14 Dec When Is It Time to Scale?
Scaling a business can be exciting, but it can also be a nightmare if you’re not actually ready. Read our tips on when it’s a good time to scale below.
You’ve had your head down, working the daily grind in order to send your startup up into orbit.
You’ve finally been seeing sales and revenue growth. That startup buzz is gone and you’re ready for the next level.
You’re now wondering, When is it time to scale?
Everything feels prime for scaling up, but your company’s readiness to scale depends on timing – not a gut feeling.
Timing is what matters, and that’s the message Scale My Empire wants to emphasize today.Ready to scale? Learn how to avoid scaling up your startup too quickly. Click To Tweet
Whether it’s broadening your customer base, hiring more staff or searching out new sources of revenue, it all needs to be done at just the right time.
Growing too fast could be deadly to your company. So before moving up, you need to be absolutely certain that your business is ready.
Do you know which signs to look for in order to know it’s time to scale up?
How can you avoid scaling too quickly?
And, what can you do to ensure that your company is prepared to scale?
Let’s dissect each of these questions.Ready to scale up your business? Check out our latest post. Click To Tweet
What are the key indicators that your business is ready to scale up?
How do you know when your kid is ready for a new pair of shoes?
You don’t just buy a pair that is too big for her and assume she’ll grow into them with time. Absurdly large shoes will only make your child trip and fall.
Rather, you wait until there are signs that the current pair doesn’t fit well anymore. (Her complaints might be a good indicator!)
Your company needs similar care. You can’t neglect it and ignore the need to scale. But, neither can you force the growth.
Premature scaling is a frequently overlooked startup killer.
Too many new CEOs make the mistake of thinking that scaling will encourage growth. In reality, it’s the other way around. You should scale in response to growth.
Buy your company bigger shoes when it shows signs of outgrowing the old ones.
So here are a few signs that your business is expanding and ready to stretch its wings a little further.
You struggle to meet demand.
Having to turn down new clients or customers can actually be a good problem to have. The only way to satisfy the growing demand is to scale up to increase your company’s production capacity.
You don’t have to worry about marketing as much as before.
Marketing is another metric to consider while scaling. But, for now, we’re referring to positive changes in your current marketing pattern.
Rather than struggling to create demand from customers and pour funds into making sales, you find the sales are making themselves. Word of your quality product or service is spreading via means you didn’t plan on.
There’s no need to try to attract new customers because they’re simply coming to you.
Your company continually meets and surpasses goals with ease.
Setting and reaching goals is a great feeling. But, if those once seemingly impossible goals you set in the beginning now no longer present a challenge, then it may be time to set new ones by leveling up.
There’s a low-risk and zero-pressure atmosphere surrounding the prospect of scaling.
As we’ll discuss more in a moment, scaling is never something you should decide to do at random.
Scaling is something you must be ready for. If it’s clear that your business won’t risk much by attempting to scale, then it is probably safe to do so.
How to avoid scaling too quickly.
As you’ve probably gathered by now, you should never jump at the chance to scale up without first ensuring that your company is ready. Timing is everything, so you need to be careful that you don’t attempt premature scaling.
This brings us to a key point:
Avoid doing the right things in the wrong order.
Scaling is good for a business. Growth is good for a business. That’s why many entrepreneurs mistakenly believe that scaling is something they should do to boost their business.
Scaling is healthy, but all business metrics must be scaled at the right time, at the same time.
It’s too easy to get carried away and focus on scaling up just one aspect of your business. But, that’s getting ahead of yourself and you could end up doing your business a huge disfavor.
One prime example of doing things out of order can be seen in companies that over-hire.
Watch out for over-hiring.
Take Internet security startup Dasient as an example. It’s now owned by Twitter.
Co-founder Ameet Ranadive admits that the company made a serious mistake early on that led to them burning through cash and unable to adapt to a changing market and customer demand.
Sales were trickling in at a painfully slow rate. Under investor pressure, the CEOs mistakenly identified the problem as a sales issue. In response, they hired an expanded sales team to address the matter.
In reality, their issue boiled down to a marketing problem. The original team – very lean to begin with – had not yet discovered a reliable model for making sales and steadily growing.
How could they expect a new sales team to work a miracle with the same conditions as the original team?
Dasient wound up essentially begging potential customers to try their product. They struggled to make the product fit customer needs.
By the time they realized that it would be best to focus on developing a different and more useful product, it was too late.
The sales team was already on task executing Dasient’s previous vision. There was just too much weight on-board to change the company’s direction.
As a result, Dasient spent way too much trying to pay a sales team they couldn’t afford to fix the wrong problem.
Moral of the story? Scaling up in order to solve a problem is the wrong reason to scale up.
Focus on the unscalable.
Lastly, pay attention to elements in your company that you can’t scale. Customer service and the customer experience are good examples of unscalable elements.
You can’t quantitatively measure these things. But, focusing on them will help you avoid prematurely scaling any other aspect of your business. Doing this will also build your brand so that you have a more solid product and a reliable market, which is great preparation for scaling.
Let’s now talk about what else you need to have in place before you try scaling.This Scale My Empire article is a must-read if you have plans to scale your business. Click To Tweet
Before you attempt to scale your business…
The good news here is that you do have some control over when your business is ready to scale up.
First, check to make sure that you have all of the right elements in place.
What needs to be in place before you scale:
You need to have a reliable, repeatable and scalable model in place before you can scale.
This is important for two reasons: a definable system will help you earn the trust and funding from investors that you need in order to scale up and it’s easy to confidently scale a system that you know will get results.
Establish the right systems.
