How to scale a business is a perennial question in entrepreneurship circles. Not only is the answer different for every company and every industry, it’s also fairly tricky.
Growth leads to increased revenue, profits and valuations. But spending aggressively on scaling anything from adding staff, regions or new products can lead to pitfalls, pains and sometimes the end of a business.
As a business owner, knowing when to grow can play a major role in your company’s long-term sustainability.
The key is to find the right balance of acceleration to maximise the business and capture market share without breaking the bank.
Here are a few tips to grow your business.
Know when to scale
Founders going for growth need to consider the market’s own growth rate or the expansion of total spending in a given space. This is basically the pace car you need to beat to gain a share.
While it may be enticing to jump into the land-grab race, it’s important to focus on your product and the interest of target customers rather than growing too fast. Once you’ve nailed the product and caught the audience’s attention, then it’s time to go big and fast.
Understand your cash flow and budgets
Here’s a scary thought: High growth businesses can easily go bankrupt. That horrible outcome of great product, bad business happens when growth consumes cash. Get intimate with your cash flow statement.
Understand when money comes in, where it goes and when, as you don’t want to let your bank balance fall below zero. As for your marketing budget, expenses should be targeted towards activities that generate customers quickly and inexpensively.
Also, try to direct more of your budget toward clients who will stay with you long enough for you to recover your initial customer-acquisition costs. This way, you’ll have a more consistent flow of money coming in.
Recognise the trade-offs
Continue to manage the balance between growth and profitability. If you raise prices too high, too early, you could curtail growth while widening profit margins.
Further, if your prices are too high, you could lose market share, as a more moneyed competitor that can afford to undercut you for longer could step in. It’s a tricky balancing act but one that needs constant attention. Remember that you must continue creating value to outpace the market.
Get the capital
Being able to sustain a company while generating losses requires capital. If you have a business that is venture-fundable, gaining VC investment provides long-term capital to continually invest in differentiation and growth.
To have a top returning venture-funded company, you probably need to be at least doubling revenue every year for many years. If your company is going to grow more slowly, then seek other forms of capital, such as loans or sweat equity from yourself and your partners. Either way, you need to focus on having a stream of capital to keep your business afloat.
Hire, hire and then hire some more
Before you decide to go full-speed ahead with your growth strategy, make sure your business is prepared for scaling with human capital. Do you have the team to execute in a high-growth environment? If not, the best advice is to hire well. Look for folks with senior-level experience.
You will have to make some hard calls, not just in hiring but also in letting go of employees who’ve been with you since the early days but haven’t grown with the business.
Handling rapid expansion
Undoubtedly, a rapidly growing business is a great problem to have. It means more market penetration, increased customer reach and ultimately, greater sales.
But there are also many challenges to address and overcome to effectively manage the infrastructure of a business that is flourishing quickly. Get it right and you’re building a R100 million business. Get it wrong, and your flourishing SME might still fail.
Customers come first
As with any business – especially one focused on emerging technologies – it’s important to not only understand trends in the marketplace but to keep up with them. (If you can’t effectively satisfy numerous and varied consumer demands, you will lose momentum and expansion will fizzle quickly.)
The consumer and market dynamics can dictate what strategies are necessary for a successful business and being able to assess the initiatives and changes you choose to implement will benefit you in the long run.
Consumer shopping patterns and expectations have also changed. Focusing on exceeding those expectations through offerings such as expanded store hours, increased product knowledge and expertise and unmatched in-stock inventory can make you a vital resource for your customers – ensuring they get the products they need, when they need them.
Be flexible and willing to adapt
As with many things in life, it’s important to embrace change and be willing to adapt. In fact, continual evolution can signify your ongoing commitment to serving an ever-changing market. Continue to innovate and progress through new partnerships, products and services to survive a rapid expansion.
Reinvest in your brand
It’s important to continue investing resources to protect your position in the marketplace while you’re growing. To meet consumer demand and improve service levels, introduce new products and services, improve in-store technology, increase omni-channel marketing efforts, add training programmes, and be willing to dedicate time and money toward solidifying operations and boosting sales.
In addition, by expanding your staff and keeping your supply chain and distribution centre consistently functioning, your business will run smoothly while growing rapidly.
Maintain your company ethos
When a business faces rapid expansion, it can be easy to lose sight of its core principles. A good company mantra that can keep both you and your employees grounded and focused is the acronym H.U.M.B.L.E.: Hard workers, Urgent, Mutually Accountable, Brand Builders, Loyal, and Execute with Excellence.
In business, growth isn’t possible if you rest on your laurels, but it can be equally detrimental if you spread yourself too thin. Stay humble through rapid expansion and your customers and investors in your brand will appreciate you that much more.
Communication is key
Constant communication among key stakeholders, the exchanging of ideas and feedback and making sure you’re aligned toward achieving the same goals is critical.
Whether you’re hosting a company convention, participating in a franchise council, executive meeting or simply taking a phone call from a customer, the line of communication throughout your business should always be open.
Incorporate a consistent and streamlined process for connecting with everyone in your company to relay key messages, major milestones, goals, company changes and plans for the business. You must all be on the same page in order to move forward collectively