by Joshua Botello
Scaling your small business is less about the “right time” or the “stars aligning” and more about building your business systems and growing. How do you know when you should scale your business or if you can? In this article, I’ll cover 5 aspects of your business that you as an owner should evaluate to know when or how to scale your business.
If you are looking to grow or even scale your business you need to have a plan. If you created a plan when you started your business, there are some basic milestones you probably set for yourself. If you are an existing business, these might be your goals for the next 1-5 years. This strategic plan should be referred to and updated often and must have the appropriate goals and milestones to reach for growth. As a business owner if you don’t meet those milestones you are not ready to scale your business.
While revenue is indeed an important factor for growing and scaling your business it should not be used solely to make that determination. Being profitable is not a great indicator either, because these profits may not be consistent. Let me explain. If you sell high ticket items and are constantly scrambling to close deals, this is the old “feast and famine” dichotomy your business should avoid at all costs, even if on paper your business makes money.
A better metric is cash flow. A business’s cash flow is a much better indicator of health. If a business has a strong cash positive cash flow and little expenses then it may be time for your business to start investing to scale. You should be monitoring your cash flow monthly to make any adjustments before things go south.
“How do I do that?” you ask?
If you are looking to scale, invest in technology to make production easier and more efficient. This can include getting new or upgrading software you use to process your orders. This technology can also be new machines or equipment to increase your production capacity.
The other way you can scale your business is by investing in your employees. This means training through some professional development courses or new processes. Investing in employees can also be the hiring and training of additional employees to meet an increase in orders or complete jobs faster.
The next factor that impacts your ability to scale your business is time. At a practical level, time, a sign of operational stress and sign that your business isn't ready to scale is if lead times grow. As I mentioned before, your business should strive to make your operations simpler and an indication of this shortened time during jobs.
As a business owner, when working in your business and growing, you may quickly realize that time is not your friend. This is another indicator within our time factor. Many business owners start out as solopreneurs who struggle to keep up running a business. Time is a double-edged sword, many business owners work too much in the business instead of on the business and unable to scale because of operational and resource constraints.
If you are looking to scale your business and the demand for your products then you need to invest in marketing. This can be done through advertising rather than large time investment of organic marketing may offer, although this may not necessarily be true. This is simply done through training or upgrading marketing channels to make acquiring customers easier or more efficient.
Scaling your small is more complicated than just making more money or needing more employees, you need to take a hard look at your finances and operations. If you are looking to scale or you plan to scale your business, then contact your local SBDC to plan your business for growth for the future. So are you ready to scale your business? Do you have any questions about scaling your business today? Let us know in the comments below.
Scaling your small business is less about the “right time” or the “stars aligning” and more about building your business systems and growing. How do you know when you should scale your business or if you can? In this article, I’ll cover 5 aspects of your business that you as an owner should evaluate to know when or how to scale your business.
GOALS
If you are looking to grow or even scale your business you need to have a plan. If you created a plan when you started your business, there are some basic milestones you probably set for yourself. If you are an existing business, these might be your goals for the next 1-5 years. This strategic plan should be referred to and updated often and must have the appropriate goals and milestones to reach for growth. As a business owner if you don’t meet those milestones you are not ready to scale your business.
Financials
Your business’ financials are a strong indicator to measure growth and when to scale. While this is true, how you look at your finances and what measurements you look at will give you the proper insight for scaling. However, If you think that simply making money and booking enough revenue to meet your goals is a reason to scale, not so fast. Revenue isn’t everything.While revenue is indeed an important factor for growing and scaling your business it should not be used solely to make that determination. Being profitable is not a great indicator either, because these profits may not be consistent. Let me explain. If you sell high ticket items and are constantly scrambling to close deals, this is the old “feast and famine” dichotomy your business should avoid at all costs, even if on paper your business makes money.
A better metric is cash flow. A business’s cash flow is a much better indicator of health. If a business has a strong cash positive cash flow and little expenses then it may be time for your business to start investing to scale. You should be monitoring your cash flow monthly to make any adjustments before things go south.
Operations
Another indicator regarding your business to know when to scale is your operational success. Your goal for operations should be simplicity. Larger operations will naturally have more complex processes but if your small business has unnecessarily complex processes, scaling your business prematurely will only exacerbate those shortcomings. You should strive to simplify and streamline your processes to do things better, faster, and cheaper.“How do I do that?” you ask?
If you are looking to scale, invest in technology to make production easier and more efficient. This can include getting new or upgrading software you use to process your orders. This technology can also be new machines or equipment to increase your production capacity.
The other way you can scale your business is by investing in your employees. This means training through some professional development courses or new processes. Investing in employees can also be the hiring and training of additional employees to meet an increase in orders or complete jobs faster.
Time
The next factor that impacts your ability to scale your business is time. At a practical level, time, a sign of operational stress and sign that your business isn't ready to scale is if lead times grow. As I mentioned before, your business should strive to make your operations simpler and an indication of this shortened time during jobs. 
As a business owner, when working in your business and growing, you may quickly realize that time is not your friend. This is another indicator within our time factor. Many business owners start out as solopreneurs who struggle to keep up running a business. Time is a double-edged sword, many business owners work too much in the business instead of on the business and unable to scale because of operational and resource constraints.
Marketing
Demand
One of the most important factors in scaling your small business is managing demand. As a small business owner, you should recognize how demand affects your business and needs steady demand to grow. One sign of increasing demand that suggests you need to scale is the need to turn down customers because your business can take on more work.If you are looking to scale your business and the demand for your products then you need to invest in marketing. This can be done through advertising rather than large time investment of organic marketing may offer, although this may not necessarily be true. This is simply done through training or upgrading marketing channels to make acquiring customers easier or more efficient.
Reputation
The final factor any small business owner needs to know about scaling their business is: knowing your reputation. One sign of scaling your business regarding reputation is the need for you to maintain quality throughout your products and service offerings. As you grow as a business you may encounter an increase in customers but may affect the quality of your offerings. If this wavers and quality decline, this could tank your reputation. Even if your business scales properly, the damage will be done that may never be able to bounce back from.Scaling your small is more complicated than just making more money or needing more employees, you need to take a hard look at your finances and operations. If you are looking to scale or you plan to scale your business, then contact your local SBDC to plan your business for growth for the future. So are you ready to scale your business? Do you have any questions about scaling your business today? Let us know in the comments below.
Funded in part through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.
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