Do you know how to scale a business? It takes quite sometime, effort and money to scale a business, so its must be done right to reap the benefits. As per statistics, around 50% of new businesses survive only five years while one-third of business last 10 years.
No matter how much we plan, we can never predict the future. We may never get to the point where we get everything right, and growth is an inevitable consequence of our business. We might encounter a series of challenges that make it hard for us to grow.
We all want to grow. Growth is a sign of success, and many businesses will thrive as a result. However, life isn't always easy, and we might come up against challenges that prevent us from achieving our goals.
This article provides answers to the most crucial questions relevant to consider when scaling your business:
What is Business Scaling?
Scaling is a way to increase your business from one level to the next. There are different types of business scaling, but they can be classified into four major categories. Knowing these is important if you want to know how to scale a business.
- Vertical Scaling
- Horizontal Scaling
- Hybrid Scaling
- And Geographic Scaling
It refers to expanding vertically by increasing the scale of a business within its current industry. In other words, you dive deeper into the market your business is already penetrating in to increase the demand for your product and build a greater customer base.
There are two ways businesses can scale vertically; one is by further enhancing the present product with additional features and capabilities, and the other by introducing new products with similar market segmentation.
However, one might face challenges in upgrading the manual work in large machines, and hardware additions can only be upgraded to a limited extent.
It refers to expanding horizontally by increasing the variety of a company's products or services.
There are multiple ways of horizontal scaling, such as introducing existing or new products/services to new markets and outdoing competitors from that market. Another way to scale horizontally is to develop your own supply line or delivery service.
Remove the dependability of third-party suppliers and take all business operations in-house. Extract the core of the existing succeeding product and apply the same values and core competencies in designing products for other industry needs.
Nonetheless,horizontal scaling might create extra problems for a business, especially related to your target market. Multiple challenges might occur due to due to challenges with product localization or industry-specific business considerations.
It refers to expansion in all directions simultaneously and includes vertically scaling as well as horizontally scaling the business slowly and steadily as per requirement.
In the tech world, there is easy access to expand a business via hybrid means. A real-life example of this would be the Apple Computer. They used an independent dealer network to distribute their low-cost computers. However, the company had to adapt when it began to offer more sophisticated equipment to large corporations. As part of a new direct sales strategy, Apple hired 70 national account managers. So, with time, Apple applied the necessary measures to scale the business accordingly to satisfy the increasing demand.
This type of business scaling refers to expansion in new geographic locations.
Corporations can scale geographically in multiple ways, such as managing a manufacturing plant in another region or selling existing or new products in a new region. You can introduce a new product, establish service centers, engage in mergers and acquisitions, or expand your product or service to a new geographic market.
However,you must include geographic factors when considering the effects that a region's natural features, people, and industries have on a firm since this kind of expansion happens in significantly different regions and requires certain changes in product or business procedures which will accommodate the needs of the areas. Geographical scaling, in some instances, can also be considered the globalization of a local brand.
What is the difference between scaling and scaling up?
- Scaling is a fundamental concept in business and technology. It refers to the process of making things larger and larger.
- Scaling up is a specific form of scaling that refers to the process of increasing the size of an organization or system.
The difference between scaling and scaling up is that scaling up is a specific form of scaling, while scaling can be applied to all forms of business or technology.
When a business scales, it usually entails developing business models and upgrading or improving your company in such a way that it can easily scale to create steady revenue growth, maximize profit, and avoid stalls without adding a lot of extra costs and/or resources.
Scaling up usually happens when a company has significantly achieved a lot, has been successfully growing, and is now willing to move to a much bigger level. It is considered the most rapid and significant stage of development and is most likely to include huge challenges and risk factors.
Why You Need To Scale Your Business?
Now that you know how to scale a business, its time to know why its important to scale a business. Every business has two options: to either grow or stagnate. Stagnation is the antithesis of growth, which is why scaling a startup has become a buzzword in the entrepreneurial world.
Scaling a business can be loosely defined as expanding or increasing your success by adapting your business model to accommodate larger sales volumes, traffic, or other metrics. It also means expanding your reach so that you are able to sell more products and services to more customers.
Many entrepreneurs tend to think that scaling their business means adding more people, adding more staff, adding more processes, and adding more systems. But in reality, scaling a startup means figuring out how to do more with less.
Being deliberate in expanding a firm can guarantee that you tackle all of these responsibilities effectively, allowing you to laser-focus on product development and other elements. Every new firm confronts challenges, from developing an original idea to growing and meeting growth targets. Yet, it maybe tempting for aspiring entrepreneurs to ignore constructive criticism while addressing it, believing they are wunderkinds who just don't face what others do. Some may assume their business will expand fast and effortlessly because their idea is so amazing, they have a large online following, and/or they believe the world urgently requires their service.
If you are not ready for scaling but want to build your own business you should read our checklist for starting a business.
Scaling Your Business Brings Long-Term Growth
Another reason to scale up business is that long-term growth is the solution for everything else that may and does go wrong at a business. The ability of a company to accomplish sustained growth (how fast, for how long, and how profitably) is the difference between a firm failing, reaching a small outcome,or expanding into the enormous enduring business that all founders and investors desire. This is why scaling is so crucial, at least in terms of being associated with growth.
Scaling is Not Easy
Scaling your business entails more than just increasing its size. You can expand your firm, but that doesn't imply that you will be able to handle the extra output.To scale means being able to take on larger workloads while being cost-effective and meeting your company's expectations without suffering or overstretching. It's about adjusting to the increasing workload, consumers or users, and then delivering. When a new firm begins, it must consider scalability and profit growth.
Consider scalability to be the litmus test for determining whether or not your company concept is feasible. It is the reality check you need to get your business up and running, and it should be regularly monitored and referred to throughout the process.
