by Kelly Deis of SoundPoint Consulting
First, what does it mean to scale your business, and how does it differ from growing your business?
Consider scaling a business:
“growing sales at an exponential rate while only adding costs incrementally by developing a replicable system for delivering goods and services.”
with simply growing a business:
“increasing sales coupled with increasing costs with little improvement on profit margins.”
The difference is clear. There is nothing easy about scaling your business, particularly for small businesses. It takes intention, strategy and investment.
Often business owners are caught in a Catch-22. They know they can sell more if they hire a Vice-President of Business Development. But, they can’t afford to pay for this this new position until they have increased sales.Yikes.
The larger your business, the easier it is to scale. Larger businesses may have multiple revenue streams, fungible staff and banked capital which can help see them through the ramp-up phase of accelerating growth. Smaller businesses often do not have this luxury.
Keys to Success
The more efficient the mechanism you have for mass production (replication) of a product or service, the more scalable your business.
Repeatable Product or Service
To achieve scale, the delivery of your product or service should be repeatable and systematic. Think of the Model T and the advent of assembly lines. Or, McDonald’s cookie-cutter stores. All Model T’s and McDonald’s franchises are virtually the same, making each incremental unit easier and cheaper to build.
Keep It Simple
A simple business model allows revenue increases without the increased costs of offering completely different products and services. By focusing on limited products and/or services and offering them well, you have the potential to exponentially increase your market.
If a business is going to scale, it needs standardized and repeatable processes. This may require investments in technology, such as inventory and POS systems, as well as training of personnel. Technology not only allows a company to do more with less, but it often does it better, faster and more accurately than humans.
The more you are able to create efficiencies across all areas of your business, the more easily you will be able to grow gracefully and achieve scale.
Build a Team
Building the right team is also crucial to business growth and evolution. Most business owners are really good in one or two areas. Hardly any are good in all areas needed to grow a company. Consider the engineer/inventor that can’t sell. Or an innovator who doesn’t know an income statement from a balance sheet.
If you are planning on scaling your business, you need all disciplines humming and working together. Recruit smartly. Be sure all team members have a shared vision, common values and commitment to grow.
A scalable platform deemphasizes the individual. A company has the potential to grow indefinitely if it is not dependent upon any one individual’s input. This means the owner needs to delegate certain functions to others. Having standardized processes will make this easier.
Work on It, Not in It
To continually grow and improve, the leader of a scaling business must take him/her self out of the day-to-day running of the business. S/he needs to keep the broader perspective, always asking, how can we improve? Where is the opportunity?
This kind of broader strategic visioning is more challenging to do when one is in the weeds executing day-to-day tasks.
Business leaders who want to scale think about how they can systematize their products, and standardize process so they can grow without increasing costs at the same rate. They also need to envision their business without being dependent on individuals, including themselves.
Kelly Deis is president of Soundpoint Consulting, based right here in Kitsap County. She earned an MBA at the Wharton School, and offers services as a Certified Valuation Analyst and Certified Exit Planning Analyst. She also helps clients develop a differentiating strategy.