Growth. It is something that every entrepreneur dreams of – a business that is successful in its target market, popular with clients and ready to reach the next level. And yet, if handled incorrectly, trying to scale your business to a bigger model can actually be its undoing.
If you are at the point where your business has outgrown its current premises, needs more staff or is growing faster than your cash flow can handle, then you need to decide whether or not to take that next step that will enable you to grow.
This is a significant decision to make because in nearly all cases, taking that leap to the next rung on the ladder also means a significant increase in investment.
Whether it be new premises that are suitable for your next phase of growth, but come with a significant increase in rental; or the recruitment of your first (or next) staff member, who is essential to your plans but will add a salary and on-costs to your expenses – you need to think carefully about whether this is the right move.
And this is the question – to take the plunge and invest, or to stay as you are?
If you are serious about growth and fulfilling a big vision, at some stage you will reach the point of needing to take this significant step to make it happen. Staying paralysed in the present is not the answer, nor is blindly leaping into the unknown without a plan.
So first things first – what makes you think you are ready to scale?
1. Issue: Too much business and not enough time
Are you turning business away because you simply don’t have the time to take it on? Before you jump into increasing resources, you need to have a hard look at your current processes, business model and use of your current resources. Many entrepreneurs in this position are wildly inefficient, simply because they are trying to do it all themselves and have never taken the time to step back and analyse where they are spending their time, where the inefficiencies are, what their pricing model is, and what they could automate.
Next step: Before investing a chunk of your hard-earned money into bigger premises or more staff, invest in a business advisor who can look at your business foundations as they are now, and provide advice on increasing efficiencies, minimising waste, and whether or not your business model warrants (and can support) the increased investment. This will ensure that whatever your next steps to scale your business, you’ll be making decisions based on a clear picture of your current situation and how to achieve your long-term overall vision.
2. Issue: Your current premises doesn’t allow you to expand your current business model.
Next step: Similar to point one, seriously take a look at what you are doing now and where you want to take the business. Do you really need more space? Could you use your current space in a more efficient way?
Before you take on this increased cost, you need to work out where you will be making the additional revenue each month to pay for it – and I’m not talking about enough to ‘break even’. Can you sell enough to cover both your increased costs and generate a profit?
Finally, have you tested market demand for what you want to offer (and I mean with real people)? This is a critical step before adding products or service lines to your business that never end up going anywhere.
3. Issue: You perceive market demand and opportunity to be everywhere, if only you had the resources to take advantage of it.
Next step: To put it bluntly – where is your proof? If you’re thinking of every person that promises ‘If only you offered X, I would give you Y amount of business…’; and of all those contracts that go begging because you don’t have X, then stop right there. Most of those, if not all, will never amount to anything once you are standing there asking for the actual business. At the risk of sounding like a total cynic – words are cheap even though intentions might be genuine.
So back to that concept of getting proof. Start testing these opportunities by asking for money. Yep. You heard me. If the opportunity or demand you perceive is real; if you have the skills and experience to add value in these areas; if your contacts are genuine in their want to buy from you – then they will be happy to pay something upfront. Whether it is in the form of a signed contract with a down payment; or commitment to a membership with a minimum term; or deposit on a series of workshops – you know that when people are willing to pay for delivery, they are serious. If when you ask, there is an awkward silence and a reluctance to make a commitment, take that as an invaluable opportunity to find out why – either there isn’t real demand, or your proposal just isn’t compelling enough (yet). Either way, test before you invest.
The common threads here are:
• Expansion will always cost you more than you think - significantly more. Simply doing what you are doing now isn’t going to be anywhere near enough to cover increased costs and obligations, let alone make you a profit.
• Make sure you are absolutely clear on why you are expanding, what your vision is and how you are going to make it work.
If you’re thinking you are on your own in this dilemma, and fear that you might have taken the plunge too early (or alternatively are stuck in the paralysis of not taking the next step because it terrifies you) – don’t worry! It’s way more common than you may think!
As one client said to me this week – ‘I have outgrown my current premises and it’s time to move’. When I asked him how many additional sales he would need to make it worth his while, he responded ‘At least double what I do now – I think – and it worries me.’ Now in this particular case, the client is right. He does need to move – the landlord is selling the building. However without a proper sales strategy and vision of where he wants the business to go, this becomes a scary proposition. Not only does he have to commit to new premises (at the cost of at least double his current rent), he will also need to commit to spending more time and money on sales strategies, business promotion and additional staff, and re-assess his current mix of clients, to make it all work.
The moral of the story is that if he ‘just doubles’ the work he is currently doing, it still won’t be enough to cover his increased costs. For this business, getting really clear on the most profitable business lines and the mix of clients is what will make or break it. By understanding exactly who his ideal client is, what his proposition is for them, and promoting that with laser focus, we have laid out the road map of where he needs to take the business, and instead of feeling totally panicked he can now see the logical next steps he needs to take to make it happen.
The bottom line
Deciding to scale your business is a big commitment, and can be either incredibly exciting or totally terrifying. Determining which depends on whether you have an understanding of your market, a clear picture of your current state, a vision of where you are going and a strategy to support your move.
• The decision to expand your business is not one to take lightly. Take the time to plan out your strategy, which starts with getting really clear on the vision for the business and then engineering a roadmap.
• It will always cost more than the initial cost of a new staff member or bigger premises. As your cost base increases, so too must your revenue – and at a faster pace, so that you are turning a profit. This will take more than just doing what you are doing now – so make sure you have a growth strategy and an understanding of what it will cost you to make it happen.
• Think hard about whether your business is ready to expand, or if you first need to make changes to improve its efficiency, automation, client/product mix or productivity. Chances are this is where your next uplift in profit will come from, and then when you do take the plunge you will have great foundations from which to grow.
Need help? I’ve got your back!
I work with many entrepreneurs who have big visions and are raring to grow, but are worried about whether now is the time to stretch themselves.
If you –
- Aren’t sure whether now is the right time to scale;
- Are worried about how your revenue line will increase more than your cost base;
- Want to be sure that your business is operating at maximum efficiency before you invest more money –
Then get in touch with us!
click on the link below to book in a free 15 minute Discovery Call with me!
And don’t forget…
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