How to Scale a Business

So you’ve made the decision to grow your business – congratulations! Now get ready for the next challenge: how to scale your business for growth. Even if you manage to sell like crazy, you’ll soon have another problem: you have to be able to deliver to all those new customers.

Scalability is about capacity and capability. Does your business have the capacity to grow? Will your business systems, infrastructure and team be able to accommodate growth?

If growth causes your company to stumble because of confusion, orders falling through the cracks, insufficient staff, miscommunication, not enough manufacturing or delivery capacity –you’re going to have unhappy customers. The manual processes that were fine when you were small but now won’t let you move fast enough. You’ll either be putting out fires or desperately trying to keep your head above water. All of which is stressful.

Scaling a business means setting the stage to enable and support growth in your company. It means having the ability to grow without being hampered. It requires planning, some funding and the right systems, staff, processes, technology and partners.

Here are five critical steps to scaling your business:

Evaluate and Plan

Take a hard look inside your business to see if you are ready for growth. You can’t know what to do differently unless you take stock of where your business stands today.

Strategize what you need to do to increase sales. Then assume your orders doubled or tripled overnight. Does your organization have the people and systems to handle those new orders, without failing or getting a big black eye? This is where a good plan is essential.

The best planning starts with a detailed sales growth forecast, broken down by number of new customers, orders and revenue you want to generate. Include a spreadsheet that breaks the numbers down by month. The more specific you are, the more realistic your sales acquisition plan can be. Then do a similar expense forecast, based on adding technology, people, infrastructure and systems to handle all those new sales orders. Look at every item on your current P&L to see how it might be impacted. Expenses will go up -- you have to anticipate where and how. Again, include an expense spreadsheet that breaks down expenses needed to meet your sales forecast.

Try to think of everything. You’ll need to do some hard thinking and research to come up with proper cost estimates, but doing so will make your plan better.

Secure your funding lines

Scaling a business doesn’t come free. Your growth plan may call for hiring staff, deploying new technology, adding equipment and facilities, and creating reporting systems to measure and manage results. How will you find the money to invest for growth? While bootstrapping is a common way for many small businesses to begin, it typically takes years to grow through bootstrapping alone.

There are a number of funding options available to small businesses with more than 6 months’ trading history to take advantage of, including secured and unsecured business loans or lines of credit.

Equipment financing can also typically be used to cover any kind of business operating expense – from vehicles to furniture to large machinery – and businesses that take advantage of these funding programs can often buy equipment through equipment financing plans at lower interest rates than with traditional loan options.

Whatever your requirements, it pays to seek professional advice from your finance broker or accountant before committing to any one particular line of funding

Secure the Sales

Scaling your business obviously assumes you will sell more. Do you have the sales structure in place to generate more sales? Look at sales from end to end. Do you have:

 A sufficient lead flow to generate the desired number of leads?
 Marketing systems to track and manage leads?
 Enough sales representatives to follow up and close leads?
 A robust system to manage sales orders?
 A billing system and a receivables function to follow up to ensure invoices are collected timely?

Invest in Technology

Technology makes it easier and less expensive to scale a business. You can gain huge economies of scale and more throughput, with less labour, if you invest wisely in technology.

 Automation can help you run your business at lower cost and more efficiently by minimizing manual work.
 Systems integration is a prime area for improvement in most businesses. Companies today don’t run off of a single system -- they may have a dozen or more systems. If those systems don’t work together, they create silos, which in turn multiply communication and management problems as your company grows.

Now’s a good time to evaluate new products on the market that save time and money, yet accommodate much higher volumes in every part of your business. Look at CRM, marketing automation, sales management, inventory, manufacturing, accounting, HR, shipping and other technology systems.

Evaluate not only software, but also networks and hardware such as servers, computers, printers and telephony equipment.

Find Staff or Strategically Outsource

Last but certainly not least, are the hands needed to carry out the work. Technology gives huge leverage, but at the end of the day you still need people.

 Do you have enough customer service staff? Look at industry benchmarks to determine a rule of thumb for how many customers one service rep can be expected to handle.
 What about the people who are responsible for your manufacturing, inventory and delivery of product or services? How many are typical for your industry per customer, and how many will you need?
 How do you find qualified help quickly? Recruiting and hiring systems are important, as are benefits and payroll.
 Don’t forget management. The importance of a management bench grows as your business grows. You won’t be able to oversee everything.

Sometimes the answer is to outsource or look to partners, rather than hire internally.

Scaling requires that you make tough choices. What functions can and should you perform -- or not perform -- internally?

Third parties may have the staff and investment in systems that enable them to be much more efficient in handling a function than your company. Trying to replicate that function internally may take too much time or money. Instead, find a reliable partner to outsource, thus positioning your business to scale better, faster and cheaper.

These are five factors to consider in scaling a business. Have you encountered any issues in scaling your business?