how to scale a business for growth planning & valuation

How to Scale a Business for Growth Planning & Valuation

Nov 01, 2021

No matter how quickly your business venture grows, you also need smart scaling for a sustainable future. What does it mean to scale a business? Scaling in business prepares your enterprise for increased demand, which means you can cost-effectively handle the influx of work without affecting product quality, customer service, or employee morale. In short, scaling ensures a business with increased revenue will see increased profit margins. This guide provides scaling strategies to implement as your business grows to smooth and streamline the expansion process. 

Know when it’s time to scale

While no magic formula exists to determine the right time to scale your business, be aware of these indicators that your growth has outpaced your capacity:

  • Your sales funnel sees a constant flow of leads with no signs of slowing.
  • Your existing team can no longer keep up with the workload. 
  • Despite increasing profits, your business lacks the resources to achieve long-term goals. 

You should also have these characteristics in place before you ignite your scaling strategy:

  • A solid sales model you can replicate for new staff, product lines, and campaigns.
  • Strong business finances, including steady cash flow and growing demand.
  • Clear marketing objectives and a detailed customer persona for each of your target audiences.

Knowing how to scale a business in advance can help you prepare for this complex process. 

Establish realistic goals

Set several time-based growth milestones with profit projections. As you reach each of these growth levels, re-evaluate your company’s scaling needs. For each new financial goal you set as you scale in business, estimate the sales support and other costs you’ll need to get there. Look for opportunities to cut costs and support the needs created by expansion without damaging your brand. 

Look for fast growth opportunities

Here are some of the most common methods ambitious businesses use to drive rapid expansion when scaling a company.

  • Bootstrapping: Many companies rely on this strategy in their early stages. With bootstrapping, you build your business without funding from outside investors. However, this creates reliance on business loans and lines of credit, which means you’ll eventually need to move beyond the bootstrapping phase to truly grow.
  • Outside investors: When you’re ready to bring in outside funding, you’ll need to build a case for prospects to finance the growth of the company. If you have a strong professional network, start talking up your product or service if you haven’t already. Benefits like stocks that pay dividends attract investors by offering steady cash flow.
  • Crowdfunding: Sites like Kickstarter make it easier than ever to get your business in front of the eyes of interested investors. If you have a goal that you need to reach quickly to take advantage of a scaling opportunity, set a clear crowdfunding goal and create an engaging campaign.
  • Revenue streams: Look for ways to increase your company’s profit without spending more money. Examples include consulting opportunities, digital versions of existing offerings, or transitioning a service into a product (like selling an ebook based on a training course). 
  • Joint ventures: Partnering with another business can build profit, whether you opt for a short-term project or a long-term engagement. This could be as simple as establishing a local referral network among businesses in complementary industries. 
  • Selling invoices: This strategy could support growth if your business has a strong cash flow. You sell outstanding invoices in exchange for an influx of cash, then the clients pay the invoices as agreed, which repays your loan.
  • Bank loans: If your company has a strong credit profile, you can likely qualify for business loans and credit lines from a traditional bank. You may want to consider low-interest loans backed by the U.S. Small Business Administration.
how to scale your business

Seek the right staff

Scaling naturally results in the need for a larger team. A strong hiring process can reduce the expense of recruiting, onboarding, and training new employees. Look for candidates with hallmarks of exceptional productivity. In a McKinsey study, these individuals are about 400% more productive than the average employee, increasing to nearly 800% in director and C-level roles. Hiring too quickly because you end up in a bind can damage the company’s mission and vision. 

Deep dive into customer needs

You should already have a fleshed-out buyer persona, but scaling creates an opportunity to further delineate the needs, wants, and pain points of your prospects. A better understanding of your target market is essential to expanding your customer base as you scale. Make sure you can answer these questions:

  • Who is your customer? How old are they, and where do they live?
  • Where do they work, and how much do they earn?
  • Why would they want to buy your product? What problems does it solve for them? 
  • When does the typical customer decide to spend money on your product? What triggers them to make a purchase?
  • How do they view your brand? What do they like, and what could be better? Ask the same questions about your competitors. 
  • What expectations do your customers have? Are you currently meeting these expectations?

Tools such as surveys and focus groups can help you fill in the blanks and fine-tune your strategy to speak directly to those in or approaching your sales funnel. 

Invest in tech

Using technological tools to structure and systemize your business allows you to access significant economies of scale. Take advantage of automation to reduce the manual work and expenses associated with running your company. Countless operational areas are ripe for automation, so you can implement tech that streamlines shipping, HR, accounting, manufacturing, inventory, sales management, marketing, and customer relationship management.

When you succeed at scaling your business, your expenses increase at a reduced rate compared to your revenue growth. Without these strategies, growth does not result in increased profit because the business’s expenses rise at the same rate as its sales. Balancing these factors and learning how to scale your business sets your company on the path to healthy expansion.

  1. About the Author:

  2. About the Author:

    Heather Hubbard is a managing partner of Valesco Industries. She is responsible for managing the firm, strategy development, portfolio management, new investment origination, and team development.

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