What does it mean to scale your business?

Deciding if you can scale your business can be a challenge. As a business owner, it can be difficult to know what exactly it means to scale your business, and whether or not growth will be sustainable for you. Gallo LLP can provide you with financial insights into your business to know whether or not scaling your business is the right decision for you right now, as well as how to successfully scale your business. 

What is scaling a business?

Scaling your business means preparing to support your company’s abilities for growth. It is having the ability within your means to grow without being hampered or hurting production/services.  If you want to scale your business, you are looking to equip your business to handle increased demand without incurring extra expenses. Scaling is about capacity and capability. Does the business have the capacity for growth, and will the current business systems, infrastructure, and team be able to accommodate the growth.

A few examples of preparing to scale a business include investing in technology, integrating new systems, and preemptively hiring new employees. Investing in technology can result in gaining economies of scale and more output with less labour. Automation can help run your business at lower costs and more efficiently by minimizing manual work. Companies may have multiple systems running today – these systems need to work together to ensure no hold ups or problem areas where a bottleneck can occur, and new, more efficient systems can be used to scale your business. Finding the right staff ahead of scaling is also important, you will want to ensure there are enough customer service staff, sales people, service/manufacturing staff, etc.. This is important to provide your staff with the proper support so they are able to handle the growth without burning out or feeling improperly trained

What is the difference between scaling and business growth?

Growth is when a business increases their resources equally as fast as their revenue is growing. An example is a company hires a new sales representative for a $50,000 salary, and as such they gain $50,000 in new revenue. The company is growing but hasn’t really gained much value.

Scaling is when revenue is added at a faster rate than new costs are output. An example of scaling is when a company invests in $5000 in marketing and as such they increase their revenue by $50,000. Scaling is when revenue increases without a substantial increase in resources.

How to know when it’s time to scale a business?

If you are able, there is never a bad time to think about scaling your business. You will want to be prepared to scale as early on in your incorporation process as possible. Increasing your revenue only by adding more resources with a corresponding increase in costs is likely to cause stagnation. The effort it takes to grow often simply isn’t worth the modest financial gain. Scaling, however, increases your revenue significantly without the same operational costs. 

Businesses need to implement strategies to increase revenue while also increasing efficiency. You can increase your company’s value by increasing the efficiency with which you can bring in new revenue. Most companies, though, will notice it’s time to focus on scaling when they are not a start-up, but they also haven’t reached the point of being a large corporation either. The decision will have to be made between growing at a regular rate or faster scaling. Scaling can be difficult, as companies will want to keep overhead down so they have a chance at lasting, but they also need to ensure their current resources and efficiencies are enough to successfully complete the workload.

Some key points to look for that it’s time to scale:

  • Your employees can’t handle the workload. Even though you have strong cash flows, you might find you’re turning down new opportunities or letting customers down because your team has too much on their plate. 
  • When long term business goals are unattainable. If long term goals look impossible or really challenging because you don’t have the right people or resources, consider scaling.
  • When leads are increasingly difficult. Don’t leave a new lead or potential customer hanging just because you find yourself unable to follow-up. 

Key challenges businesses face when scaling up

Scaling your business can be incredibly difficult, especially if you don’t have the right people supporting you. Gallo LLP can help you face every challenge with scaling to ensure your business’ success. 

Top Challenges Business’ Face When Scaling:

  1. Choosing the wrong staff/people to work with. This could mean suppliers and vendors, or staff and investors. Ensure these individuals fit into the plan/business and strategy and that you can have a long term relationship with them.
  2. Failing to maintain longevity in demand and market share. Creating a strong buyer market and building long term demand is just as important as focusing on ramping up sales.
  3. Attempting to compete on price leading to lost revenue for additional work. Competing on price can be tempting when scaling, but it can result in a race to the bottom. Instead, compete on quality and customer service to better position yourself long term.
  4. Company culture isn’t aligned with scalability. For example, your employees may need autonomy while your managers need control.
  5. Your current managerial styles aren’t ready for the scaling end goals. Your current management styles may work well in a small firm, but they likely need to be adjusted as you grow into a larger/growing corp.
  6. Some may forget to trim the fat as they scale. As you scale, you will need to get rid of staff that are not helping, throw out and readjust ideas that aren’t working, and replace systems that are no longer relevant.
  7. Hiring more people instead of the right people. Some companies may end up hiring for quantity instead of quality, which can deter scalability,
  8. Scaling faster than you can handle. As you scale your business, ensure your staffing, IT, and infrastructure can handle the scaling and growth.

How to scale a business

  1. Have a plan for setting up new employees and offices.
  2. Make sure you have airtight IT and IT support
  3. Use platforms and software that are easily scalable
  4. Budget and evaluate your finances
  5. Seek the advice of appropriate professionals

Every business has the ability to scale, so long as the company invests in the right lines of business and truly wants to scale. Invest in company culture early on, core values can get lost and muddled in scaling, and you need to ensure the culture doesn’t get lost or slip while scaling

A business’ founders need to take a step away from the small things that can eat up their time, micromanaging can greatly hinder scaling. Identifying your ideal customers and messaging your products well to them will help you scale. Make sure you have strong management practices. When scaling, you’ll have already taken on extra staff during growth – therefore, scaling is a balancing act between bringing expertise on board and running a tight team. Rather than focusing solely on revenue, you will want to challenge your competition and become a market leader. Carve out a niche for your product or service. Having strong IT is vital for scaling. Your IT needs to be able to cope with an increased demand so you’ll need experts to provide help and service to both customers and your team. Finally, ensure you have strong marketing and sales teams to increase your ability to scale. 

How Gallo LLP will help you scale your business:

Gallo LLP are experts in financial advising and accounting needs. We can assist with all aspects of scaling your business to ensure you win. Areas we can help with include consulting, choosing software, developing budgets, obtaining financing, networking, cash flow projections, business valuations, growth through acquisitions, leave vs buy options, buying and selling businesses, corporate restructuring and reorganizations, regular and ongoing communication, and financial statement analysis to try and figure any areas of wastage. Whatever your business needs, trust Gallo LLP.

Jonathan Gallo is the Managing Partner of Gallo LLP Chartered Professional Accountants. He started his accounting career at a large international firm, which provided valuable technical lessons, but his passion is business and winning in business. As an in-depth tax practitioner his recommendations and solutions, are simply, not taxing.