“Scaling the business: why and how?” Lidia Paschuk, Head and Member of the Supervisory Board of the SME School
Do you have your own business that works stably and confidently and really wants to move on? Then it’s time to consider scaling. Any startup or new company in the case of its success, market demand, sales stability naturally goes through several important stages of its development:
- minimally viable product;
A startup is a newly created enterprise or project. The word “startup” translates from English as a beginner. So, when you have stopped being a startup, work steadily, have regular customers, understand that your products or services are needed by the market, but do not have the resources to meet such needs — it’s time to think about scaling, namely the development and multiplication of existing business models. In the theory of business, scaling involves cost savings, ie with increasing sales, revenue growth exceeds costs.
But does every business always need scaling? To begin with, its necessary to determine the vector of development:
Vector 1. “The quieter you go, the further you will be”.
Absolutely normal choice, when scaling means predictability and stability. Usually, the owner and the company in this case know each consumer, controls the quality of products almost personally, can develop in the direction of premiums, boutiques. This is how a family business is often built, exists, and develops. In this case, you should think about whether your business, products, and services are truly unique.
A small cafe in the sleeping area can withstand the competition of large networks due to the special atmosphere, pleasant coffee and becoming a place of communication of the surrounding houses, and the owner of this cafe wants to continue to communicate with each visitor, check the quality of coffee and sweets.
Vector 2. “Forward and upward”.
It’s about growth. A good choice when there is an understanding or even a feeling that there are no limits to growth or they are so far away that the business has the opportunity to grow tens, hundreds, and even thousands of times. Exactly the business owner needs to choose the following vector if in answer to the following questions he gives positive answers:
- Am I ready to let go of operational control?
- Am I ready to accept the fact that not all decisions are made on my own now?
- Am I ready for not knowing all my employees?
- Am I open to hiring new professionals, partners, and organizations to run my business?
Once you have decided that scaling in the style of “Forward and upward” is your vector of development, you need to determine the purpose of scaling. Why is this for you? It can be an increase in profits, and brand promotion, and entry into new markets, and simply satisfying the owner’s own ambitions… Whatever the goals, they must be formed and realized, and even more desirable and long-term.
Of course, there will be circumstances that will encourage you to reconsider your goals, but having goals makes it possible to avoid Brownian motion. 92% of large corporations do not achieve their long-term goals, but they continue to formulate them. Do you know why? At least in order to understand what made it impossible to achieve the goal.
It’s important to identify the needs for team expansion. Probably, the competencies of your or your specialists may not be enough. You may want to consider attracting a partner or investor.
You need to have a plan and a clear understanding of exactly how to scale, step by step. First of all, make sure that business processes are described, clear, and understandable. Then determine what actions will allow you to achieve a positive result in each of the company’s activities: production, marketing, finance, partners, legal issues, and more.
And another very important aspect to consider before you start scaling is the need for resources. What exactly is needed for scaling – staff, space, and most importantly — money?
Scaling is about future revenue growth, but growth requires investment. Therefore it is necessary to determine the amount of investment, to estimate own means. If there is an understanding that it is not possible to cope with one’s own resources, then it is worth identifying ways to attract investment. For example, investors or partners. And of course, don’t forget about franchising. In my opinion, franchising is a great way to scale a working business model.
Scaling is a serious choice that will pose new challenges. Scaling decisions are always up to the business owners. We live in a time of turbulent change. Just compare the brand ratings of the 1990s and 2019. This opens up huge opportunities, and what if suddenly scaling is your chance?