If you want to grow your business, you have to plan for growth so you can deliver more products or services once the orders roll in.
Scalability is about focusing on the gap between your costs and your revenue – that's your gross profit. When you approach your second or third year of business, you should of course be growing your revenue. But you don't want your costs to go up in line with each dollar earned.
For instance: every $10 of sale shouldn't keep adding another $8 of cost. Instead, your aim is that for every $10 of extra revenue, you go from $8 to $7 to $6 to $5 in terms of costs. That's one example of scaling. Another is being able to replicate your business model in multiple locations, easily, without having the headaches experienced first time around.
1. Finding the “black holes"
First, ask yourself: “Where am I grinding my gears?"
“What do I spend most of my time doing that is leaving me with the feeling that I'm not being as productive as I should?"
Work with your team to uncover the areas you spend time in, that don't directly relate to either earning new revenue or delivering good customer service. Then, try to pull the costs down by standardising these areas or using innovative technology.
2. Move atoms to bytes
A reliable path to scalability involves thinking about your business in terms of 'atoms' versus 'bytes.'
- Atoms are expensive! They are people, machines, premises – anything in the physical universe.
- Bytes are the digital universe like a website, digital marketing, software and systems.
Scalability can happen when you turn atoms into bytes; in other words, leveraging as much as you can out of the physical universe into the digital universe, and getting your customers to do things online which bring your costs down. That could be as simple as making a reservation online or as complex as selecting and buying/selling a product, like on eBay.
You can't grow your business as fast if your costs grow proportionally with your sales. Scaling digitally helps reduce the gap between sales and costs – leaving you with the cash flow to grow even faster or take home a higher profit.
To move from atoms to bytes, identify the part of your business you can improve using technology and machines. In manufacturing, scaling could involve smarter, cleverer machines.
For example: the automotive industry scaled by having robots in many of their plants. For a small business, scaling could involve better point-of-sale material, or better use of databases to track customer information, or a website allowing customers to book, order or buy 24/7.
3. Partner or outsource?
When you want to scale, you must define what parts are the core of your business – what is your brand, who are your key people?
- Do you own trucks? If so, maybe you could consider outsourcing to a trucking company?.
- Do you need your own call centre or sales force? Should you outsource telephone sales then take the warm leads and use your own staff to follow those up?
I'm an investor in a business that sells shoe inserts and other healthy feet options through a chemist chain. We don't have to warehouse it or deliver it or cover any of that because we've outsourced our distribution. Instead we focus on designing and improving the product and getting it made to a quality standard and price.
4. Anticipate bottlenecks
Before you scale, consider how you'd respond to a massive increase in sales volume.
- What will you and your team do if the phone rings off the hook and you have ten times more customers than you have now?
- What bottlenecks would stop you from responding? Perhaps it's your manufacturing time, or maybe it's your delivery capacity.
- Once you identify the bottlenecks in advance, you can problem-solve to fix issues ahead of time.
If you won't be able to manage the deliveries, look for a delivery partner. But you should do that before you start marketing.
5. Re-engineer. Repeat.
Scaling your business is a journey, not a destination. You need to constantly re-engineer and repeat. When you are growing your business, you should sit down every 6-12 months and review the process to constantly improve efficiencies.
How can we streamline, what can we outsource or shift to digital?
That's what keeps you fresh, and keeps you growing.