Image sourceAccording to the Small Business Administration (SBA), small businesses account for 99.9 percent of the business population in the USA. They are also the main drivers behind economic growth in the economy. For any small business, a natural progression is to think about expanding its business. In fact, a recent report by Guidant Financial showed that 49 percent of small business owners plan to grow their staff and expand their business this year – even though it has been a tough year for many small businesses. Whether it is due to your customer base growing, a desire to expand your eCommerce presence, or a move to reach new customers, scaling up your business can be a great success – if done at the right time and with the right planning.
Signs It May Be Time To Scale Up Your Small Business
Recognizing the signs it may be time to scale up is just as important as taking the right steps. Get the timing wrong, and small businesses can leave themselves vulnerable, both financially and strategically. The first sign it may be time to expand your business is an increasing incidence of having to turn away customers due to insufficient stock, opening hours, or operational resources.
Also, if your business has been enjoying strong financial performance steadily over some time, particularly a good cash flow and sales volume, it’s a sign that it’s time to expand. Be careful not to confuse your profitability with cash flow. An expansion requires financial investment and liquid resources. Profits are not always liquid: they can sometimes be tied up in assets. Lastly, consider whether you have the right resources in place to support your growth. You may have exceeded the previous business goals and feel it is time to move onto new ones, but without the right infrastructure and resources, scaling up can easily go wrong.
Get Your Finances Ready For The Growth
Before you can work on creating public interest for your brand, you need to be able to support those moves. Being financially sound to expand your business, while still maintaining operational flow during expansion is critical. For instance, if you are expanding your business premises, overhead costs like rent, utilities and insurance will rise. It will also be some time before you can enjoy higher profits to compensate for higher activity levels, so your reserves should be adequate to pay for those additional costs.
Map Out And Streamline Your Resources
There is an important distinction that business owners need to know before scaling up their business: growing a business versus expanding a business. According to Blair Nicole, CEO of Media Moguls PR, “Scaling is about increasing revenue without committing an equal amount of resources, allowing you to boost profits instead of just the size of your company.” Therefore, scaling up does not always equate to spending more. If you do end up increasing your spending, there’s a high risk your profits may end up being lower or stagnant instead of growing.
To reduce this risk, resource mapping is vital. Start by identifying your business’ core competencies before identifying any inefficiencies or overspending. Creating pockets of savings means they can be redirected to your expansion plans – without driving up the investment bill. Also, look into streamlining your current operations. If you have to hire additional employees or expand your vehicle fleet, make sure that the resources you do invest in are effective and efficient. For instance, you may find that outsourcing additional business functions like marketing and accounting is cheaper. In other words, ensure you are getting the most out of your business resources.
Figure Out Where The Scaling Up Will Happen In Your Business
There is no right or wrong way to expand a business. In fact, there is a long list of ways to grow a business, such as introducing a new product to the market, expanding to new demographics, or pursuing cross-industry collaborations. With the help of customer insights and market research, get to know your customers (or potential customers) and what they want to see from your business.
A key part of a successful business scale-up is the support of its customers. Using these insights, businesses can tailor their expansion goals to align with customer demands. More importantly, it can tell you whether there are enough customers to justify an expansion like this. For instance, you might look to introducing a new product in your range.
Scaling up a business takes planning and patience. For a business to expand successfully, there must be capacity and capability for it to happen. Identifying the right time to scale up, and following the right steps, puts you in a much better place to make it a reality.