What kind of systems are we talking about?
Well that depends where exactly in business you are [link to the systems maturity blog], but overall – your customer experience:
- Product delivery and customer support
- Project management
- Sales and account management
Empower your team to deliver your vision and automate the repeatable tasks.
It may take a little time and expense to set up these systems, but once in place, they’ll save you so much time. An automated process is easy to predictably scale up.
You’ll also save on funds that would otherwise go to paying staff to take care of these tasks. The money you save can be invested back into the business.
Take a good look at your hiring process, as well.
Aim to hire people to fill only tasks that a machine can’t do.
Hire based on unique skills that can transfer or apply to a variety of areas. Hire people who can contribute fresh ideas. Hire those who will fit in well with your company’s culture and who believe in your business’ mission.
The goal of having the right systems in place is to increase marketing spending or to trigger a strategic partnership that will generate a lot more business.
If your systems and process can scale up properly, you’ll see these benefits.
Have the right team in place.
Before you even think about who else to hire, carefully reassess who you have on your team right now.
The right staff will accelerate your growth because they’ll be ready to grow with you.
Really understand and appreciate and strengthen the core team you currently have. You’ll want to have at least a few individuals on your staff who are committed to the long run, who are personally invested and reliable.
If you doubt your current team’s ability or commitment, then now is not the time to add overhead and scale up by hiring more. Establish your core group before scaling up.
Get sufficient funding.
You have to pay out a good deal of cash to ensure that your team, processes, software, and hardware are ready to scale up.
Growth and scaling are an investment, and it may take months to see a return on the investment.
In the meantime, you need to be certain you’ll have the funds necessary to keep things afloat during the transition period. You shouldn’t have to exhaust your account and put your company in danger for the chance to scale up.
If you face that prospect, then you aren’t ready to scale. This means that you need to pay attention to increasing your funding. One way is by looking to increase your net profit margin.
As we touched on earlier, another way to grow your funds is to show investors your worth and the value you bring to the table.
Having a solid game plan is the way to win them over. You’ll gain more support if you can show proof of meeting your business’s goals and of a scalable model that’s already in action.
Confidence in a predictive revenue-generating model.
You can wind up wasting valuable time and precious resources if you aim for short-term, money-making gains, instead of long-term, consistent revenue.
Focus on developing a reliable and repeatable model for creating slow and steady growth, and you’ll see your funds gradually increase. Be patient and don’t randomly decide to scale just because you’ve suddenly stumbled across a pretty chunk of change.
You need to be able to point decisively to specific metrics and say “this will win us 5 new customers.” Or, “spending X dollars means we will earn Y dollars.”
The model must be functioning, successful, dependable, and scalable. You should be able to project its success down the road with larger numbers.
Having wide margins to work with are a sign things are working out for you. But, you also must be able to identify your business model and what processes keep it in motion.
A system to predict future cash flow.
Use a model or financial tool that lets you change variables to get a picture of possible outcomes.
Maintain a strong company culture.
Brian Hamilton, Chairman at Sageworks, recommends having a “company ethos you’re comfortable with.” Keep your company culture strong. This will factor into the decisions you make as far as when to scale up and how far to go. Your culture drives your business’ purpose.
A solid customer base.
Focus on your existing customers, don’t neglect them – pay into keeping them happy.
Scaling too quickly often leads companies to neglect their customers and lose that special touch they had as a startup.
If you lose that connection with your customers, then it doesn’t matter how much you’ve grown. You can lose credibility and gain a bad reputation in your industry.
On the flip side, consider a great success story shared by Jerry Murrell, CEO of Five Guys Burgers and Fries. His is a perfect example of successfully scaling up because he placed so much value on a quality customer experience.
From the very start of Five Guys’ humble beginning, Jerry has held his ground and refused to budge when it came to giving customers what they expected.
Even when the customers themselves beg for new services, he’s very deliberate and slow to incorporate new changes. Jerry wants things to stay as close to his original dream as possible because he wants to preserve that customer experience and keep his loyal patrons coming back.
Jerry puts it this way:
“We figure, our best salesman is our customer. Treat that person right, he’ll walk out the door and sell for you. From the beginning, I wanted people to know that we put all our money into the food. That’s why the decor is so simple–red and white tiles. We don’t spend our money on decor, or on guys in chicken suits. But, we’ll go overboard on food.”
For the first 16 years that Five Guys Burgers and Fries was in operation, it wasn’t even franchised. It operated out of six locations from 1986 to 2002. But since 2002, it exploded to over 750 locations across the United States.
They don’t seem to spend much on traditional marketing. Jerry just knows his success is due to “sticking to his guns” when it comes to preserving the special experience he set out to create.
A few more tips on scaling.
Be adaptable and pivot early on.
Stay attuned to the need to change directions and make those needed changes. It’s easier to do so when you’re startup is still small.
Grow strong before you grow up. Make sure you have a great product, a loyal and skilled team, reliable systems, and streamlined processes that are all well-established before you attempt at expanding your company.
Lastly, be reasonable and know when to say no. It’s okay to say no to the chance to scale up even if you are planning to do it eventually.
Have a modest and realistic view of what you can afford and what your business’s infrastructure can handle.
Don’t just go for it because there is funding, an invitation, an opportunity. You need to be ready on all accounts and scale up when your business is truly ready.
Are You Ready to Scale?
Are you wondering when is it time to scale? Get personalized advice by consulting Scale My Empire.
We’ll help you assess every aspect of your startup and point out areas that could use more reinforcement with systems and automation.
Contact us today to talk about determining the perfect time to scale.