Scaling Your Business

Dear Readers,

Maria developed a thriving technology business about five years ago and has her eye on the future. Maria asked, “How can I position my business for the future to scale up?”

Josh: The most important piece of advice is to work on your business, not in it. This can be challenging as business owners are passionate and pour their heart into their business. However, business owners must be focused on the right aspects of their business. Ask yourself: why do I want to grow? Where do I see this business in five years and then in ten years? If the answers to these questions do not require growth or expansion, then growing would be a big mistake. On the other hand, if you know why, you’re on the way!

Pedro: Another question, business owners should ask themselves frequently is am I building a business that I can scale? Companies that scale have operating leverage. They can grow revenue with minimal or no increase in operating costs (e.g., administrative, sales, etc.). Still, growth can be a scary proposition. If you scale before you’re ready, you run the risk of over-extending and getting into a situation that isn’t profitable. On the other hand, if you expand at the right moment, you stand to reap some major rewards. You shouldn’t attempt to scale your business unless you’re truly sitting on a thriving second-stage business and have experienced profitability for at least two years.

Josh: What are some signs that indicate a business owner is ready to scale his/her business, Pedro?

Pedro: 1) If you’re hearing from customers in multiple markets, then it may justify market growth. 2) If you’re experiencing a spike in inbound leads without spending significantly more on marketing, then it might be time for you to think about the best way for your small business to grow. 3) If you have an incredible team that you can trust, then it becomes a lot easier to be confident that growth is a good idea. 4) If you’re constantly faced with more orders than you can possibly fill, then it’s time to think about ways you can boost your production to meet that demand.

Pedro: What should Maria and business owners like her do when he/she is ready to scale his/her business?

Josh: There are definitely right and wrong ways to scale up. First, expand your network of formal and informal advisors. Consider creating an advisory team that meets quarterly. Also, team up with your banker and evaluate financing options. You’re going to need some capital. There are very few businesses that are self-funded. Whether you want to expand your employee base, buy a new facility or develop a new product, one of the key elements in taking a company to the next level is knowing the kind of capital you need to support that growth.

Pedro: Business owners should be proactive, think big and act boldly. You have to be in the right mindset to take action. Surround yourself with the right team, mentors and connections; build strategies to reach your ‘big thoughts’, then pull the trigger.

Josh: Building a public profile for yourself is important too. Make yourself known in the community. Since you’re the leader of your company, other people (customers, investors, advisors, strategic partners) want to know you. Make sure your website includes information about you as the founder/leader of the business. Get yourself public speaking opportunities so that the community can get acquainted with you. Also build and foster relationships. Certainly you need to know your stuff. You need to be stellar in your area of core competency and have deep domain expertise at what you do and the value you bring to your customers. But in the end, it comes down to connections, especially in a smaller community like Kansas City.

Pedro: Scaling is an exciting time in a business owner’s career. You’ve already identified your core competences, articulated your competitive advantage, established standardized processes, and committed yourself and your business to growth. Now, it’s time to take action and reap the rewards.

We’d love to hear from you. We are offering $100 to the reader whose question is selected next. Please submit your business questions to together@lead.bank.

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