Once your small business has begun to turn a profit, it may be time to start looking for opportunities to scale. Scaling up your small business may be necessary to keep up with growing demand in your market and avoid missing out on new opportunities. Even solo-run businesses or small businesses with one or two employees can find creative ways to grow like using time-saving technology or outsourcing rather than hiring more full-time staff. Whether you want to expand your services to new areas, add a new product to your lineup or hire a new employee to help you manage your current responsibilities, scaling your small business can have a significant impact.
When to scale your small business
Determining when to scale your small business can help you avoid growing at an unsustainable pace. Increased demand can be an indicator that your business is ready to scale, but it isn’t the only one. You’ll need to consider all aspects of your small business’s unique needs and the size of your customer base. Before you begin taking steps to scale your small business, think about these factors:
- Surpassed goals. Future projections for your small business indicate when you’re ready to begin scaling. Surpassing previous goals for profit or customer retention may illustrate how your business will perform in the future. If your small business has surpassed your goals significantly in one year or consistently over several years, you might be ready to scale.
- Customer demand. Growing customer demand can indicate that your small business is ready to scale. For example, if your car dealership struggles to fit in new appointments with potential customers, scaling your business can prevent losing out on sales.
- Stable profits. Scaling your business will require money, and without stable profits, you might bite off more than you can chew. Predictable revenue allows you to scale at a sustainable pace. Since small businesses typically have low operating costs and little overhead compared to larger companies, you can begin to scale even with small, stable profits.
Steps to scale your small business
Once you’ve decided that your small business is ready for growth, it’s time to take the steps necessary to scale up. Before making any major moves, evaluating and planning the trajectory of your business’ growth is essential. After you create a plan for scaling, your small business will need to overcome cash constraints, hire new employees and invest in technology.
Evaluate and plan
The first steps to take before you begin scaling your small business is to evaluate your current operations and plan for business growth. Supply chain issues, lack of cash flow and understaffing can be difficult or impossible to overcome once your business has started to scale. Successful scaling requires resources, and you’ll need to plan for the necessary amount.
Part of the evaluation and planning process may involve identifying an end goal. Do you want a stable and reliable small business, or would you like to expand to become a larger business? Maybe you’re looking to sell your business in the future? No matter what your end goal is, identifying an objective will ensure you scale in the right way. For example, if you own a beauty shop and want to expand to several locations, your plan for scaling will likely be different than if you’d rather focus on one successful storefront with an e-commerce website.
Overcome cash constraints
Small businesses often run into cash constraints when scaling up. Avoid overextending your business’s budget. Your small business must be able to supply enough inventory or services to meet growing demand. As your business expands to new areas or reaches new customers in an existing area, you will need more money upfront to continue producing your product or service.
Opening an e-commerce site for your brick-and-mortar store can increase your reach, but sold-out products lead to missed sales and annoyed customers. If you run a small business that provides services, like a dry-cleaning service, scaling up might include hiring new employees or opening a new location. Being able to make payroll and rent is a must, so any cash constraints should be considered before expanding your business.
Expand your staff
Hiring additional employees will likely also be an important step for scaling your small business. Once you’ve overcome cash constraints and know that your small business will be able to support more employees, it’s time to expand your staff to support new growth. For some small businesses, expanding staff might mean hiring one employee to help your solo-run business meet demand. Other businesses might need to create new positions, like hiring a social media manager or office manager.
Scaling your small business might not always require hiring more employees, but if you are unable to keep up with demand it will likely be necessary. One way to know whether you should hire more staff is to consider if you or current employees are spread too thin. If you find yourself struggling to maintain a work-life balance on a regular basis or notice important aspects of your business often slip through the cracks, hiring one or more new employees may help. Expanding your staff allows you to focus on the most important parts of running your business. If you’re able to keep up with demand with your current employees, hiring new employees may still be necessary to meet other goals, such as expanding marketing.
Invest in technology
Small businesses typically have smaller budgets, but that doesn’t mean there aren’t cost-effective opportunities to scale up. Including technology in your business plan can help you scale without draining your budget. If your business requires in-office work, fast and reliable small business internet will support your growth. Digital workspaces that include tools for collaboration and cloud storage can increase productivity and help your business stay organized. Payroll software and digital accounting systems save money and time by automating and standardizing processes. If your small business sells products, inventory management systems are a must for keeping tabs on what and how much you’re selling each month. Using technology creatively may allow you to expand your small business without hiring more employees.
Following these steps can help you scale your small business and ensure sustainable growth. Although scaling up is important for business growth, remember that small businesses will grow at a smaller scale and pace than larger businesses. Scaling up your small business might look like hiring one employee or opening an e-commerce website. The change doesn’t have to be overwhelming. No matter what type of small business you own, determining the best time to scale your business can allow you to meet growing demand without the risk of overextending your current capabilities.