How to scale a business effectively

Tips for scaling your small business

When you first started your small business, you likely hoped it would continue to grow by increasing sales and revenue. In other words, you planned to one day start scaling your company. But as sales and revenue increase, the business becomes more complex and challenging to navigate.

Luckily, the challenges you face when scaling your business are not unique. You just need the right strategy, team, and processes in place to help you scale effectively. In this article, we’ll help you understand what it means to scale your business and identify steps to take to reach your goals.

What does it mean to scale a business?

Scaling a business means equipping your company to handle increased demand and sales without sacrificing quality or significantly increasing costs. 

The term “to scale” is often used interchangeably with “business growth,” but they are not exactly the same. Growth is when you increase revenue at roughly the same rate as you add resources, such as team members, technology, and capital. But when you scale your company, it grows more efficiently. So your revenue increases without substantially increasing costs or adding many new employees.

What is a scaling plan?

A scaling plan is a well-organized, sustainable, and adaptable strategy that helps you reach your growth goals. It helps ensure you have the systems and procedures in place to prepare for lasting, profitable expansion. A scaling plan identifies how your business will handle an influx of new customers and orders and lays a foundation for future growth.

To create a scaling plan, take the following steps:

1. Look at your company’s current revenue, expenses, processes, and infrastructure. You cannot know what your business needs to do differently to encourage and support growth if you don’t first take stock of where it stands right now.
2. Strategize how to increase sales. Determine what people and systems you need in place to handle an influx of new customers and orders.
3. Create a detailed sales growth forecast. This should include the number of new customers, orders, and revenue you want to generate each month to meet your scaling goals.
4. Plan for your future expenses. Create a similar forecast for your costs once you add the necessary technology, people, infrastructure, and systems to handle that sales growth.

Why do businesses fail to scale?

According to McKinsey, only 22 percent of new businesses started in the last ten years have successfully scaled. That’s not an encouraging statistic, especially since most entrepreneurs have big ambitions for creating a lasting, successful company. But you can help ensure success by understanding why many companies fail to scale.

Some common mistakes companies make during the scaling process include:

• Scaling too quickly
• Prioritizing short- and long-term goals
• Losing focus
• Hiring without considering the quality of candidates
• Overlooking processes and systems that drive efficiency
• Lacking agility
• Not understanding their target customer

The key to avoiding failure as your business grows is ensuring you and your leadership team agree on your company’s goals, values, and processes. This will help you ensure that your company can handle future sales.

Strategies to scale your business

Because every business is unique, every scaling plan will also be unique. But many companies that scale effectively follow similar practices.

1. Define your growth goals

To ensure your business scales effectively, you need to define growth goals. This helps you determine what steps you need to take to achieve success. 

When goal planning, you should focus on both short- and long-term goals. If you focus only on short-term goals, you risk scaling too quickly and ignoring the processes needed to sustain growth. On the other hand, if you only focus on long-term goals, you and your team can become demotivated because you do not see short-term success.

Your company’s goals should also be both outcome- and process-oriented. Outcome-oriented goals focus on the end result. Process-oriented goals determine how your business systems and processes will change to achieve those outcomes. For example, if you want to double your customer retention rate (an outcome-oriented goal), you may need to improve your customer experience (a process-oriented goal).

To meet your growth goals, you need to identify your target market, set realistic goals, and set milestones.

Identify your target market

Before you can set realistic goals, you need to determine your target market. Your target market is the group of consumers with shared characteristics who are most likely to buy your products or services.

Identifying your target market helps you focus your marketing message on the people most likely to purchase from you, understand your value proposition, and determine the demand for your products or services. 

You can define your target market by

• looking at who’s currently buying from you,
• considering who your competitors are targeting, and
• determining who would benefit most from your products or services.

Set realistic goals

Once you know your target market and the demand for your products or services, you can set clear, realistic goals. They should strike a balance between being reasonable and challenging. 

If your objectives are not clear or achievable, your staff may be demotivated, which can negatively impact your company’s ability to scale. You can help ensure you achieve these goals by using the SMART method. This method means that each objective should be specific, measurable, achievable, realistic, and time-bound.

When goal planning, set objectives for all areas of your company, including sales, cost management, staff recruitment, and training. A well-defined scaling plan will help you set these goals because you’ll better understand how scaling will affect every aspect of your company.

Set milestones

Once you’ve set goals for your company, you should set monthly or quarterly milestones. Milestones help set expectations for your team and allow you to adjust if the business is off-track.

Start with your end goal and create a timeline for when you need to meet various milestones. This gives you a full roadmap of what your business needs to accomplish before reaching its scaling and growth goals.

2. Build a strong team

You cannot scale your business by yourself. Instead, you need to delegate many important tasks to other people by surrounding yourself with talented and highly-motivated team members.

