February 19, 2021

Scaling a Business: 6 Ways to Do It

However, scaling up is a multifaceted challenge that forces you to ask and answer many hard questions about your small business's path to a successful future.

How to Scale a Business

To determine if you’re ready to scale your business, author and co-founder of Sageworks, Brian Hamilton, recommends using this checklist. How you scale, though, depends on your business model and the unique challenges and opportunities it faces. In this post, we’ll present six different ways to think about scaling your business. By the end, you’ll have a long list of insights to apply to your own company's growth and scaling plans.

1. Identify Your Business's Ultimate Goal

If you’re thinking about scaling, entrepreneur and investor Tim Ferriss recommends starting by confirming your endgame. In short, you need to determine why you’d like to scale your business before you can scale. As simple as this sounds, it’s a fundamental worth reviewing. Your endgame is the destination of your scaling approach, so it provides critical guidance when you’re building your scaling strategy.

2. Determine How You'll Finance Your Business

There’s no way around it: scaling requires capital. How you obtain that capital will affect your cost of capital, cash flow, equity share, and ability to raise more capital, among other things. As you determine how to scale up, make sure your funding approach is in the front of your mind. For any idea or approach your team proposes, make sure you’re asking yourself: how do we finance this? Particularly in the uncertain economic environment created by COVID-19, traditional funding options may be harder to find.

3. Create a Predictive Revenue Model

Having a clear revenue model allows you to project revenue based on things you can control. The greater your confidence in your ability to isolate the activities leading to revenue, the better you can build an approach to scaling. For example, assume that to reach scale, you need another 1000 customers in the next 12 months. Let’s say you know that, on average, it takes 75 sales calls to yield one new customer. That means you need to make 75,000 sales calls over the next 12 months. While this is an oversimplified example, it illustrates how important revenue models are for determining an approach to ensuring your business can grow. business-scaling

4. Plot Your Path to Positive Cash Flow

In addition to revenue, if you aim to scale your business, you need to be able to predict profits and expenses. That means identifying the money and time you need to sell your product or service. With this information, you can think more critically about how to sustainably grow your business. For example, when you're able to project profits and expenses, you can determine cash flow needs at various times. Based on your cash flow needs, you can efficiently plan your capital financing needs.

5. Prepare Your Personnel

You can’t scale your business without a strong, committed team assisting you in the process. You don’t necessarily need a giant team just yet; three to five committed team members can be enough. However, if you don’t have any employees whose ability and commitment you believe in, scaling up will stretch you too thin. In either case, you need to prepare your employees before you scale. After all, it’s the performance of your team—not just you—that will determine your ability to successfully scale. To ensure team building and employee morale, make sure your team is prepared for the responsibilities and challenges that come with growth rates. As a business leader, it's your job to ensure that your employees are given the tools and training to handle this change.

6. Research Financing Options

As mentioned earlier, companies that scale require additional capital. How you raise that capital, though, may vary depending on numerous factors. If your goal is business scaling, make sure you understand your financing options. Start with this list of blog posts that provides guidance on common growth financing options:

Conclusion: Scaling Up Requires Focus

To scale a business, your challenge as a business owner is to identify the one or two things that make your business special. Then, you must figure out how to funnel time and resources towards exploiting those notable components. As simple as this sounds in theory, scaling a business is more subtle in practice. Therefore, don’t rush to scale; instead start asking hard questions about your business. Figure out what you do better than your competitors and use that to your advantage. Then, create a clear plan, that outlines how you do it, how much it costs, and how and when you get paid for it. In addition, you should determine your funding and resource needs. Only then can you start to build a strategy that leverages your business’s strengths for sustainable growth.