Expansion and growth are what businesses expect, but when the time comes, most are unprepared. It's prevalent for small businesses that find success to run into scaling issues, and because of this, they find substantial setbacks and profit losses.
When faced with expansions, businesses begin to double their production at insane costs by buying more equipment and resources, hiring more workers, and expanding beyond necessity. If you want to learn how to scale a business, these tips will help ensure that your business doesn't falter during times of growth.
What is Scaling in Business?
You may be asking yourself, why bother scaling up a business? Scaling a business means setting a foundation for your business to grow as you continue operation. It's vital to keep margins as favorable as possible for your business to continue generating revenue.
When people hear the word scale, they associate it with expansion or growth. It's important to note that a scaling strategy is different from a business growth strategy. While there are similarities when discussing scaling in business, people usually refer to scaling as the ease of accommodating demand during periods of hyper-growth.
A business accomplishes this by increasing its output with little effort and cost. When a company can meet demand and has scalability, growth comes naturally, and businesses can accommodate and capitalize on new customers.
Why You Need to Scale Up Your Business
Staying agile in an ever-changing world is how businesses continue to thrive. It's vital to understand that more customers will be interested in your product as time goes by. When this happens, you'll see a demand for your product above your original starting point.
For example, pretend that growing an online clothing business is your overall goal. As your clothing business becomes popular, you're getting more orders than you typically get. Your business starts to experience material shortages, delays, and a backlog of unhappy customers waiting for their orders.
In this theoretical example, having a scaling strategy becomes crucial to ensure sales continue at a steady rate. Without a plan, expenses may become too much, and orders backlog. If a customer has to wait for an extended period, it'll reflect poorly on your online clothing business.
Business Scaling Strategy: How to Scale Your Business in 2022
If you are wondering how to scale a business online or at one of your physical locations, here are five tips to help you grow your business.
Prepare for Growth Before it Happens
Scaling a business ensures that growth happens with minimal disruption and cost. The best way to accomplish this is by preparing early. A general scaling strategy allows your business to keep up with demand and growth.
Find points in your operation that would be expensive or difficult to scale if demand grows. These points will be your main focus during your early stages of business. If increasing production becomes necessary, look for alternative methods or cheaper alternatives to maintain the same input but increase your output.
Automated processes will prove crucial to your business regarding scalability. Cutting time from marketing email campaigns, online advertising, and invoices frees up employee time to focus on higher priorities.
A good scaling model allows you to continue operation as is, regardless of the size of your business. Automating these processes as your business grows ensures efficient use of time since humans won't have to send out even more emails or invoices manually.
Businesses need to acquire any competitive advantage they can. Using technology and keeping it up to date is a sure way to ensure that your business has some semblance of scalability during times of growth.
Technology is critical in scalability because tasks requiring human intervention are limited to time and energy and are subject to errors. If needed, technology can output more than a human and do so globally.
Perfect examples of technology that improve your business's scalability are accounting, HR, inventory, and marketing software. Having computers and easily upgraded software are great ways to keep up with demand.
Using cloud services allows you to skip paying for technology upgrades as high-end machines are also available via cloud services. Digital storage also no longer becomes an issue as your business can continue to expand its storage without worrying about physical hard drives and servers.
Small businesses will find it easier to outsource expertise or equipment to meet customers' growing demands. When necessary, outsourcing saves you money and buys your business time to improve your operation to meet the growing demand while not sacrificing anything waiting for upgrades and internal changes.
Businesses scale to meet demand. So, you'll find massive losses if there is no demand for your product or service. It's important to remember that steps have to occur before proper scaling can happen.
The typical solution when forced growth happens is to try and downscale again to a smaller-sized operation. From that minor operation, you'll begin to find growth again.
Optimizations such as product or service quality improvement, resource distribution, and getting more out of raw material will improve your output and, in turn, increase your scalability.
Biggest Challenges in Scaling a Business
You'll find that some of the biggest challenges in scaling a business is that not all companies have a scaling business model. Businesses, such as consultancies that deliver specific expertise, are challenging to scale up.
Being unable to replicate or mass produce a process or service is why scaling a business is hard. Sometimes a business scaling strategy is simple and very effective. For example, you write a book and mass produce that product to sell. Books have natural scalability. It's a product or resources with natural scalability as it indefinitely meets demand.
Generally, scalability becomes a challenge if your business revolves around providing a service to someone, and a human must provide it. It's not to say that it's impossible, but the benefits of scaling a business don't come easily to some service businesses.
Scaling Business Examples
Now that you know how to scale a business, it’s important to be aware of how it can be done right.
Google is a perfect example of a business that scales appropriately. Google can actively service more customers without increasing their resource usage as much. There are a few reasons that Google can scale better than most businesses, mainly because of its focus on technology.
Google utilizes technology to its full extent to ensure costs stay low, but the number of people they can service will increase. The Google search engine, YouTube, and their telecommunications companies are all services that allow a dedicated team to serve millions without outrageous costs.
About the Author, James Webster
James Webster, founder and Executive Chairman of ROK Financial has almost two decades of experience within the financial services industry. His passion for helping small business owners and his innovative way of thinking, has allowed him to run multiple successful businesses including National Business Capital & Services. Under the National name, the team was able to help secure over $1 Billion in financing for small businesses nationwide.