If you’re experiencing any kind of success as an entrepreneur or small business owner, chances are you’ve toyed with this question at least once: Is it time to expand my business? Scaling up is a very tempting proposition, but it can be nerve-wracking too. Success can mean exponential profit increases, but the risks of failure can be just as colossal, and they have the power to finish off your business for good.
Since these are pretty intense consequences, it’s important to do your homework. Part of this means outside research on variables like market trends, but a big part of it too is taking a look in the mirror and asking some hard questions of yourself and your business. The honesty of your answers will help determine whether you’re ready to scale up – or even if you need to scale back.
- Is It Time?
This is the very first question you should ask when you’re thinking about scaling up, and undoubtedly you’re already asking it. But have you thought about everything? For example, sure, you’re turning a profit right now, but is it sustainable? Do you have sufficient proof of concept, or are you merely assuming that your product will appeal to a broader client base? And you have you figured out whether or not this appeal will last over the long term? Obviously, you’re not going to have absolute answers to these speculative questions. But you should have reasonable and well-educated ideas about each – backed up not just by your enthusiasm, but what the data is showing.
Aside from these nitty-gritties, there’s a philosophical component to this question. Namely, is this what you really want for your business? If you’re providing quality products or experiences to your customers, if you’re passionate about what you’re doing, and you’re happy with your profits, maybe it’s not time yet to expand. If you scale up too quickly, you may end up sacrificing everything you loved about your business in the first place. You should think long and hard about this one; don’t just lunge at the first opportunity that comes knocking.
- How’s Your Team?
Think about every heist movie you’ve ever seen. Before they do the big job, there’s always the scene where they go around and recruit the very best people to pull it off. Although you’re in a different business (I hope), the emphasis on recruiting is the same.
When you scale up, you’re going to need a dedicated cadre of people working for you – people who can deal with the curveballs and sucker punches that will inevitably come with expanding quickly. And despite their supreme importance, don’t focus exclusively on skills when on-boarding new talent. Remember: The best part of those heist movies was the banter. In other words, hire people you can get along with and who are enthusiastic about your business and what you’re trying to do.
And don’t forget about the people you already have. If they’ve been demonstrating the capacity to take on more responsibility, by all means give it to them. Once you scale up, you’re going to need to devote less attention to the nuts and bolts, and more to the big picture. Use your pool of talent to look after the small stuff, so you can keep your eyes on the horizon and your hand on the helm.
- What’s in the Piggybank?
Scaling up takes a lot more than just good people. You need money to pay those good people to do their jobs, as well as the countless other expenses that come with the territory. What this implies is that your finances should be rock solid. Don’t put yourself at grievous risk by staking your business on sloppy guesswork regarding future profits. You need some strong cash flow at hand to jumpstart your growth.
If the money’s not all there yet, there are ways around that, too. Loans – from a friend, a bank, or an alternative lending source – are viable options. It’s also entirely possible that there are venture capitalists or other investors out there who might be interested in throwing some money your way. Find these people, and set up meetings to pitch your business. Do your homework on these investors: What have they funded in the past? This research will help you give you a general idea of whether they’d be a good fit for you and your business.
Even if the pitch goes sour, you’ll likely learn a ton from the experience. After hearing pitch after pitch, venture capitalists generally have a finely tuned ear for what’s plausible and what’s not, and if they choose not to invest, their reasons why not might be worth their weight in gold to you.
If all else fails, many businesses have been able gear up simply through crowdsourcing, which can not only get you the money you need, but can also double as an effective marketing tool.
- Do You Have a Plan?
When you scale up, the workings of your business are going to get much more complex. As I’ve already mentioned, this is why having good people on your team is crucial. But it’s not enough. You need to have plans in place that properly delegate the work to your good people, along with a bunch of other processes that ensure that your growth is strategic and not haphazard. In short, this new complexity must be managed by robust systems.
Before scaling up, do a review of the systems that help you run your business. What are they? Do all your processes have a comprehensible and repeatable workflow? Are tasks delegated intelligibly and logically? What sort of IT solutions does your business use regularly?
If you don’t have these systems worked out and buttoned down, it’s going to get pretty scary when you expand. The best-case scenario is that, because of poor planning, you’ll outgrow your inadequate systems, and you’ll be running around like a chicken with your head cut off, trying to put out fires that should have never started in the first place. A way worse possibility is that your business will be so hampered by disorganization that it won’t grow at all.
- Who Are Your Customers?
Expanding means you’ll be trying to ramp up sales, but who exactly are you selling to? You should have a good idea of who you’re trying to reach. It may be that you’re simply trying to gain a better foothold in your current target demographic, or you may be trying to broaden your business’ appeal to a wider set of clientele. Either way, you should have an intimate understanding of who you’re trying to reach before you scale up to reach them.
Not only do you need to know who they are, but you also need to know whether you can satisfy them. Some reflection here is needed on the business you’ve already done. Have you properly addressed your existing clients’ pain points? A good way to answer this question is to look not just at your profits, but whether you have repeat business. At an early stage of your business, profits will tell you that your marketing is working. But repeat business tells you that your product is doing what you say it does.
Repeat business should not be underestimated when you scale up. Satisfied customers are potential evangelists for your brand and product. Not only will they likely continue to buy your products, but they’ll also send new business your way via word-of-mouth. I’m not saying you shouldn’t invest in a strong marketing plan to reach new customers – you should. But don’t ignore the loyalty you’ve already worked so hard to cultivate. These customers are helping keep the lights on while your money is tied up in scaling.
Dan Scalco is the founder and Director of Marketing at Digitalux, a digital marketing agency located in Hoboken, New Jersey. Throughout his career, he has helped hundreds of businesses save time, increase leads, and maximize sales.