As a seasoned business owner, you know how tough it is to grow your business. Some years you work your tail off just to squeak out another percent. But growth can come easier if you adjust your model to one with high scalability.
Your ability to scale depends mostly on what you do. If your business depends on your skillset, scaling will be difficult. There are only a certain number of hours in a day you can work. You can hire other people will similar skills, but they will never produce identical work, and they will never love your business. It’s possible to scale simple service businesses, but expert-level services are challenging.
Construction is a poorly scalable business because work must be done with people and machinery. If a company wanted to take on more projects at a time, they would incur most overhead costs. Software, on the other hand, is highly scalable because selling one digital product is just as easy as selling a thousand.
Investors love scalability. You’ll have a much easier time finding investment and financing for your business if it’s highly scalable. But you have to show concrete evidence that you can keep your margins high and your costs low.
How do you scale your business?
- Be a proactive owner. It’s important to plan for scale before you begin aggressively growing. Your overall business plan should lay out a growth strategy, including potential challenges. Have this in place even if you don’t expect a demand increase, so you are prepared.
- Build a solid foundation. If you want to be a big player, you have to do at least one thing exceptionally well. Keep your model simple. Scaling becomes exponentially difficult when you try to grow in too many directions. Avoid offering new services just because you can. If necessary, pivot your business into a model that permits faster growth.
- Build lots of cogs. Even though you don’t want to be some cog in a machine, your business should have lots of them. When you de-emphasize the individual, you allow the company to grow outside of a person’s skill. Create systems and processes and hold your employees to them. This ensures the quality of your product or service and protects you from the loss of key employees. The largest companies in the world are structured so that even the most important executives can be replaced without trouble.
- Build an incredible management team. Hiring is essential when it comes to growth. Even the most scalable companies require competent people who can manage the business in your stead. You have to hire people who make good decisions and then leave them be. If you hire the right people, you won’t have to hire many.
- Prepare a marketing strategy. A highly scalable business enjoys low costs, but growing rapidly does require some investment. Promotions and advertising work now, but you have to think long term. Invest in your brand. Attend conferences and become a thought leader.
- Get help before it’s too late. Before you take the next growth step, don’t be afraid to consult with a specialist. That advisor could be a consultant, a financer, or an expert in your industry. It’s easier (and cheaper) to get help putting together a plan than to get rescued when you’re in over your head.
Bob E. Teittinen
Commercial Lender, Senior Vice President