Avoid Damaging Mistakes When Scaling your Business

 

Once you have actualised an idea and created a business around it, the idea of scaling comes naturally. 

While this is the obvious progression of things, scaling takes numerous little decisions that must be well-thought-out and implemented at the right time. But, on the other hand, going about it incorrectly can cause irreparable damage to your bottom line and even collapse your business. 

Here are some damaging mistakes to avoid when scaling your business. 

 

Many things in life go through phases. Businesses are not exempt. The two main phases a business goes through are the growth and the consolidation phases. 

Growth will happen over time and then temporarily stop or slow down. This often indicates the need to consolidate. This is necessary as slowing down growth can mean you have too much going on, essentially spreading yourself too thin with minimal returns.

 

When business trends suggest that you are not nailing core services, it's time to consolidate. During this phase, some of the things that stand out are:

Your margins are on the decline

Your business is generally not growing that much on multiple indicators

Your efforts are geared towards cost control and risk reduction

You notice that your projects have been stretched as far as they can go

When this happens, it’s key to bring back growth mode and take on risks and investments again to push your business forward. 

 

A good, widely trusted framework for capital allocation is the 70-20-10. This allows a business to cover all its bases by having its business on solid ground while trying out other avenues. 

70% of revenue allocation, in this case, goes towards a company's core business. This entails ensuring everything on this end is well taken care of, from production to marketing and everything in between. This is the backbone of the business and ensures everything runs and that profitability is maintained. 

20% is allocated to project growth. These can be new or running projects that will need some funds to push them to the end line. 

10% is there for special projects. These are not the core business nor running projects. However, every business has potentially lucrative opportunities to explore. This allocation allows this to happen without interfering with the established moneymaker, which is the core business. 

This is for equilibrium. However, there are circumstances under which you are free to teak these figures. 

The first is during a growth spurt. You can increase the 20% allocated to projects to see more projects completed faster and more efficiently. The second is during consolidation. 

Here, it's allowed to push resources back towards the core business bracket. These efforts can be geared towards cost control, creating or improving efficiencies, and cost-cutting. 

 

Scaling and tech go hand in hand. When trying to take your business to the next level, you must leverage technology. 

Investing in technology can allow your business to scale and be competitive with lowered labored costs. The most common systems used are;

Managed IT services

Managed print services

Customer Relationship Managed systems that increase internal collaboration

 Inventory Management Software. for manufacturers, this can be synced with key supplier systems so that they replace inventory on a rolling basis

Financial and accounting software to keep an eye on the money and make sound decisions

Human Resources Management System to help manage people, information, and tasks

Digital Marketing Tools to house marketing strategies conveniently

These are not a one-size-fits-all, but ideas that can be adapted depending on your industry. Ignoring technology as you scale means the entire process becomes more labor-intensive and more susceptible to human error.

 

Fast and furious growth sounds exciting, doesn’t it? On the face of it, yes, on further scrutiny, you might be digging your business into a hole.

As a business scales, so does its demand for resources. If this process is not managed properly, a business can go from profitability to severe inefficiencies quickly. At times, collapse might be inevitable. 

Your finances should be able to handle growth, your staff should not be overextended, and you should be able to maintain the quality and standard of your products and services. 

If any of these begin to suffer, you are probably scaling too fast. 

 

Unfortunately, you can be at all places at all times. You also can not have your hands in everything. 

This calls for the creation of a team with a shared vision to drive the company forward. Attempting to scale without a stable, core team in place is a recipe for failure. 

One place to start is hiring. Be very thoughtful about the roles you need to feel and what the ideal candidate would look like. This goes for education levels, skill set, and cultural fit. Avoid making hurried hiring decisions simply because you need to fill a vacancy urgently. 

Be equally discerning with your investors, vendors, and suppliers as well. All these people represent long-term working engagements. You should therefore strive for a good fit from the onset. 

 

The common assumption is that scaling means growing upwards and outwards. While this is indeed part of it, you might need to take another direction as you grow. 

As your business grows, you might identify departments, staff members, processes, and technologies that simply don't gel. Trimming these is just as important as bringing things on board that align with your scaling plans. 

These trims do not mean you are stalling or moving backward. Instead, they simply get what is unnecessary out of the way so you can focus on a leaner, more effective process of getting your business where it needs to be. 

 

Growing a profitable business is no mean feat. The time and financial resources required to do so are an enormous investment. As eager as you might be to scale, ensure to avoid pitfalls that could cost you all your hard work.