For many start-up businesses, the next step is knowing when to grow your business once you’ve started to turn a profit. More than likely, your business will have begun with a small and flexible idea but once established, you will start to ponder what’s next for you and your organisation.
This isn’t always the case though – after all, there is nothing wrong with running a small, yet successful and efficient firm.
Alternatively, at the other end of the spectrum, a business could be long-running but have never scaled-up because the founders didn’t know how to, or couldn’t understand what the business growth would look like.
Happily, there is no time limit to when a business can or should grow; it doesn’t matter if the business is still in its infancy or 30 years old. What is important is that scaling-up is thought through strategically to ensure success.
Ask the right questions
Scaling-up a business is an exciting, albeit stressful, time in any business owner’s career. There are many challenges that need to be carefully planned for and thought through in order to grow your business. However, if you consider the right questions, and good advice is sought, then what was initially a small and flexible idea can evolve into a household name.
Scaling-up a business doesn’t come without its risks though. In fact, many businesses fail because they start trying to grow before they are ready to do so. Before a business owner starts to expand, there are some important considerations which need to be taken into account.
Are there support systems in place?
Processes are an essential part of the day-to-day running of a business, particularly larger ones. For start-ups to grow, systems need to be put in place and challenges need to be broken down to identify bottlenecks or labour-intensive areas where systemisation could be implemented. The benefit of systemisation is that it frees up time, allowing strategy implementation and growth to become the focus. Procedures also make a business more valuable when it comes to a future sale, because such processes enable a business to run successfully, irrespective of who owns it.
Do you have the right resources in place?
Scaling-up a business involves significant cash investment. Whether growth calls for hiring more staff, outlay in new technology, or additional equipment and facilities, it will require additional capital, potentially by raising finance, in order to reach the next level.
Not only does growth require money, but it also needs people. After all, one person cannot be everywhere, doing everything. It is important that the business attracts and retains an effective management team and supports its staff to achieve its growth plans.
Is there a plan in place to support expansion?
Without a plan, it is easy for entrepreneurs to get lost in the fog and lose sight of what the end goal is. Things can easily spiral out of control and a lot of time, as well as money, can be wasted pursuing initiatives which don’t support the business’ growth strategy, although they may seem to at the time.
What’s your end goal?
An end goal is also important. This is because it gives the business owner something definite to aim for. Once this point has been reached, the entrepreneur knows that the business has successfully grown. Without the end goal mapped out, it is difficult to define if the enterprise has hit its target, or how it has grown, because there are so many ways in which this can be measured.
Can your business support scalability?
Having the right infrastructure in place to support business growth is imperative. It needs to be able to keep up with the increased demands that come from higher trading volumes. Without sufficient infrastructure, not only will the business struggle to support increased demands, but it may put undue stress on the company, affecting its ability to run even at pre-scale levels.
For example, if the organisation is a goods manufacturer, it will need to ensure it has the capacity to produce increased units and take on additional staff required to manage the production line, as well as the transport network to deliver these products.
‘Is the business idea itself scalable?’
Is your business adding something?
Once the risks have been assessed and scaling-up the business can be supported, the next step is to analyse whether the idea itself is scalable. Often a critical eye is needed to identify whether the concept can actually be expanded upon.
At this stage, it is important for entrepreneurs to remember that it is not just their enterprise growing and changing in isolation, it is the entire marketplace too. They will likely encounter new technologies, new competition, and possibly even a new audience. This can have a major impact on a business and its growth plans.
Is this the right time?
Due to the additional investment required to support expansion, scaling a business can put a lot of pressure on the fundamentals. The idea of expanding and reaching more customers, or new customer bases. can be an exciting one but the timing needs to be assessed.
What about the wider business landscape?
Not only is it important that expansion can be supported from within the business, with the right people, capital and processes, but the wider landscape should be taken into account. Always check for political instability, such as trade disputes. Look at what else is happening in the industry which could have a knock-on effect. Be certain that there is actually demand for the business to grow. These outside influences are just as important as internal ones.
Simon Smith is a partner at Wellers Accountants