About 20% of businesses make it past the first two years of being in business.
You’re likely to be familiar with these statistics. That doesn’t stop you from trying to defy the odds and create a successful business. There are many reasons why businesses fail.
One of the issues lie in how the business grows. The successful businesses look to scale up as opposed to grow.
What does it mean to scale a business?
Read on to learn what scaling your business means, why it’s not the same as growing your business, and what you can do to make the most out of your business.
What Business Growth Usually Looks Like
Most businesses start out as sole proprietorships, or they have a couple of employees. As a business, you want to have as much revenue as possible.
So, everything you do is about growing revenue. When you have more resources available, those resources will go right into growing the business.
You may decide to market the business, which will bring more customers to your door.
There’s one major blind spot in that model. You don’t look at the profitability of the business. Yes, your business is growing, but your overhead is so great that you can’t possibly be profitable.
Another common situation for businesses is that they’ll experience growing pains. They’ll start small with a small staff and get a lot of customers right away.
As the business gets more customers, they’ll overwork themselves in handling the increase in business. They end up so overworked that they end up providing customers a bad experience.
As the business grows, they have a churn and burn type of business. They end up having to replace the customers they lose, which is very costly for a business.
They end up with burned-out employees, which makes employee retention difficult. You end up with a business that has a high employee and customer turnover rate.
You lose money as a result. You could continuously grow revenue, but you aren’t profitable. All you have is a business that isn’t sustainable.
What Does It Mean to Scale a Business?
Growing a business is the typical path that businesses take as they mature.
When you scale a business, you increase your capacity to increase revenue without losing profitability. These businesses rely on efficiencies and systems that allow the staff to take on more capacity without burning out.
Scaling a business is about making your business easier, without compromising the quality of service. You don’t sacrifice your profitability, either.
You end up with a much more profitable business because your employees and customers are happy. You don’t need to invest in replacing them.
You’re also more profitable because you focus on improving systems, rather than hiring more people to do the same work.
A great example of scaling is in email marketing. There are email systems that have the capacity to send an email to thousands of people at the same time.
Compare that to growing. You would grow your list to the point where you have thousands of people on it. Without the system in place, you’d have to send individual emails to every person on your list.
How to Scale a Business
What do you think is better, growing a business or scaling one? Scaling is what you definitely want to aim for. Here are a few ways you can scale your business.
Start by looking at all aspects of your business, from customer service to accounting. Look at all of the tasks that they do and find the ones that are repeatable.
You could find that your customer service team deals with 5 common questions every single day. You can then look to limit the time spent on customer service for these 5 questions by using a messaging bot.
That frees up your customer service time to deal with bigger customer service issues for more people. Your capacity to increase your ability to handle more customer service issues increased by installing a simple system.
There are other issues within your company that are like that. You have to look at every employee, every department, and uncover the repeatable tasks that can be handled in a different, more efficient way.
Make a Plan to Scale
After you look at every aspect of your company, you’ll be tempted to just invest in systems and scale-up. That’s not the best way to do it. You want to have a plan and a vision for the business.
The vision that you have for the business will guide the rest of the process. Your plan will be the step by step map to achieve the vision of the business.
Within your plan, you’ll have different milestones to achieve in order to take a step in scaling your business. You’ll also look at the possibilities to scale and prioritize which tasks need to be scaled.
This will help you scale your business in a way that’s methodical as opposed to going all out and potentially wasting resources.
Financing Scaling Up
You’ll notice that scaling a business can be very costly. This is because you have to invest in systems that help make your team more efficient.
Each milestone that you set can be a revenue-based goal where you invest in the most important systems. You’ll be able to take on more customers without sacrificing profits, so when you hit your next revenue goal, you can invest in the next system.
Scaling vs. Growing Your Business
The mistake that many business owners make is that they only look at growing revenue in business and adding employees when they can afford it. This creates a business that functions as a roller coaster.
What does it mean to scale a business? It means that you have a business that can take on more work while making use of the resources you have. It usually involves creating systems that give your business the ability to take on more business.
Visit the Business section of this site to get more tips to grow your business.