Upscaling a business, particularly a startup that has little capital, brings many challenges. Still, if you do manage to do it, it can create significant levels of success. Ingenuity and new business partnerships can often make up for a lack of resources.
The reason only a few businesses scale up is not because the rewards aren’t well worth it, but because there are many things that can wrong. While some of them can be anticipated, others can take you completely by surprise.
By expanding too much, too fast, their previous level of productivity and efficiency can go awry. Order is replaced by chaos and confidence with doubt. If you’re not careful small issues can quickly blow up to become critical problems.
Here are 7 strategies to ensure that you successfully scale up your business without derailing your current level of business success:
- Complexity beyond the scope of your business expertise. If your business wants to reach larger markets, it might need the help of an experienced third party. One way, for example, of reaching a larger, more profitable market would be to import and export goods, but it’s not easy to accomplish this because of the overwhelming number of regulatory issues that pop up. If you choose this route to grow your business, you may need to find a third party to manage the compliance issues and handle all the various complexities. If, for instance, you want to use Mexico’s IMMEX program to import goods that will be manufactured in Mexico and then re-exported without paying heavy taxes or compensatory quotas, it’s a good idea to partner with the North American Production Sharing, Inc. (NAPS) to help you with administrative and compliance management services.
- Choose the right people to work with during the expansion. When you’re scaling up, you will need to work with more people. You may need to hire staff, find more suppliers, work with more joint venture partners, and build relationships with more investors. If possible, add members to your transition team who have experience with scaling up a business. You will need a strong corporate culture and lots of new business allies to handle the stresses and strains that come from expanding your operations.
- Upgrade your management and business structure. The management style, equipment, and business processes that work for a company of 25 people will not work for a company of 100 people. You will have to research what works for a bigger organization and adapt to it. While it will be possible to anticipate many of the changes you need to make, some changes may evolve in an organic way.
- Get good at troubleshooting. With expansion comes change and with change come unexpected problems. Unless you troubleshoot these problems as they arise, you could be heading for trouble. Some of your top executives may quit because they can’t cope with the sudden increase in workload. Meetings may start taking too long to sort out the many issues that have to be dealt with. Machines might break down because of an increase in production loads. Overheads might rise at a faster rate than revenue coming in from sales. While it might appear easier to ignore these issues as they pop up, some won’t go away and ignoring them will get worse.
- Focus on long-term demand. It’s not enough to simply think in terms of short-term goals. While your company may have grown to its present level of accomplishment through an aggressive marketing strategy, expansion requires a more sophisticated approach. Before launching a marketing campaign, you need to re-evaluate your target audience and reckon the future demand for your products. You may also need to build new business partnerships that will help you maintain long-term success.
- Remove redundancies and obsolete processes. As your business expands, many things will fail to serve a useful purpose. Certain job responsibilities might be replaced by automation or equipment that worked for small processes may have to be replaced with equipment that can handle more output.
- Compete on quality rather than price. When you enter a new market, you might be tempted to compete on price to grab some market share from established businesses. You might reason that by ramping up production you can still make a profit on volume. This is a short term strategy. While you may enjoy some initial success, you are initiating a race to the bottom price war. The quality of your goods and your profits will decline as your rivals also temporarily cut their price to force you out of the market. Since they may already have a loyal customer base, you won’t win enough new customers to earn a decent profit. A much better way to get market share away from established companies is to produce a better quality product at a comparable price. More innovation and better customer service will help you stand out from the competition.
The Benefits of a Good Strategy
Businesses that do scale up, but that have not prepared a plan to manage the change, may do themselves more harm than good. If your small or medium-sized business does not have a strong foundation, it might not be able to cope with the increased volume of work. Using these 7 strategies will make it easier to scale up your business, maximizing the upside and minimizing the downside.