Getting your business off the ground may have been challenging, but scaling it up will bring a whole new set of issues to contend with.
The reality is that scaling up your business will require a different skill set to the one you employed when getting it off the ground in the first place – you need to manage both growth and risk. In practice, that means planning ahead so that the business has sufficient resources in place to service the needs of its clients and customers, while also ensuring that those resources are managed in the right way for your company. Below are five tips to help you get started.
As your customer base grows – with both new and existing clients – you need to be certain your operating model is fit for purpose. Do you have the resources you need to cope with rising demand and the financial foundations necessary to underpin your growth? Crucially, your cashflows must be sufficient to cope with the lag between the periods during which you’re incurring costs and the time when you get paid. You may need to renegotiate payment terms with customers to get this balance right; if your customers aren’t willing to help – and large multi-national businesses may feel able to dictate their terms - you will need to discuss funding with your bank.
By ‘stress testing’ your business regularly, you can confront these challenges before they become pressing. Think carefully about what the impact of specific increases in turnover would be on the way your business runs and the resources it has available – including people, inventory, space and finance. Take advice from your professional advisers, including your accountant, on building these financial models so that you can plan for future growth.
As new business comes in, it’s easy to lose sight of the drivers that enabled you to get the company up and running in the first place. But rather than automatically saying yes to every contract you’re offered, try to focus on your business’s long-term strategic planning. Consider all new work in the context of that planning – will it move your business forward in the right way.
In part, that question will depend on the numbers. Is a new business opportunity worth pursuing given the margins available on it? Would your resources – these are finite for any business – be more profitably employed on other ventures?
It’s crucial not to become dependent on a single large customer for too much of your business’s revenues, but this is an easy mistake to make. Serve that customer well and there’s a good chance you’ll win more business from it – before you know it, your firm’s success, or otherwise, is dependent on just one relationship. If that relationship comes to an end, for whatever reason, the business may fail.
As your business grows, it is therefore crucial to keep a very close eye on the proportion of revenues you get from each of your customers. Don’t be tempted to neglect efforts to diversify the customer base when you’re doing particularly well on one account – it may even be worth appointing an account manager to handle such a customer, freeing up your time to develop new business.
Entrepreneurs often find it difficult to let go, but recognising your limitations is an important part of achieving business growth. For one thing, there are only so many things you can attend to personally each day; potentially even more significantly, growing a business requires new skills that entrepreneurs often have to learn.
These skills might loosely be described as management – that is building and operating a corporate structure that ensures a growing business is able to function effectively. As the business increases in size, it is likely to require greater hierarchy and process – if you can’t meet these needs (or don’t want to), look at appointing professional managers.
The numbers your business generates on a day-to-day basis are the evidence basis you can employ to make many of the decisions detailed in the first four of these tips – unless you understand the data, know how to interrogate it, and act on the insight produced, you’ll be operating blind. Often, entrepreneurs talk about following their gut instincts, but the truth is that the business data will help you make much better strategic decisions.
A good accountant should play a crucial role in helping you with this, delivering the data in a timely fashion and in a format that is easy to use, and working with you to develop actionable insight.
This article was written by the UK Scale team who’ve worked with hundreds of scale-ups from all over the world, across a range of sectors and technologies, to achieve commercial success.