Every startup and small business dreams of rocketing growth. But without a little planning, business owners may stay mired in focusing on daily tasks and to-dos and may not take time to come up for air to work on their business strategy for growth.
If you dream of expanding your business, get a plan for scaling it smartly and sustainably over time.
What Makes a Business Scalable?
Scaling a business means growing it slowly and steadily so that it can sustain that growth over time. A business is scalable if it can handle an increase in demand from customers without heavily increasing its expenses to accommodate that demand.
Scaling a tech company is easier than scaling other types of businesses. For example, a software as a service (SaaS) brand could easily handle a significant increase in customers simply by adding more servers to its system. On the flip side, a business that trades time for money, such as a consultancy, is one that may be more difficult to scale because, in this example, a consultant can only work with one client at a time, so is limited in how many customers she can serve.
Key factors like profit margins, efficiency, and partnerships
Profit margins play a crucial role in scaling a business since they directly impact the sustainability and long-term viability of the expansion. While scaling can bring in increased revenue, maintaining healthy profit margins is essential to cover growing expenses, invest in further expansion, and ensure the business remains financially stable. Additionally, healthy profit margins allow businesses to attract investors, access capital for further growth, and build a resilient foundation for sustainable long-term success.
Efficient and streamlined processes are also essential for scalability. Automation and optimized workflows can help handle increased demand without an equivalent increase in resources.
Partnerships can also be a beneficial strategy for scaling a business, but they’re not always necessary. Whether a business needs partnerships to scale depends on various factors, including the industry, the nature of the business, and the specific growth goals.
Signs that your business is ready to scale (strong finances, operations, demand)
- Effective financial management: You have a clear understanding of cash flow, managing expenses, and having access to capital for expansion when needed.
- Market demand: You’re able to tap into a growing or large market demand, ensuring that the potential for expansion exists and that there is room for the business to grow without saturating the market.
- Flexible infrastructure: You have an infrastructure that can adapt and accommodate growth without significant changes to the fundamental structure. This might involve scalable cloud computing, flexible manufacturing processes, or an adaptable organizational structure.
When Should You Scale a Business?
A business that is established and has steady cash flow is one that can scale to greater heights.
On the other hand, a company that has unsteady revenues or too much debt is one that may not be secure enough to successfully launch a scaling strategy. And a new business may be focused on establishing roots and may not be ready to scale.
Entrepreneurs considering scaling should carefully consider whether their companies are truly ready for growth since it’s going to require time, money, and effort to get there.
7 Ways to Scale Your Business
Now let’s look at a few of the ways you can scale your business.
1. Expand your business model
You’ve made a name for yourself by offering certain products or services. It’s time to consider offering new products to better deliver what your customers want.
Consider related services or products that your customers might want. For example, if you sell home decor in your retail shop, you could start offering live plants. If you are a business coach who works one-on-one with clients, you could start offering group coaching programs.
Franchising is a business model where a franchisor grants a franchisee the right to use its brand, products, and business processes in exchange for fees and ongoing royalties. This arrangement allows for quick business expansion without the need for a huge investment from the franchisor while providing the franchisee with a proven business concept and support system.
Licensing a business involves granting permission to another party to use your intellectual property, such as trademarks, patents, or copyrights, in exchange for fees or royalties. You’ll typically draft a licensing agreement outlining the terms and conditions of use, including the scope of the license, payment terms, and any restrictions on use. Both parties have to negotiate and finalize the agreement, ensuring that all legal and financial aspects are clearly defined and agreed upon before the license is granted.
To open a new location for your business, start by conducting thorough market research to identify a suitable location with high potential demand for your products or services. Once you pick a location, be sure to get the necessary permits, licenses, and zoning approvals from local authorities. Finally, set up the new location by hiring and training staff, establishing operational processes, and creating a marketing plan tailored to the specific customer base and needs of the new area.
2. Invest in partnerships
There’s no reason you have to do all the heavy lifting when it comes to scaling. Consider potential partners you could work with to score more customers. With your home decor store, you could partner with an interior designer who offers in-person decorating classes in your shop. She can promote the event to her contact list, exposing your brand to a wider audience.
Choosing the right vendors for your business involves looking at things like vendor reputation, reliability, pricing, quality of products or services, and their ability to meet your business’s specific needs. Look at the vendor’s track record, financial stability, and their capacity to scale alongside your business. Prioritize vendors that can offer flexibility, innovation, and a strong partnership that aligns with your business strategy and can contribute to your overall growth and success.
First, find affiliates whose target audience lines up with your customer base, ensuring a natural fit between your products or services and their content. Analyze their reputation, reach, and engagement levels within your industry, as well as their ability to drive traffic and generate conversions. Establish clear communication channels, fair commission structures, and provide comprehensive support and resources to make sure it’s a mutually beneficial partnership.
You can research and attend industry events, conferences, or seminars to connect with other professionals and potential network members. Use online platforms, like LinkedIn or industry-specific forums, to engage in discussions, share insights, and build connections with like-minded professionals. Actively participating in networking activities, professional associations, workshops, or local business events can help you establish rapport and credibility within the business community.
3. Hire employees
Scaling happens from all sides: as your customers grow in numbers, you’ll need new employees to help serve them. Look to hire team members with skill sets that complement your own so that you have experts in every area — from customer service to marketing.
Build out your team to meet demand
To build the right team, start by figuring out the expertise you need to fulfill customer needs. Develop a clear job description outlining roles, responsibilities, and performance expectations, and then recruit employees who can fill those roles. Foster a collaborative and supportive work environment by offering in-depth training, resources, and tools to empower your team members to perform at their best.
4. Automate processes
One overlooked aspect of scaling a business is simply improving operations, workflows, and internal processes. If you leverage automation to handle, for example, your email marketing, you save time and can put that toward other areas of your business.
