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Small Business Advice: The Basics of Scaling Your Business

Written by Ian Smith on June 27, 2013 in Small Business  |   4 comments

There’s more to a successful business than free cash and killer marketing strategies—sales growth is what truly drives a business forward. That said, rapid growth can be dangerous for your small business if the proper systems aren’t in place to support the additional demand on…

small business advice, small business marketingThere’s more to a successful business than free cash and killer marketing strategies—sales growth is what truly drives a business forward.

That said, rapid growth can be dangerous for your small business if the proper systems aren’t in place to support the additional demand on your resources. If you’re not prepared, you could wind up with a leak in your growth rate. That’s why scaling is so important.

Think of scaling, in its very basic form, as a sequential set of events that connects the key components of your organization. Scaling implies alignment, control, and predictability. In other words, it means fast—yet safe—growth.

In order to successfully scale your small business, you first need to recognize the key components of scaling and then understand how to optimize them.

The key components of scaling

  • Positioning: Creating a brand identity, thereby positioning your company in the minds of your target consumer base.
  • Product Innovation: Crafting a product that is new or improved as well as fit for your sector and target market.
  • Marketing: Communicating the vision and value of your product to your customers in a successful way.
  • Sales: Selling your product to customers, informed by your marketing story and position in the market.
  • Operations: Performing the recurring tasks that need to be done in order to keep your business running and generating profit. Examples include everything from facility management and the delivery of goods, to measuring customer data and analyzing financial performance.
  • Production/Development: Managing the processes and methods necessary to create and build a product or make sales.
  • Customer support: Implementing the services provided to customers to ensure they can use your product.

Successful use of scaling: An example

One of the companies I’ve been watching, ADMET, offers a great example of a small business that scaled for sustainable, successful growth by optimizing the key components of the business.

This company manufactures and sells systems that test the mechanical properties of metal, rubber, plastics, and other materials. Several years ago, the owner of the company saw an opportunity to reposition (positioning) the company as a specialist in the biomedical sector. This involved building systems (product innovation) that could test the strength, durability, and all relevant mechanical properties of molecules.

Thus, a new story for the company was crafted (marketing), new sales talent recruited (sales), production altered to build the new systems (operations and production/development), and customer support implemented to ensure the new systems were used properly. Several years later, the company has built a multi-million dollar business, and it is now ranked as one of the fastest-growing companies in the country.

Sounds simple enough; all the moving parts are connected and aligned. So why don’t all small businesses scale?

Leakage: The downfall of many small businesses

As small businesses grow, leakage often creeps in. People don’t perform, processes are not put in place, and follow-through is missing, all resulting in lost revenue and a leak in forward momentum.

For example, leakage is quite common in small software companies when the product begins to sell but the owner doesn’t get ahead of the curve. Instead of investing in sales and marketing teams to scale the business, the owner builds the product, answers queries on the phone, builds enhancements to the website, and then, late at night, does the bookkeeping. It’s the classic long hours and potential burnout scenario that can easily result in lost revenue.

Other issues that may arise include:

  • The company’s position in the market is not defined.
  • Products are created that aren’t useful for customers.
  • Marketing strategies are weak and, as a result, so is lead generation.
  • Product knowledge is patchy, and sales scripts are not connected to the marketing story.
  • Analysis of financial performance is poor.
  • Workflow is inefficient or quality control is non-existent, resulting in costly reruns and corrections.
  • No formal processes are created for the onboarding of new customers.
  • Communication between sales and customer support is ineffective.

Unfortunately, leakage generally occurs only as you become successful—as you grow and add more components. As the founder gets stretched, leakage can occur all over the company. Orders are late, cash isn’t chased, metrics aren’t put in place to measure things, and momentum is lost.

Without addressing these issues, it’s nearly impossible to grow your business. As a small business owner, it’s important to realistically approach scaling in order to minimize leakage. Consider what tasks you can offload that will enable you to focus on bigger-picture items that will help your company grow.

Scaling often requires opening up the mind to bigger plans. Businesses evolve through various stages, and you need to be open to all of them.

To learn more about minimizing leakage, read “Small Business Advice: Minimizing Losses While Growing Your Company.”

 

Ian Smith is the author of “Fulfilling the Potential of Your Business: Big Company Thinking for the Mighty Small Business,” which won the Small Business Book Awards for Management in 2012. His blog, the Smith Report, focuses on ways to scale businesses. In 2010 he founded the Portfolio Partnership to help CEOs fulfill the potential of their businesses. As an ex-CFO, investment banker, venture capitalist, and CEO, Mr. Smith has realized more than $400 million for shareholders over the past 25 years. Still competitive, Ian is ranked in the top 20 in the world at 400m on the track for his age.

 

4 comments

  1. http://www.bizsugar.com says:

    Hi Ian,
    From experience, I can say that scaling a business is huge and sometimes the hardest part. Though, of course, it is often the most critical aspect of creating a sustainable business that will continue to grow over time.

  2. Ian Smith says:

    Heather to emphasize the point, only yesterday I was in a lunch meeting with a successful consulting business with $3m in sales who wanted to scale to the next level. As I pointed out their business would be less risky not more risky at $6m sales with a better spread of customers and profit.

    Ian

    Reply | Edit

  3. Harry says:

    Managed growth is how I would advise small businesses to scale. Yes, customers would love to have you in more places or expand your product portfolio, but if you don’t have the operational prowess to maintain the key ingredients that made you successful in the first place you will eventually lose that competitive advantage and eventually lose customers and sales.

  4. Ian says:

    Managed growth is a great phrase for scaling. And the problem Harry is that so many businesses grow with one or two big customers but fail to build out from that successful promising start. The key is to monitor for leakage across your company not just in sales but right across your business. That is why scaling is so much more than just sales growth. In practice I believe owners underestimate the operational talent that actually get stuff done.


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