How to Scale a Business

When you “scale” a business, you commit to growing it. However, scaling requires more than simply increasing your customer base or sales. Instead, you need to proactively plan to handle the increased workload in a cost-efficient manner. Scaling requires a lot of planning, so don’t rush into the process.

EditSteps

EditGrowing Your Sales

1. Analyze your current sales. Look at what you’re selling each month and each year, on average. To scale the business, you’ll need to imagine your numbers doubling or tripling overnight.^[1] Work with your bookkeeper or accountant to get the most accurate information.
   
   • Hire an accountant if you don’t already have one. You can ask another business owner to recommend their accountant, or you can contact your state’s accounting society.
2. Focus on what you do best. To really grow, you need to stand out from the competition. Your current business might be doing all kinds of different things. Identify which one you do best.^[2] Your ability to effectively compete for clients will depend on identifying your strengths.
   
   • For example, you might run a day spa where you give massages, pedicures, and skin treatments. You might excel in one area, which can be the focus of your growth.
3. Create a sales growth forecast. Based on your current sales, estimate where you think you can be within the next year. Break down your forecast by customers, orders, and revenue. Also include a monthly forecast.^[3]
   
   • Sales forecasting is an art, not a science, and involves educated guessing.^[4] However, you can use your competitors as benchmarks. How large have they grown in a year? Did they double their sales? Triple? Or does your industry grow much more slowly?
4. Generate more leads. To grow, you need to find new customers. Study how your competitors find leads. Are they advertising on television or online? Consider the following methods of drawing eyeballs to your business:^[5]
   
   • Create a newsletter and have a sign-up box on your website. Put out a newsletter once a month or at least every quarter.
   • Start conversations with key people in your industry using social media. Twitter is a great way to connect. As they get to know you, they can sing your praises.
   • Reach out to the media. Don’t make a PR pitch, but tell your story in an authentic manner. The journalist might write up a story about you, which will increase your visibility.
5. Improve your online conversion optimization. More people will visit your website than will buy from you. To grow your business, you need to convert more visitors to paying customers. Consider the following strategies:
   
   • Increase the content on your website. Provide information that is useful, such as how-to articles. For example, if you run a dental office, you can write articles about at-home care. This is a great way to showcase your expertise and give customers some idea about your communication style.
   • Get product reviews. Ask your current customers to leave a review on websites such as Yelp, and then feature positive reviews on your website.^[6]
   • Write and give away a free eBook that showcases your expertise.
6. Encourage customers to spend more. Give away free samples of your products or services, or offer coupon discounts to encourage them to return. Also find ways to “upsell” added products or services.^[7]
   
   • For example, if you are a dentist, you can ask customers if they want to buy an electric toothbrush, teeth whitening, or veneers.
   • If you are a florist, you can ask customers if they want a larger bouquet for just a few dollars more.
7. Ensure invoices are collected. With fewer customers, you might have had sufficient time to track down customers who were late with their bills. However, if you grow rapidly, you’ll have much less time and many more unpaid invoices. Investigate how you’ll improve bill collection.
   
8. Work with a mentor. You might not know how to increase your sales. Find a mentor who is experienced in your industry. Meet with them to discuss your goals and ask their advice about how you can increase your revenue.
   
   • Find a mentor using Micro Mentor or Score Mentoring. These websites connect small business owners with mentors.
   • You can also find potential mentors by joining professional or industry associations. Remember to ask them upfront if they are willing to be your mentor.^[8] The relationship will be more satisfying if you are clear at the outset about what you need.

EditIncreasing Your Capacity

1. Draft a detailed expense forecast.^[9] Based on your sales forecast, estimate how much you will spend to keep your business running. For example, you might need to double the number of sales associates in order to handle the anticipated increase in sales. Look at your current expenses as a guide.
   
   • Try to be as detailed as possible. Network with people in your industry so that they can help you think of things you might have overlooked.
   • For example, you might handle payroll yourself for your two employees. However, if you need to triple the number of employees, you must schedule tripling the amount of time you dedicate to payroll. This is an expense you might not have thought about.
2. Upgrade your technology. If you increase your sales by 200%, do you have the resources to deliver on those sales? Probably not. Scaling a business requires that you take a hard look at your current technology and see where you need to upgrade.
   
