The numbers for small businesses and start-ups that successful grow are not – on the face of it – particularly encouraging. The majority of new businesses typically fail after the first five years, and a sizeable minority of small businesses (around 20%) fail almost immediately, within the first year or so. In order to prevent this from happening, you need to know how to exist as a small business and find a niche that will help you grow. But a great deal of failed businesses also collapse because, when the time has come for scaling up, they did not grasp the nettle. If your business has done well enough to be on the cusp of expansion, then the most important thing is to do it. In the dynamic business world, businesses need to keep moving to survive.
Thus, scaling up your business very quickly becomes a two-pronged problem. It is important to know how to scale up, but it is also important to know when to scale up. However, while it might appear self-evident that it is simply business success that indicates a need to expand, things are rarely that simple. Sometimes the opportunity to expand and scale up comes along before it has actually happened.
A Distinct Concept
This point about knowing when and how to scale up brings us to an important distinction that we have ignored thus far. Scaling a business is not the same thing as growing a business. In the realm of business terminology, at least, they are two distinct concepts, and the precise definition of scaling up is intimately related to doing it right and at the right time.
This difference becomes more apparent when we consider that there is such a thing as a business that grows too quickly, inappropriately, and unstably, simply because the revenue to make this possible happens to be there. The reality is, though, that there is certainly a wrong way to grow your business which, while it may well offer an initial period of demonstrable revenue growth, will incur increased costs in excess of profits at some point down the line. Without a proper contingency plan in place for this eventuality, it could become the point at which the business goes under.
A Fundamental Principle
So, what is the correct way to scale up a business? Many business advisors today refer to the “hockey stick” model of corporate growth. This model asserts that the majority of start-ups go through an initial period of relatively stagnant linear growth (the blade of the stick) before hitting an inflection point and seeing revenue sharply increase (the handle). This is a good model to bear in mind as it outlines the usual trajectory of small start-ups that eventually achieve lasting growth.
The biggest mistake you can make is to disregard the “blade period” of growth. Just as a hockey stick with a one-inch blade would be no use at all, so is a business which grows too fast destined to fail. The blade period is important, and it is the time when company values develop, when procedures are put in place that will safeguard long term growth, where a plan for that growth is developed, and where the company’s brand identity is solidified. In other words, this is the time when you plan out your scaling up – without it you are only recklessly growing.
To underscore this point better, consider that an effective scaling up will account for every aspect of your business as it goes through this change. A proper plan for scaling up will outline what will change and in response to what – as well as what will stay the same. Everything from the general and important, like how you will expand your market niche or open new niches, to the little considerations, like how many new first aid boxes you will require for the projected expansion of your office space, will be included in a thorough scaling up plan.
And the only way you can really work out what all of these are is to go through the “blade period” of company growth and become intimately acquainted with your business, how it works, and what is needs to effectively grow. Sometimes, the answers to these questions will only become apparent after a period of day-to-day business operation.
How to Effectively Scale Up a Business
So, with all those especially important points out of the way, how can you effectively scale up your business? There are some general steps outlined below which follow the model observed in the vast majority of successful start-ups. Bear in mind, however, that these tips need to be combined with all the information – specific to your company – which you will gather when going through the blade period.
Nevertheless, here follows a tried and tested way of going about this trickiest of tasks:
Start With the “Why”
Scaling up a business relies on knowing why you are doing it in the first place. To simply be successful or make money will not cut it – and this is because you are not only dealing with yourself. Scaling a business requires creating customer loyalty, and that only happens if everyone is clear about where the business is going. You should focus on your staff first, and that confidence in your company will be passed on to the customers.
Conceptualise Future Checkpoints
You can only work towards successful growth if you know what it will look like when you get there. What will mark the business having been grown successfully? A certain figure of revenue? Expansion of your product line? An increase in physical outlets? What these will be for you depends on your business, and again may only become apparent after a period of going through the blade.
Perfect Your Product or Service
The importance of the blade period becomes evident once again. Customer response to your product or service (and how well it sells) will inform you of how it can be improved. Growing your business before perfecting what you are selling is the first step to selling more of it.
Put Your Procedures and Operations in Place
Another thing that a period of linear growth will tell you about your product/service or company is what type of challenges and problems are typical for your line of business and what procedures can be put in place to deal with them. For example, market reach to the right customers for a particular service might require some strategy to get right even when your company is small. Unless that procedure is put in place at this point, the problem will only magnify if you prematurely grow.
Develop Your Brand Identity
The final thing that is necessary for a successful scaling up is a strong brand identity. A weak brand might cut it at your current level, but if you grow without making necessary changes to prepare it for wider exposure, this will seriously stymie your growth. Before scaling up, you need to be confident that your company looks good from the outside.
These tips are the conceptual basis of a successful scaling up operation that will engender stability for your company and an ability to withstand the increased pressures of operating at a higher level. Remember, however, that these tips represent only a theoretical basis and, to make them work, you need to learn about your own company first.