"How do I scale my business?"
According to UK Government statistics some 660,000 new companies are established each year and many of these will have plans to scale rather than to remain a micro business. Some founders will of course be happy to run their startup as a side hustle, and others will only be looking for a lifestyle business. But for many others that are looking for something larger, ‘how do I scale my business?’ is a question that I am often asked.
To answer any question, it is of course important to know exactly what the question is, and in this context that means to fully understand what the person asking the question means by ‘scale’. For some this will simply mean having two small retail outlets rather than one, whilst others are looking to expand very aggressively and planning world domination in 5 years.
If as a founder your plans are to stay as a side hustle or a lifestyle business then in many ways life is more simple, as it is not necessary to take on all the additional responsibilities that scaling brings with it. Micro businesses often do not raise any external equity finance or even hire any senior staff, just to name two differences.
However, in order to scale a business there are so many more considerations that must be accounted for, including the following:
- Finance – In order to scale, and certainly to do so quickly, would normally require external finance to pay for all the extra steps that need to be taken. Even ignoring this aspect, a growing business devours cash from a cashflow perspective and so needs to be better financed.
- Staff – Even a small, simple business needs more staff than the founder alone and so others must be recruited, either as an employee or on contract. As soon as the business starts to scale quickly or has larger ambitions the senior hires need to be taken on and in order to get the best people this will often involve some form of share options or incentive bonus.
- Offices / Premises – Whatever your business does it will require more space as you take on more people and expand sales. This might be bigger offices, more retail units, more storage space, or larger factory or workshop premises.
- Advisory Board – Any business, other than a micro business, with plans to grow, really should have a good Advisory Board to help guide and nurture the business as well as to help with contacts and assist in many other ways.
- HR / Legal / Accounting – As any business grows in size, it also grows in complexity and has greater needs. Just as a good Advisory Board is a crucial part of the scaling journey then so to is working with good external advisors when need.
All of the above takes time and resources, and whilst they are being put in place and imbedded, they are actually distracting from the main point of the business, and that is to grow sales and profitability.
Scaling a business, as with any undertaking works best when there is a precise vision and a detailed plan for what steps to take and in what order. This plan will reveal the best way to scale as well as when to scale, but all of this must be based on good research of the market, the competition, and the opportunities. Whilst the plan needs to have a very definite timeline and key milestones along the way, it must also build in contingencies to cater for those little setbacks that will inevitably occur.
So, the best way to scale a business is with consideration and planning that has been arrived at after solid research. It then needs to have the financing in place to ensure that all the other necessary resources will be available when needed, and as the business grows in scale and complexity it needs a good Advisory Board and other external advisors to ensure that the business keeps its focus and maximises new opportunities in a professional way.