How To Prepare For Scaling: A Strategic ApproachOct 26, 2022
Scaling your business is a process that takes time. It’s a continuous process that never ends. There will always be areas of your business that need to be scaled or expanded to grow and thrive. Some scaling activities – such as adding new products, services or markets – may coincide with other growth strategies. Every business has its own set of challenges that must be met strategically to maintain stability and continue growing profitably. A key client or project can initialize the need to scale – but are you ready? And…ready for what?
Today we’ll discuss 5 Keys to scaling strategically: Processes, Products, People, and Facilities, plus Finance. In some cases, you may have challenges in all five areas; in others, you may only have one or two. Understanding which of these areas you need to scale first will help you better strategize how best to implement appropriate changes within your organization.
Any scaling activity that involves changing or improving your current processes will positively affect all other areas. You want to systematize your processes, increasing efficiency and predictability. For instance, you can look at your customer acquisition or retention processes to see if there are ways to improve them to reduce costs or increase revenue. Enhancing your sales or marketing processes could include increasing the number of leads generated, closing more sales, or increasing customer retention. Improving your supply chain processes could include increasing inventory or reducing supplier lead times. Many scaling activities also require setting new, specific goals tied to timelines. Having concrete goals tied to particular processes will allow you to measure your success and determine if any changes need to be made.
You must be honest about your existing systems and processes and about those changes. Look for points of weakness. These often reveal redundancies, like two people or departments doing the same or similar tasks. Look for opportunities where manual efforts can be automated. And take a close look at the skill sets of your people and how they are – or aren’t – contributing to any inefficiencies. More on that later.
Expanding your product line can be an effective and efficient way to drive revenue and increase market share. Product line expansion can be a cost-effective way to increase revenue by reaching new customers and increasing customer retention and lifetime value (CLV or LTV). One strategy is leveraging your existing customer base and sales channels to sell additional products. You can also look at creating a new product line and sales channels from scratch. Adding or expanding products also means you’ll need to re-evaluate your supply chain, product development and quality assurance processes to ensure they are optimized for the new product(s).
Scaling your organization may involve hiring new employees, increasing headcount or adding new talent (such as a new executive or technical expertise). It could also be about re-deploying existing employees to maximize their capacity and productivity. Hiring new employees is a big challenge for many businesses, and in the context of scaling strategically, consider hiring for the future and not just for the present. Understand what you need regarding skills and experience, and then determine if there is a gap between what you have and what you need. This can help you determine how to fill the gap and in what time frame.
Another critical thing to consider is the culture fit. Make sure you hire people who fit your culture and the culture you’re trying to create and can add value to your business. Hiring for the future also means staying ahead of employee turnover.
Expanding or scaling your facilities may require adding additional space (or real estate) to your current location. It could also mean re-configuring your space to accommodate new departments or employees. Some companies need a large and visible space to accommodate growth, while others may need a smaller and more cost-effective location. Whatever your situation, a key business driver in determining what new facilities you need or what changes need to be made to your existing space is your ability to generate enough cash flow to support the changes you want to make. As ever, note how this is related to the products discussed earlier. Like everything in your financial and business model, the keys to scaling strategically are connected to and impacted by others.
Scaling your business may require more capital than you currently have available, requiring you to find financing. Adding complexity to your financial focus, you may only know how much money you’ll need to accommodate scaling once you’re in the middle of growth. Keep the concept of strategically in mind where financing is concerned – the more and better you can plan to scale, the less friction you’ll likely experience with financing.
Financing options and strategies will vary from business to business, but usually, the best financing option is the one you can access and use. It’s important to enlist an expert to help look at your margins, cash flow and other metrics so you’re prepared to raise capital through investors or lending. Investors are going to want to see reports that indicate strong cash flow, and they’ll want to see revenue sources and uses. They’re asking, “If we give you this money, how will you use it to better your processes, create new services, hire people or change facilities?” And investors will want to know how they’ll get their money back. Projections and forecasts help complete the financial picture for lenders or investors, showing them in numbers and demonstrating your preparedness and plan for new capital.
Scaling your business organically and strategically is a continuous process that will help your company thrive. Choosing to scale in areas where you have the most challenges will allow you to grow in smart and efficient ways. Make sure you understand where your organization currently has challenges, determine which areas should be prioritized and work to correct them. Once those areas are addressed, you’re better prepared to scale your business and progress toward growth and success.