Why should one scale? Scaling your startup is beneficial because it will allow you to make your business not only grow faster but also become much healthier.
What Are The Dangers And Challenges Of Scaling Too Quickly?
Scaling is a popular term used to describe a company’s growth rate. It is a business strategy that can be beneficial but can also have significant consequences if not implemented properly. Scaling too quickly may lead to increased costs, loss of employees,and lack of resources. According to statistics, quick scaling is responsible for 74% of startup failures. A company will need to have everything in place before scaling as it takes time to develop the necessary resources as well as the proper infrastructure.
It is easy to become sidetracked as you expand, so resist the urge to introduce additional features or items too quickly. If you are not addressing your clients' fundamental pain problem, the other bells and whistles won't matter.It is critical to maintaining focus on the larger picture and the tasks that will ultimately lead to success.
One way to prevent scaling too quickly is by following a more deliberate approach called slow scaling. A company will first identify its goals and then take gradual steps towards them by dividing them into smaller milestones that are more manageable for the business and its employees. If a company follows this approach, it will be able to create a road-map of milestones that will help with decision-making and resource planning. As you scale,keep your purpose in mind. What factors contributed to your company's success?What do customers claim to want?
Using this method, businesses can effectively allocate their resources while simultaneously meeting the short-term objectives of the business.
How Does An Entrepreneur Go About Solving The Scaling Challenges?
An entrepreneur has to be able to identify the problem before they can solve it. They have to understand who their customer is, what problems they are facing, what are solutions to those problems, and how they will benefit from the solution.
Entrepreneurs should also identify the best time of day for them where they are most productive. This is important because if their hours don't align with customer hours, they won't be able to solve any problems for them since fixing a problem doesn't happen overnight.
Solid growth signals do not necessarily imply that you are ready to scale. The major reason why companies fail is a lack of product-market fit. When you begin to acquire traction, it is critical to pause and assess your progress. You must not only have a product or service that an expanding user base wants, but you also have the business systems, infrastructure, and people in place to meet that demand. The answer is simple: take your time when scaling your business.
Also, an entrepreneur needs people on their team who can help them scale the business by providing different skill sets that might not be available on the team or may not exist in-house.
How Does A Startup Need To Change As They Grow From A Small Business To A Large Enterprise?
Many small business owners start their business with a low budget. With low overhead and limited financial resources,it can be difficult to grow to a large company. However, some steps can betaken to make this process smoother.
As a startup grows, they need to change the way they run the business. They also need to alter their organizational charts, and management style is a crucial factor in creating an organization that can sustainably operate at a larger scale. The more complex an organization becomes, the more it needs clearly defined lines of authority and responsibility at all levels. This is necessary to meet the demands of running a large enterprise.
Do learn from mistakes and get better it's also recommended to follow the Lean Startup Approach.
How Can I Hire The Right People For My Company As It Grows?
The recruitment process is not an easy one. Many people are unaware of the steps they need to take to find the best talent for their company. A big part of recruitment is discovering what talent you are looking for, who you want to reach out to, what you have to offer them,and how they are going to benefit from their association with your company.
This section is all about different ways in which you can hire talented people for your company. It includes tapping into networks of professionals by creating an environment that will attract young professionals or even looking outside your own country in order to find the best talent that will grow with your company.
- Focus on culture: This is the most important criterion that should be taken into consideration while hiring people because if your company's culture isn't great, the chances are that you will lose amazing talent.
- Hire for the future. Instead of looking for someone who can immediately fit into your company, look for someone with the potential to develop into a great contributor with time and effort.
- Find company builders who align with your mission and values.
Some of the best recruiting strategies are talent scouting, work at home, and content marketing.
What Are The 3 Key Things That Need To Be Present For A Company To Grow Successfully?
The company needs to be charismatic and offer a diverse range of products and services for an increasing number of customers. Furthermore, it needs to obey these key factors:
- Vision: This is the ability to understand and predict what will happen in the future and plan for it accordingly.
- Mission: This is why a company exists?What does it want to do? What problem does it want to solve for its customers and society?
- Culture: This is the foundation on which a company’s success is built.
You should also start early to create financial forecasts and projections, to predict and control the future of your company.
How to Grow a Business from Small to Bigger With the Help of Systems and Processes
The growth of a company is not a linear journey. It takes different stages and strategies to grow from small to bigger.
- In the first stage, a company starts small with few processes and systems. The management can be easily managed by one individual or a team of people.
- In the second stage, the business starts demanding more from its systems and processes as it grows in size.
- In the third stage, the company has grown to require more managers with experience in this field of specialization.
- Lastly, the fourth stage requires an ex-CEO who can run and oversee all organization and business operations smoothly and effectively.
The way to grow a company is by ensuring that systems and processes are in place. This will help the business grow while ensuring consistency in how it does its work.
Some of the most common systems and processes for growing a business are:
- Setting up processes for hiring, feedback, training new hires, and performance reviews
- Setting up a process for dealing with customer feedback
- Setting up a process for handling accounting tasks
- Setting up a system of processes to handle customer requests
There are three phases of business growth. We will outline them here and discuss how systems and processes can help in these stages.
Phase 1: The Baby Business - This is when a company has one or two employees. Systems are not yet necessary because the owners are running the show themselves.
Phase 2: The Growing Business - This is when a company has grown to 10-20 staff members who need to be managed. Systems are necessary for this phase because it would be too time-consuming for the owner to do everything manually on their own.
Phase 3: The Mature Business - This is when a company has 100+ employees on staff, with all sorts of different departments that need managing. Systems are necessary for this phase because it's impossible to keep track of everything yourself.