Simon Smith FCCA explains what needs to be considered to scale up your business.
If you’re like most early stage business owners, you’re more than likely to have started out small and flexible with a feasible idea. Your vision will be to become profitable and then scale the business. Or, at the other end of the spectrum, you may not be sure where you see your business idea going. In reality, very few ideas translate into a scalable business model. Have you considered how this might occur in your organisation?
In some cases it can be obvious. If your start-up business relies solely on your service or skill, then it’s unlikely to scale. There’s only one of you, consequently resources are somewhat limited. Not everyone wants to run a scalable business either, and that’s fine!
When the answer isn’t so obvious, you need to understand what it means to be scalable before you decide if you really want your business to take that path, or if it’s even possible for you to achieve it.
What you need to consider prior to significant growth
Once you’ve survived the initial start-up stage, the growth and expansion phase in your business lifecycle can prove somewhat tougher. Most businesses remain small because scaling requires more than just a great idea and quite often doing it successfully is what establishes you as an industry leader.
Building up a business can reap significant rewards, but it’s not without risk. So, before scaling you need to ask yourself:
Do you have systems that can expand with your business?
Do you have the right resources in place?
Do you have a viable plan to scale resources as your business grows?
How will you meet increased demand?
If your ambition is to change the world, or disrupt a sector, then the only way to multiply your arms, legs and time is through scalability. Whilst it’s all well and good to have an idea solving a prevailing issue, you need to be certain that you’re setting up your business to meet high demand. Not only that, but you also need to be confident the business can handle increased demand in the form of higher trading volumes.
Is the problem you’ve identified really a problem?
Your business idea will need to be appreciated globally, providing a solution for more than just a limited issue. Many entrepreneurs find difficulty in creating a business that’s truly scalable because of how quickly technology evolves. You need to be visionary; what’s a common problem today might not be an obstacle of tomorrow.
This is where disruptive innovation comes in to play. Ever changing technology enables new businesses to disrupt existing ideas. A great example of disruptive innovation is Apple’s iPod which changed the way we listen to music. Apple then disrupted its own iPod with the iPhone which also changed computing and how we communicate. You may decide to get into this mind-set if you want to start planning the next disruption and cause a stir in an industry!
According to The Clayton Christensen Institute “Disruptive innovations are not breakthrough technologies that make good products better; rather they are innovations that make products and services more accessible and affordable, thereby making them available to a much larger population.”
Are you trying to scale too quickly?
Premature scaling is a common reason for the failure of many start-up businesses. After all of your hard work and ingenious idea, the last thing you want is to grow too quickly. Consider the diagram below (the Stages Model, a concept originally developed by Shirlaws).
Proving the benefit of your product/service in a small sphere is one of the most important steps, if not the most important step to becoming scalable. No product or service, however brilliant, is ready to scale until it’s been proven to work with a number of real customers paying the full price. Once your product is established in that limited capacity, then you can invest the money to grow the business.
Are you challenging and testing your assumptions?
It’s too easy to go with your assumptions, but you need to test and challenge your presumptions to ensure you’re actually pleasing your target market. You can better your product or service through customer feedback and you can implement gradual improvements. Only a proven concept will grow in the long run!
Are you demonstrating innovation?
If your business sounds like it’s a one trick pony then scaling up won’t be feasible. You need to prove that your business is ever growing with endless possibilities.
Don’t try and solve everyone’s problems at once, but show that you’re certainly open to innovation, and further enhancing their experience well in to the future, with follow on solutions or products which will compliment the existing offering.
What’s your end goal? How are you going to get there?
Too many entrepreneurs attempt to scale blindly – if you don’t have an idea of direction, then you’re going to get lost, and eventually fail!
Consider the possibility to franchise and merchandise; have you also considered granting licensing for intellectual property?
If you have enough demand you can become scalable with a sufficient amount of the right resources in place. Consider your goals carefully and every step that needs to be taken to get there.
Be sure before deciding if you’re going to take the plunge of scaling your business, or perhaps you’ve realised you really are content with the comfort of your small, but sufficient success. If you’re serious about going big, make sure you bear in mind the risks that can come with it!
The content of this post is up to date and relevant as at 10/10/2016.
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