A successful small business will typically bring you increased revenue over time. Scaling your business is not exactly the same as growing a business. Read on to learn more about what scaling is, how to scale your business, and when you should scale.
Scaling a business means expanding and improving the efficiency of your current business systems, processes, infrastructure, and team. The goal of scaling is to increase your revenue by far more than your resources. When you increase your revenue and resources simultaneously, you’re growing your business, but not necessarily scaling.
To explain more: Growth is when you add exactly the right amount of resources to handle a new client. Scaling is when you take on multiple new clients while adding few to no new resources because your staff, tools, and processes are efficient enough to handle the growth.
You should generally scale your business if there’s increasing interest in your products or services. Scaling your business will typically prepare it to serve more customers, adding more revenue without a jump in costs.
Scaling is also a natural consequence of diversifying your products or services. For example, if you sell cookware, but your audience also wants bakeware, you may want to start stocking bakeware and boost your sales without hiring more people or expanding your storefront.
The following strategies may potentially help to lead to successful scaling.
If you have a loyal customer base for your products or services, offering them new products and services to meet their needs may be a natural way to scale. So, too, may be replacing your current products and services with better ones. Anything more you can offer with minimal changes to your expenses, resources, and internal processes can generally help scale your business.
Cross-marketing is the use of other businesses to market yours and vice versa. A classic example includes the free samples that certain department stores might give you with your purchase. Cross-marketing may help to expand the customer base for both entities with minimal spending, generally making it a highly effective way to scale your business.
Another great example is local business partnerships, even between completely unrelated businesses. For example, let’s say you own an ice cream parlor around the corner from a toy store. If both businesses include coupons for the other in your next newsletters, you can typically both scale. You’ll bring in new customers with lower prices – and hopefully they like your offering and return.
Scaling will likely inevitably involve hiring new employees. But if you hire exactly enough employees to keep up with increased demand, then you’re growing your business, not scaling it.
With scaling, the point is generally to increase your revenue compared to your costs so substantially that your profit margins vastly increase. Labor, though, is the largest expense for the average small business. That’s why scaling means hiring better, but not necessarily more.
Newer businesses often spend half their revenue on marketing within the first year, and that doesn’t dovetail with scaling. Typically the trick is to reduce your costs and reach more people with your marketing. On the cost-cutting front, content marketing is typically a solid strategy. It’s also generally great for high engagement, as is influencer marketing.
Content marketing may be low-cost since you can do much of it yourself. A best practice is to use a tool that shows you terms relevant to your business that people are searching on the internet. From there, you can write your own content with these phrases included so that your website shows up in results for these searches. Influencer marketing often leads to a strong return on investment immediately and long-term. Influencers’ audiences are often much more engaged than the average person who encounters traditional marketing campaigns or ads. These influencers have also earned their followers’ trust, so their followers may be more likely to buy your products if the influencer endorses them. For an deeper look at influencer marketing and tips on how to find the right influencer for your business, visit the SmartBiz® Blog: How to Find an Influencer for a Small Business: 9 Tips.
Scaling generally always comes with the prospect of rapid growth that can start to feel unsustainable. A tip to achieving sustainable growth is automating as much of your process as possible instead of hiring people to oversee it. This way, you can likely scale without your labor costs ballooning. Automation can help to remove repetitive tasks from your plate. Some of these tasks might be customer and vendor follow-ups, reporting, drafting emails, and posting content to social media.
Of course, there are certain processes you can’t automate – like customer service. That said, you can generally outsource many processes to keep costs down. The resulting gap between your revenue and cost increases can often resemble scaling more than growth.
Running a storefront and a website is typically a great multi-channel way to increase your revenue, and you can do more. To scale, consider joining seller marketplaces such as Etsy® or service provider marketplaces such as TaskRabbit® to further fuel interest in your products or services.
Scaling your business means spending less money, not spending nothing. Sometimes, especially in periods of high growth, you may need help to get through your cash flow. In that case, a small business loan may be a great place to start. It may substantially increase your cash flow while minimally impacting your expenses.
An SBA 7(a) loan may be an especially good fit for scaling your business. You can typically borrow up to $350,000 to cover working capital costs and repay your loan back over 10 years at a low interest rate. The result is often small monthly payments that will add little to your expenses. Bank term loans are generally nearly as effective, and other great options include business lines of credit, business credit cards, and invoice financing. SmartBiz® can help you determine the best type of loan to help your business scaling goals.
As your company scales, there will be certain times when extra funding will likely be necessary. SmartBiz may be able to help you find that funding through one easy online application. With SmartBiz, you save tons of time and hassle as you search for loans, so check now whether you pre-qualify*. Successfully scaling your business may be just a loan away.