Just because you want to increase your revenue, however, does not mean you need to increase the size of your workforce substantially. Instead, focus on adding people who want to excel, are properly engaged, and are motivated to help the business meet its goals.

To build a strong team, you need to develop a management team, hire the right people, and cultivate external relationships.

Develop a management team

Your management team is responsible for motivating employees and achieving their team’s individual goals. They also hold your staff accountable for outcomes.

Your management team’s effectiveness will directly impact your company’s ability to scale successfully. To ensure your managers are successful, identify the right skills to drive growth. These skills include critical thinking, strategic planning, time management, change management, problem-solving, relationship building, and delegation. Your managers should also be flexible and agile so they can grow with your business.

Hire the right people

When creating sustainable growth, you don’t want to hire anyone to do the work. According to a study from McKinsey, high-performing employees are 400 percent more productive than the average team member. As roles become more complex (as is bound to happen when scaling your business), that jumps to 800 percent more productive. So it’s crucial that you hire quality workers.

To ensure you’re hiring the right people, you must first decide what skills your business needs to meet its goals. Consider both hard and soft skills that will support customers and ensure success. 

• Hard skills are job-specific and technical knowledge gained through education and experience. They include things like business analytics, search engine optimization, graphic design, and project management.
• Soft skills are self-developed traits that can be more difficult to define. They allow employees to work well with a team and adapt to your company’s culture. Soft skills include agility, customer service, communication, organization, and time management.

Once you’ve determined which skills are crucial for your company, look at your current team and identify any gaps to know who to hire. To learn more, read our article “A guide to hiring employees (what to look for and watch out for).”

Cultivate external relationships

To successfully scale your business, you need to think beyond your employees. You must develop strong relationships with suppliers, partners, and other companies that will be part of your overall growth. 

You also need to establish close relationships with your customers to give them an excellent experience from beginning to end. Your goal when creating a customer experience should be that your customers become strong advocates for your business by spreading the word, which will help you scale your company.

3. Implement scalable technology solutions

Even high-performing workers cannot effectively do their jobs with the wrong tools. By investing in the right technology, you can better support your team and make scaling your business easier and less expensive.

The right technology can automate many manual tasks, saving you and your employees a lot of time. This means it takes less effort to achieve results, which can make it less expensive for your company to scale successfully.

To implement scalable technology solutions, identify the platforms you need and determine the right solutions for your company.

Identify the platforms you need

Every business may need different technology solutions, so you need to determine what products will best help your team. Consider which tasks and processes take up the most time and look for solutions to help you create repeatable processes. 

You may need multiple software solutions, including customer relationship management (CRM), workflow automation, project management, and human resources management (HRM) platforms.

• CRM: CRM software collects all your customer information in one place so your team can quickly access the data and better support your customers.
• Workflow automation: Workflow automation platforms help you create repeatable processes at a lower cost to encourage more productivity. They can help you automate any tasks that are low-value and repetitive, such as data entry and task logging.
• Project management: Project management software helps with project planning, scheduling, and resource allocation to meet deadlines. To learn more, read our project management software guide.
• HRM: An HRM platform helps you manage any and all internal human resources (HR) functions. It can include employee data management, payroll, recruitment, benefits, training, and employee engagement. Find the right HRM solution with our human resources management software guide.

Determine the right solutions for your company

Once you’ve determined which platforms your business needs, identify the right technology vendors. When comparing different software solutions, consider the following:

• Usability
• Customer service
• Implementation Timeline
• Cost 
• Any other key criteria for your company

Secure funding

Although successfully scaling a business means minimizing how your costs increase, it’s still not free. Working to scale your company before your sales start to grow can be expensive — you may need to hire new staff members, invest in new technology, and add equipment or facilities. But if you’ve developed a strong business plan and scaling plan, you can secure the funding you need to handle these costs and help your company succeed.

You should consider a range of funding options, including equity financing (such as angel investors, venture capitalists, and crowdfunding) and debt financing (such as obtaining a loan through a bank). It’s crucial, though, to ensure that how you gain new capital aligns with your business’s goals. To learn more, read our article “Funding your business: 5 ways to secure financing for growth.”

Monitor progress and adjust as needed

Scaling a business is an ongoing process. Be proactive by continuously reviewing your progress and ensuring you’re meeting your goals and milestones. By tracking your progress, you’ll be able to identify issues that could derail your scaling efforts and make adjustments to correct those problems. Having the right products or services, processes, and people in place can help the scaling process go smoothly. You’ll be able to easily adjust and change your scaling plan.

Take the first step toward scaling your business

As you can see, it’s crucial to plan for your business’s growth to ensure that your costs do not get out of control and that you can handle an influx of new orders. If you’re ready to start scaling your business, start by setting goals. Read our article “How to set revenue and profitability goals for your business” to take the first step.