Building a Case for Scaling Your Business
Every entrepreneur understands that growth is essential for almost every business’ long-term survival. Companies that fail to grow will invariably fall behind their competitors as the industry evolves. Of course, it is one thing to recognise that your company must grow, but it is quite another to know when you can successfully scale your business without undermining its core foundation. When it comes to building a case for scaling your business, you need to know how to determine whether that expansion is financially viable.
When Building a Case for Scaling Goes Wrong
Business expansion is something nearly every business owner dreams of making happen, but it’s not an easy task. There are dangers associated with scaling at the wrong time, expanding too quickly and growing your company without a serious plan for managing the financial aspect of the equation. History is littered with the remains of companies that tried to grow without first examining their financial capacity. So make sure when building a case for scaling, you get it right.
So, what can go wrong when you scale at the wrong time or in the wrong way? Scaling too soon or too late can leave you with extra costs if, for instance, your industry enters an unexpected downturn. Scaling too quickly can leave your resources stretched too thin, disrupt cash flow or create unexpected problems in the basic systems your company relies on to get things done. When you scale without an appropriate plan, you could be wasting valuable resources that would be better served in other areas of the business.
You already know that business is about more than just servicing customers and making money. It’s also about marshalling resources, managing assets and conserving financial strength for things that matter most. If you attempt to scale without the right financial foundation, you’re asking for trouble. Below are some key factors to consider to help you determine whether your company is financially ready to scale its operations:
The Health of Your Industry
What does the future look like for your company and your industry? Are you positioned in an industry that is seeing sustainable growth? Or are there new technologies and marketplace changes that could pose unexpected risks? How well-positioned are you to meet current and potential competitors? Are new customers using your industry’s services, or is the customer base stagnant or in decline?
You need to know whether there is a firm financial foundation within the industry that can justify your desired growth. Otherwise, you could end up spending valuable resources that should instead be used to modify your business. It’s important to make sure that your business survives any potential decline within the industry.
How Well Your Growth Strategy Aligns with Your Vision
When you started your company, you should have had a vision of five, ten, or twenty years in the future. Your company mission, strategies and execution should move the business toward that destination. You must examine your plan and determine whether it is in alignment. If immediate growth doesn’t facilitate the realisation of your vision, it may not be the right move, right now.
The choice may involve sacrificing your long-term vision for that of short-term profit increases – and that’s not the type of choice you should be considering. Being a market leader requires tough decisions. Sometimes, those decisions require you to forsake short-term growth strategies, especially when you cannot be certain that they’ll contribute to long-term success.
Your Company’s Foundation
How stable is your company from a financial standpoint? Do you have the cash flow, infrastructure and service capacity to manage rapid expansion? Will your capital be sufficient to finance the growth and sustain it? What additional costs will you bear in terms of added training, equipment needs or the development of new processes? You need to ensure that your company has the necessary foundations in place to adapt to the challenges that will present when building a case for scaling.
Your Scaling Timeline
How realistic is your plan? Before you can build a solid case for scaling your business, you need to know that your plan is achievable. To determine that, you must set clear deadlines for reaching each goal. Create measurable milestones and be realistic about how you’ll measure the progress. Growth can be unpredictable so be sure to leave room for unexpected complications.
Most importantly, make certain that you understand the growth plan down to the smallest detail. If you only have a vague idea of what the expansion will look like – or the impact that it will have on your company – then you’re not ready. Without that understanding, no amount of financial readiness can justify your decision to scale. Know what you’re trying to achieve, and be objective about any assessment of that plan’s viability.
As an entrepreneur, business growth is something that you will certainly want to achieve. However, the timing of that scaling effort is critical since failure to scale efficiently could leave your company on life support quicker than you think. To avoid negative consequences, take the time to critically evaluate all these important factors when building a case for scaling. When you do, you will be able to identify potential risks and be able to adjust your strategies accordingly. Ultimately, when scaling, timing is everything.