As businesses grow, they often discover new ways to perform certain functions to maintain efficiency and sustain their profitability. Scaling a business helps leadership teams implement and test these new processes or procedures to reduce risk and prepare the organization to better manage its growth. Understanding what this process is can help you grow a business that can succeed long term.
In this article, we explain what scaling a business is, list how to do it in seven steps and provide some tips to help you when scaling a business.
What is scaling a business?
Scaling a business refers to actions leadership teams take to ensure their business grows without sacrificing quality or increasing costs. A successfully scaled business has the infrastructure to handle increased sales volumes while steadily reducing costs. Businesses that do this effectively can support growth by planning and preparing systems, staff and processes for sustainable long-term growth and profitability. Scaling is a growing company’s ability to ensure cost-effective production and an effective workforce.
Beyond increasing sales or inventory turnover, scaling a business prioritizes adapting to a different way of doing business. For example, a human resources manager in a small business may interview all prospective hires personally, but in a larger business, the HR manager delegates interviews for entry-level employees. The company’s leaders realized that as the company grew, the HR manager’s duties increased. Because of this, they updated their interview process to delegate the task more efficiently.
How to scale a business
Here are some steps you can follow to help you scale a business productively:
1. Plan properly
In addition to sales growth, it’s crucial to consider your product offerings, marketing, funding sources, internal processes, staffing, business premises and infrastructure when trying to scale. Consider looking at how to grow your company’s operational capacity to handle more sales or work without disrupting ongoing processes. The goal is to devise a well-organized, sustainable and adaptable strategy, and having an effective plan can help ensure you reach your goals.
2. Secure financial support
Scaling a business before experiencing sales growth can be expensive, but if you developed a strong business plan, you can secure financing that helps the business succeed. When seeking new finance opportunities, consider a range of options, such as equity financing with angel investors or venture capitalists, crowdfunding, debt financing through loans or a line of credit. It’s important to know in advance how much investment you want and how you’ll allocate it.
3. Set realistic and clear targets
Try to set goals for all areas of the business, such as sales growth, cost management, staff recruitment and staff training, and carefully consider how scaling and growth might affect your company. Building a business plan for growth that has clear metrics for success in all departments can help each team member know what role they have in the growth and better understand the company’s future.
When creating goals, consider using a combination of short- and long-term objectives to help monitor progress and create more milestones. Using the SMART method can help you set more achievable goals, which can help you scale more effectively. Steady, sustainable growth often is better for a business than rapid overexpansion, and setting realistic goals can help ensure you don’t scale too quickly.
4. Consider the best options for growth
The fastest way to achieve your goals may not be the best way, so try to review all of your options for growth. For instance, sales may grow rapidly through expansion into a new market, but invoicing and accounts receivable processes might be unable to manage the increased volumes. Considering other methods of growth can help you grow sales while also ensuring accounting processes remain efficient. To help with this, try to think about the role technology, consolidation or outsourcing might have in your growth plan to help you succeed.
5. Change the internal culture
As you scale your business, you may want to hire more staff, and a hands-on approach where you know all the employees might not be possible in a larger company. As you grow, it’s important to ensure new employees take part in supporting the company’s business values. Try to promote a culture and environment where people want to work and excel, which can help them be properly engaged and motivated.
Consider establishing and communicating the values of the business when hiring new people. You also can involve existing employees by having them define what’s most important to them and ensuring everyone in the organization is clear on how the business operates. A strong sense of organizational identity can help a business scale.
6. Standardize the product
To scale effectively, try to standardize products or services to make them repeatable across different locations and parts of the business. It’s crucial to provide a quality and consistent product. This can help ensure you don’t lose quality or service while growing, which can help you retain customers and find new ones. Another critical part of scaling a business is establishing structured, repeatable processes for its everyday operations. This includes payroll, accounts receivable, training of new hires, onboarding of new customers and managing complaints. Automating processes where possible can help you reduce these administrative burdens.
7. Monitor progress and adjust
Try to compare your progress continuously to your clearly defined targets and make adjustments as necessary. Scaling a business is an ongoing process, and being proactive about growing with the right products, processes and people can help you have a more smooth transition. You may still experience issues along the way, but monitoring your progress can help you identify them sooner and find more effective solutions.
When planning to scale a business, try to build an organizational structure that works with your planned changes. You may want new levels of management or new departments to manage IT, HR or other functions. It’s important to establish a clear hierarchy and departmental responsibilities before the business outgrows its current structure.