The Challenges of Scaling a Business and How to Overcome Them
Scaling your business is exciting, but it comes with a variety of challenges you need to overcome. From lack of energy to poor timing, without the right tools or plan, your business can quickly fall off the tracks.
In this article, you’ll read about four of the most common challenges faced when scaling a business. You’ll also learn how to overcome them and scale your small business successfully.
Let’s start with a quick distinction. Scaling is not the same as growing. Typically, when people talk about growing their business, they’re referring to adding resources, like people, capital, a new location, equipment, land, etc.
Scaling on the other hand, refers to increasing revenue for a minimal investment. Pretty much anything that can be multiplied by automating your process, can be scaled. Some examples of scalable businesses include subscription-based platforms, like online courses, e-trading, software, investing in rental properties, e-commerce, etc.
4 Business Scaling Problems With Solutions
1. Scaling Without a Solid Demand
First off, know that scaling isn’t always a good idea.
As a business owner, you must be aware that timing plays a huge role. If the demand for your products or services is low, it’s best to postpone this process. Or you might find your revenue remaining stagnant while your expenses rapidly increase.
When that’s the case, you’ll be forced to scale back to your previous level with major losses.
The best approach is to thoroughly assess demand for your goods or services before scaling. By doing so, you’ll make well-informed decisions that will reflect your position.
Another strategy more flexible businesses could use is scaling to demand. This strategy involves constant scaling (up and down) in order to adapt to the current situation. It’s usually used by retailers and IT firms.
2. Working With the Wrong People
When you’re running a small business, choosing partners and employees is a fairly simple task. As long as you’re able to retain control over your whole enterprise, there’s no need for a complex leadership structure.
But once your business grows, you’ll need to delegate your duties to different managers. And since hiring the wrong team can ruin your scaling efforts, it’s important to know what makes for a good hire.
Here are several factors that make a suitable team member:
- Good knowledge of your industry, product or service
- A skill set that demonstrates innovation and vision
- Having goals that are aligned with those of the business owner
- Ability to cooperate and compromise
Starting at the job interview, make sure the candidate is qualified for the job. Simply checking their CV won’t be enough. You’ll need to assess their knowledge and skills thoroughly to be sure they’re the right fit.
Check their cooperation skills before you assign them to an important position. The ability to work with others and accept alternate solutions is essential for a manager. So avoid employing stubborn candidates, even if their managerial skills are remarkable.
Finally, make sure their goals are aligned with the goals of your company. The most common way to do this is through financial incentives. Some studies even suggest that managers respond better to non-cash rewards and recognition programs. Though most people instinctively prefer cash incentives or rewards. Whichever method you choose, you can be certain that your managers will be working to your benefit.
3. Scaling Without Funding
As you know, scaling is not free. And more often than not, going through this process with insufficient funds will result in failure.
The last thing you want is to have to return to you previous business model further in debt than when you started.
The solution is to secure either internal or external funding.
Sufficient internal funds can be generated by increasing revenue and profits with your existing inventory. Whereas external funds can be obtained through loans and investments. Of course between these last two options, loans are the least favorable, unless you expect your growth rates to skyrocket. Pursuing investors are far more welcome during this period.
So how much does scaling cost?
Pinpointing expenditures connected with this process can be hard to predict. But scaling does require some investment, especially in sales and marketing.
In some cases, the whole business structure needs to undergo changes, and that comes with a price. All in all though, scaling your business is less expensive than growing it. Just be sure to allow for unpredictables.
4. Confusing Growth and Scaling
As mentioned at the outset, growth and scaling are completely different. Growth refers to the process of adding new resources such as people or technology to your firm in order to increase your revenue. On the other hand, scaling involves increasing sales with little to no additional assets. As you can see, the only thing these two share is the objective — maximizing your profits.
Getting these two mixed up can be disastrous for your scaling endeavors. If your strategy is a strange mix of scaling and growth initiatives, you’ll likely not bring any results, so first assess whether your business should grow or scale.
Generally speaking, growth occurs once a small business becomes profitable enough to expand. This expansion involves growing certain aspects of the firm to service more customers. Growth is usually more expensive and it completely changes the structure of your business.
On the other hand, scaling does not require large amounts of money or drastic changes in structure. Therefore, business owners usually use it as a way to maximize their profits using the existing assets. For example, Google services more and more people every year without significantly expanding their capacities. That in mind, note that scaling and growth are both relevant to your business success, so there’s no reason to write one off.
Hopefully, this article has helped start you on your path toward a successful scaling strategy. The scaling process might seem difficult at first, but if well thought out, can be implemented with promising results. If you’re looking for a tool to help your scaling, VoIP Call Centers might be a good bet. Just prepare for the challenges that may lay ahead and follow some of our suggestions for overcoming them.
What techniques interest you most for scaling your business? Let us know in the comments. And if you have any ideas for future articles, write us at firstname.lastname@example.org. We’re always looking for new ideas!