WHY IS IT SO IMPORTANT
TO SCALE YOUR BUSINESS?
When going through the early stages of running a business, you’ll find that you are constantly distracted by all the advice you get from everywhere. From friends, family, other business owners, the Internet and the constant bombardment via Social Media.
All of them might mean well but it is still a huge drag and the bigger the pile of advice is, the harder it is to find a line through it all.
You’re probably familiar with the term “Scaling a Business”. But what does this actually mean? And how do you make it work?
Scaling while growing your business
You might think that scaling a business is the same as growing a business. In a way this is correct. The difference is that scaling keeps the dimensions of each aspect of the business. This means every part of the business grows the same without distortions.
Just growing a business might relate to any part of the business to become larger while others stay the same. Overall the business grows, but out of proportion.
In a way scaling is a more controlled form of growing.
What to look out for
Of course scaling a business can come with some unwanted effects. If the core of your business is not set up correctly, those problematic parts grow as well and this can cause some serious issues as the business scales up. Setting your business up the right way is vital if you want to scale your business.
The following diagram illustrates a Scaling Model:
This is a scaling model of a normal business selling products or services. The lines define the percentage of the total effort in each segment in relation to the turnover produced. The dotted line defines the percentage of the overhead to be deducted from the profit. The overhead is the only part that does not contribute to the turnover.
In this example, the lines (percentages) might be moving, but the relation to the overall stays the same.
The inner circle is your core business. The second circle is your waterline. Every aspect of your business should be above that waterline. The outer ring is the current scale level. Your job is to make sure every area of your business is as near as possible to the current scale level and never below the waterline. Both circles grow as the business scales up.
Scaling nurtures and controls growth
If you compare this to a simple growing model, the sales efforts might grow out of proportion while the rest stays the same. This can cause real problems. If you sell more than you can fulfil you won’t be able to deliver and you will run into serious problems at one stage in the future.
If you design your business from day one to be scalable, you create an environment of controlled growth. This means you will see straight away in which area of the business you will need to work on to keep it all in balance.
Of course, the percentage of each section is liable to change, depending on the market, season or any other factor related to your business. This is part of scaling your business. At the beginning you might have to put more effort into marketing and sales and after a while once your client base is building clients, these parts will become less important and the fulfilment part grows.
This is important because if you keep your sales and marketing up to bring in more and more orders without being able to deliver, you have a problem. In the model above each section is dependent on each other. You can’t grow fulfilment without affecting the others.
This is the kind of control every business should have.
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After starting out successfully, scaling your business is the next big challenge. There are many ways we can help and we look forward to hearing from you!