leads, closing and delivery). CRM software solutions make this easier, such as HubSpot and Zendesk. You'll most probably want to automate qualified leads, tracking, selling, and a robust system to manage sales orders.
  • Look at your manufacturing, HR, shipping and other tech systems, including networks and hardware such as servers, computers, and communication equipment. 

Step 3. Staff up or outsource
 

Technology gives you leverage, but you'll still need sales, post-purchase service, and support to accommodate growth. Identify your industry benchmarks to determine a rule of thumb for how many customers one service rep can handle. Sometimes the answer is to outsource or look to partners to help meet demand rather than hire internally (depending on what you're doing).
 

A good example is dropshipping, where companies can sell an item online but don't hold the item in stock, as the wholesaler ships directly to the customer. It's one way of scaling online businesses (like Amazon and Trade Me do) without needing to focus on storage solutions.
 

If vital skills are missing amongst your staff, look at upskilling through training or hiring someone with the knowledge, ability and experience you need. With scalable business growth comes the need for advanced skills such as dealing with data, delivery and supervising complex computer-based operations.

Step 4. Measure everything
 

Scaling a business often requires instant data to know when to change what you're doing fast, especially if the business gets the speed wobbles. For example, software companies use monthly recurring revenue (the number of sales from subscriptions each month). Then, decide what key performance indicators you want to monitor, such as online queries, leads in your pipeline, conversion metrics, or margins. You could also measure the growth rate of revenue or customer base month to month.
 

In addition to these standard measurements, you may have sector-specific metrics you want to track.

Step 5. You have enough capital or resources
 

The last step is to be confident you have enough capital to fund your rapidly growing company or have the internal capability and capacity to deliver. Many companies become stuck when their sales volume increases ten-fold. Before you begin scaling, calculate cash flow scenarios predicting different levels of growth to identify what strategy you should implement for success.

Summary
 

Scaling your business doesn't come without its risks, but the rewards can be significant. For example, the benefits scalable companies experience include: improved operating efficiency, greater market value, broader brand reach leading to new customer acquisition and more sales, and, of course, more money means businesses can improve their profit margins.
 

Remember that to ‘scale' means increasing all parts of your business to cope with the number of new customers, and it's best if the growth is manageable. Reviewing your internal system and processes to ensure maximum efficiency is crucial, but even more so is making sure you have the resources you need, such as staff, facilities, equipment and capital, to achieve that growth.

Next steps
 

  • Talk to your industry contacts or other business owners to identify how they integrate their software.
  • Find out from similar businesses which CRM software they use to manage leads.
  • Build internal capability through your people or technology.
  • Consider the funding or capital requirements of scaling your business and talk to your banker for advice.
  • If you need finance, ASB has a Productivity Grant to help improve productivity across a range of business activities - apply before 30 June. Enquire online, visit a branch call 0800 272 222 or contact your ASB Banker. 

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