Business growth relies on establishing solid processes, especially if you hire more employees. Document every task in your business so that new hires can easily ramp up and get to work. You’ll make training easier and save time.
Streamline operations for efficiency
Start by conducting a comprehensive assessment of existing processes to identify bottlenecks and how things can improve. Simplify and standardize workflows by using more efficient technologies, automation tools, and software systems that can help streamline repetitive tasks and reduce manual errors. Consolidate tasks and responsibilities where possible, and empower employees with the necessary training and resources to make them more productive.
5. Consistently market your biz
To attract more customers on a regular basis, you’ll need to leverage marketing tools like social media, content marketing, podcasts, advertising, and more. The better you establish your brand as a leader in your industry, the easier it will be to attract new customers.
As you market, keep an eye on results. Which marketing avenues are bringing in the most traffic to your website and sales? These are the ones you want to invest more in. For any channels that aren’t doing the job, cut ties and reinvest your marketing dollars in what’s working.
Promotional offers — like “buy one, get one” or “20% off” — can attract new customers by providing an incentive to try a product or service at a discounted price. This can expand your customer base. Additionally, well-crafted promotions can foster customer loyalty and repeat business, contributing to sustained growth by encouraging existing customers to buy more.
Acquire new customers
To bring in new customers, start by understanding your target audience and their specific needs and preferences. Develop a comprehensive marketing strategy that uses various channels that you’re able to support — like social media, content marketing, advertising, and search engine optimization. But don’t feel like you have to do it all, especially not in the beginning. Create compelling and relevant content that highlights the value proposition of your products or services and engages your target audience, and experiment to see what outlet works best.
6. Expand your brand’s reach online
Your scalability depends on how many people can buy your products. Your website is likely where you sell your products, but you’re not limited to it. Look into becoming a seller on Amazon or Etsy (depending on your audience) so that you can reach more people with your products.
Leverage digital marketing and social media
Digital marketing and social media are useful because you can give your customers real-time feedback or support. It’s also a great way to offer something, whether that’s education about your business’s niche or funny videos that grab customers’ attention.
7. Get the funds you need to grow
Scaling your business requires capital. You may not have cash on hand to cover the expenses you’ll run into, like new software, equipment, or payroll. Here are your funding options.
Startups and other businesses can consider venture capital and bring on experienced investors with the right contacts to help them scale. This is also called equity financing because it involves giving away a percentage of equity (or ownership) of your business in exchange for funding.
Small business loans are one of the most common types of business financing for scaling a business. Yes, you’ll be taking on debt, but many businesses find they need debt to see the growth in revenues that they’re after. Plus, the growth can more than cover the loan and interest. You have many options when it comes to financing, including lines of credit, business cash advances, and invoice financing.
Don’t want to take out a loan? Look to business credit cards to help you make purchases for your business.
Consider crowdfunding for your business if you want to generate excitement around a new product and don’t want to have to pay back a loan. Crowdfunding is collecting donations from a group of people to fund your idea in exchange for either future repayment or incentives, depending on the type of crowdfunding.
Mistakes to Avoid in Scaling
Growing businesses often make mistakes when scaling. Be aware of these so you can avoid them.
Scaling too fast
Rapid growth may sound like a positive thing, but if your business isn’t prepared, you could end up hurting the brand. Consider the small business that made an appearance on Shark Tank or Oprah’s program and found their web servers couldn’t handle the tens of thousands of views that their websites had as a result. Or the companies who couldn’t keep up with orders because they didn’t have enough inventory on hand.
Your scaling strategy needs to account for what you will need to accommodate growth. You may need to hire more employees, order more inventory, or step up your technology.
Having too many revenue streams
While yes, potentially having new revenue streams can increase sales, they can also create havoc if you stray too far from your brand’s core offerings. You can’t be all things to all people, nor can you sell everything. It’s better to own your niche and expand gradually and strategically from there than to slap together too many revenue streams without truly understanding what your audience needs.
Not updating your business plan
You may not have seen your business plan since you first wrote it all those years ago, but scaling is the perfect opportunity to come back to it and update it to reflect the new direction your business is heading. Writing down your goals and how you will achieve them gets you in the right headspace to understand what scaling truly looks like.
Not paying attention to changing company culture
Small business owners sometimes overlook how scaling impacts company culture. If you started your business with just three employees and you’ve scaled to 50, that changes how your employees experience their jobs and your company.
Your leadership skills may need to adapt as your company grows. You may need to hire managers to oversee employees while you focus on the big picture. Consider working with mentors who can guide you through this process.
Scaling to Success
As your business grows, so do the possibilities for the future. Rather than aiming for overnight success, plan for sustainable growth by carefully planning your scaling strategy, finding the right financing, and updating your plan as it changes.
Tips for sustainable growth and avoiding pitfalls
Here are four tips for achieving sustainable growth when scaling a business:
- Maintain focus on core values: As you expand, keep your business’s core values and mission that initially drove your business at the heart of everything you do. Make sure that all expansion strategies align with your brand identity, customer base, and company ethos.
- Monitor financial health: Keep a close eye on your financial health and establish sustainable financial practices. This includes managing cash flow effectively, controlling expenses, and diversifying revenue streams to mitigate potential risks and maintain financial stability during periods of growth.
- Emphasize customer relationships: Cultivate strong customer relationships and prioritize customer satisfaction. Listen to customer feedback, adapt to their evolving needs, and continuously improve your products or services to ensure long-term customer loyalty and retention.
- Invest in employee development: Prioritize the development and well-being of your employees. Provide opportunities for training, skill development, and career advancement. A motivated and skilled workforce is necessary for sustainable growth.
This article was originally written on January 7, 2022 and updated on November 16, 2023.