   • Look for ways to automate.^[10] You can automate many parts of a business, such as billing, marketing, and payroll. Automation can save you time and money.
   • Also investigate the newest technology involved in sales management, shipping, and accounting. You might be able to do things faster and more effectively with newer technology. Ask larger businesses what they use.
3. Integrate your systems. Your business probably has multiple systems in place that don’t work together. For this reason, they increase communication costs and slow down your business. Pursue system integration so that you can handle your growth.^[11]
   
   • A typical business has many systems: payroll, accounting, purchasing, order fulfillment, and customer service, among others. With an integrated system, employees in order fulfillment can see when an order is cancelled, and accounting can easily spot the cancellation.^[12]
4. Hire more customer service representatives. If your sales double or triple, you can’t expect the same number of employees to handle the work load. Study industry benchmarks to find out how many customers one representative can handle, and then hire accordingly.^[13]
   
5. Increase staff in other areas. Consider your manufacturing, inventory, and delivery staff. Do you need more? Study the benchmarks for what is typical in your industry.^[14]
   
   • Don’t forget back office functions, either. If you grow so large, would it make sense to hire an internal bookkeeper instead of outsourcing that function?
6. Consider outsourcing. Depending on your current size, you might need to outsource jobs as you grow. For example, you might outsource Human Resource functions to a professional employer organization (PEO). Or you might want to hire an inventory and fulfillment center to handle your inventory and delivery.^[15]
   
   • Outsourcing is complicated. Often, small businesses outsource most jobs. However, as you grow, it might be more cost-effective to bring in jobs internally. Nevertheless, as you continue to get even larger, it might make sense to outsource again.
   • There’s no “one size fits all approach.” Always crunch numbers to see what is most cost-effective.
7. Move your business. You might outgrow your current facility. In this situation, you should plan on renting new commercial space. Work with a real estate agent or search for commercial space on websites like Loopnet.com. Budget how much it will cost to move into a larger space.
   
   • Most commercial space is rented by square foot or by a percentage of your gross sales.
   • Always remember to nail down what is included in the rent. For example, some commercial landlords require tenants to pay for taxes, insurance, and utilities.^[16]

EditFinding Funding

1. Update your business plan. After forecasting sales and estimating increased expenses, determine how much extra money you need to fund your expansion. Include this information in your business plan, which lenders will want to see.^[17]
   
   • Make sure to update your business plan to reflect your new sales and marketing strategies.
   • Also discuss in detail what investments you’ll need.
2. Fund out of your own pocket. You might not want to borrow money to grow your business. In that situation, consider funding the expansion yourself. There’s a few ways you can save enough money to fund your growth:^[18]
   
   • Dip into your savings. You might be able to take a loan from your retirement accounts to fund an expansion.
   • Do jobs yourself. At least initially, you might be able to do jobs that you plan to hire other people for.
   • Be thrifty. Find the cheapest way to do something so that you save money.
3. Obtain a bank loan. Visit nearby banks and ask for a business loan to fund improvements. They will look at your business’ credit history as well as your personal credit history. Generally, your credit score must be above 600. You might need to put up business assets as collateral for your loan.^[19]
   
   • Banks will probably also require that you personally guarantee the loan. This means you’re on the hook if your business can’t pay the loan back.
   • Often, you’ll also need to put up some collateral, such as your house. If you default, the bank can seize your home.
4. Look into an SBA loan. In the U.S., the Small Business Administration (SBA) guarantees loans for small businesses. You still get the loan from a bank, but the SBA promises to cover a portion of the loan should you default. For this reason, your interest rate will typically be lower.
   
   • Generally, you’ll need to have been in business for two years to qualify for an SBA loan.^[20]
   • Your personal credit score will also need to be above 680.
5. Bring on a partner. A partner can provide much needed cash as well as skills. Take an honest look at what skills you lack and find someone with experience in that area. For example, you might not have general management experience, so you can partner with someone who has an MBA.^[21]
   
   • You can find a partner by talking to your network and talking to the local Chamber of Commerce.
   • Always thoroughly vet a partner before selling them half of your business. For example, you should pull a credit history to make sure they are financially responsible.
   • Also meet to talk about their goals for the business. You might find out that you have vastly different visions for where your company is headed. It’s better to find this out now.
6. Ask friends for a loan. Explain to friends or family how you want to expand your business and how you will pay them back. Your friends or family might hesitate. However, agree to pay interest on the loan and write up a promissory note.^[22] This will give your family confidence that you intend to pay them back.
   

EditTips

• Scaling your business will require longer hours at work, so don’t try to grow unless you can increase your time commitment.^[23]
• You also run the risk of alienating existing customers as you grow. For example, you might cut loose underperforming parts of your business, which means you’ll lose those customers who used only those services.
• A financial advisor can be helpful throughout the scaling process. Obtain referrals by contacting your local Chamber of Commerce or asking other business professionals.^[24]

EditSources and Citations

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