Three methods for scaling a business

Everyone knows that starting a business is hard work, but scaling a business is just as challenging. Peter Tuvey outlines three methods for scaling a business.

A scalable business must have the right infrastructure to grow

A scalable business must have the right infrastructure to grow

Scaling means something different to every business. It might refer to an increased online presence, more employees, a new premises or any combination of these. It also requires a business to add revenue at an exponential rate, whilst adding resources at only an incremental rate.

In simple terms, a scalable business is one that has certain processes and systems in place to ensure that, when the business grows, it has the capability and the infrastructure to grow with it.

While demand will certainly play a large role in how and when a business decides to scale, it is vital to have a competent growth strategy in place from the get-go. This strategy will vary between businesses and between industries, which will have different challenges to overcome, but many of the principles will remain the same.

With this in mind, here are three primary methods for scaling a business:

A strong foundation

To succeed as an entrepreneur, you must have the will and drive to succeed and the ability to learn from potential failures. By extension, it is vital to find and hire candidates who share your vision and passion, since it takes more than a founder to build a successful company.

Making clever hiring decisions is particularly crucial because, as a business expands, it will be necessary to delegate responsibilities and to define roles more clearly.

For a business to be scalable, revenue growth must outpace employee recruitment. As such, employees will need to work at their maximum level of productivity. A well-structured business model is therefore essential, and it is important to deduce which organisational structure will best empower your employees, allowing for a more efficient work ethic and a positive working environment.

Refine your scaling strategy

Each business is unique and will deal with revenue and costs differently. As such, they will require unique scaling strategies.

Naturally, some businesses will find it more of a challenge to scale than others, depending on the industry, the product and service being offered. A technology company for instance, which incurs the majority of its production costs during the product development stage, is not going to scale in the same way as a doctors surgery, whose operating costs will stay fairly constant over time.

To find the scalable aspects of your business model, first locate the aspects of your business that can be duplicated rapidly and economically.

Remember to play to your strengths. Whilst it is important to make additions to support new features and capabilities, do not veer too far from your USP. Whether it is bringing in new talent, adding new tools and features, or making new partnerships or acquisitions, your business will look more attractive if you keep to your core values and maintain high levels of customer service.

Standardisation and automation

Scaling may require the implementation of standardised and repeatable processes, which relies on proper delegation. This might mean investing in additional support systems, such as IT and training.

Technology can empower your organisation, help improve efficiencies and expand operations. However, before investing in any technology, it is important to explore how well it will integrate with your users, network and IT components, and if it will maximise returns. The question is not ‘what can I do with this technology’, but ‘what can this technology do for me?’.

Purchasing additional technology often requires further financial investment, as it will entail an increase in data usage, staff training, and software and hardware support. It is important to consider if and how your company can finance these. There are numerous options available, from bank loans to alternative finance.

For many small businesses, especially during the scaling stages, bank loans may be unattainable. For those businesses, alternative finance may be the way forward.

Every alternative finance provider will offer you something different. From peer-to-peer lending to equity-based crowdfunding, invoice financing, commercial mortgages and flexible loans from online lenders, alternative finance includes multiple instruments that exist outside of the traditional banking system.

One form of alternative finance that could benefit a scaling business is revenue-based financing. Instead of repaying a fixed amount each month, revenue-based finance aligns repayments with a company’s monthly revenue, with businesses sharing an agreed percentage of their turnover with a lender each month, until the loan is paid off in full.

For example, in months when revenues are lower and your cash flow is unstable, you have the flexibility to repay less of the loan with no fee attached, but in months where your turnover and cashflow are both in good shape, you can repay more. You make the capital work for you, not the other way around. This makes it the perfect solution for a company that wants to scale at its own pace.

As the UK’s first revenue-based finance provider, Fleximize has a first-hand understanding of how revenue-based finance can help a business that’s looking to scale. Visit fleximize.com to find out more.

Peter Tuvey is co-founder and managing partner of Fleximize.

Further reading on scaling a business

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