Here are six steps to consider in scaling up your business
For companies that have established themselves as a successful business, what comes next? If you have a $5 million company, why can’t it be a $50 million company? If your company is a $50 million business how do you strategically scale to $500 million?
Step 1: Business Planning
Breaking out of the small and medium business mindset is not easy and getting the balance right between working on the business and working in the business is a real challenge for many companies.
Establishing a business plan for profitable growth is the first step. The business planning process enables you to consider all of the factors for growing and scaling the business. The business plan roadmap puts the plan into actions and timelines.
Step 2: Build Customer Demand
Often the primary barrier to scale is lack of customer demand. Building customer demand is essential to becoming a bigger business.
Embedding yourself in the right networks is important, as no one can scale a company by themselves. Client and stakeholder relationships are critical in driving customer demand. Relationships and networks become increasingly important as companies scale. They become the source of customers, suppliers, partners, employees and investors.
Step 3: Build Systems that Scale and Drive Efficiencies
The next major challenge that businesses face as they grow is that systems and processes can be hard to scale. Systems that are sufficient in a small organisation can break down when the company is dealing with ten times the numbers of customers and employees.
It is important that these systems be flexible and evolve over time, as the systems and processes sufficient for a $50m business are ineffective for a $500m business. Developing systems and processes that drive efficiencies through the business becomes critical in achieving customer service and managing overheads.
Step 4: Hire the Right People
Scaling the business is also about the right team, the right people with the right capabilities in your business. It is important that people hired fit into the culture of the business.
You need to hire people who can help scale. In practice, this often means that you have to hire ahead of your needs. You need to hire people you trust and believe in your vision and strategy. For a small company scaling into a medium-sized business, this may mean hiring a chief financial officer with experience running a medium sized company.
Companies that scale into multiple business units across different geographic regions will need new layers of management. A simple management structure works for businesses up to 100 or 200 employees. If you are scaling past this size, then you get into an additional level of complexity and another level of management.
As a company scales, it is likely that it will outgrow some of the founding team and early employees. You have to recognise and embrace the fact that the team may change.
Step 5: Manage Cashflow and Finances for Expansion
When growing from $5 million to $50 million or from $50 million to $500 million you are going to need additional capital in the business. Growing the business at a sustainable growth rate is important. This enables business owners to balance taking money out of the business with the increasing working capital requirements.
Managing cashflow and the finances are critical, with monthly budgets and weekly cashflow reports and forecasts. Examining accounts receivables, managing account payables, implementing inventory best practices and timely invoicing are all activities in managing cashflow.
Step 6: Work On Your Business, Not In It
The final step is to establish a professional structure to the business. The process of professionalising the business is the recognition of the importance of motivated, well-informed and talented people within the business as well as putting in place business plans and KPIs to monitor performance. This includes establishing and formalising processes to implement the business plan, setting performance expectations with clear, well-defined goals and KPIs, organising formal monthly business review meetings, and nurturing the culture and values of the business as you grow.
Establishing an advisory board also contributes significantly to scaling up of the business by providing sound, objective, independent advice.
Successfully scaling up the business can provide long-term sustainability and financial rewards for business owners.