Recently, I was a guest on the Mavens of Marketing podcast with Rachel Durken and…
Learn the five questions to ask before you start scaling your business.
The first half of 2020 saw businesses stagnate and lose income largely because of the pandemic. The country’s GDP took a nosedive with the U.S. Bureau of Economic Analysis (BEA) reporting a 31.4% decrease by the end of the second quarter. Although in the latter half of the year, businesses rose to the challenge of continuing operations, and even scaled up amidst the pandemic. By the end of September, the BEA reported a 33.4% rise in the national GDP as entrepreneurs re-strategized, helping them grow and expand.
As a business owner, it’s important that you’re able to recalibrate and ask yourself the following five questions before taking a big step towards scaling your business:
1. Are you ready to scale your business?
Scaling and growth are two different things: Business coach Mihir Thaker explains that growth is “all about adding percentages here and there around the business” while scaling is “a process-driven approach to growth… No longer is the business concerned with growth for growth’s sake, but only with growth which can be managed.”
Both lead to increased revenue, but growth requires you to substantially increase resources, while scaling is often a complete modification of the company’s processes. It’s crucial that you determine which one would benefit the business most.
2. Are you capable of reaching the right people as you scale your business?
Marketing consultant Perry Marshall outlines in 80/20 Sales and Marketing that selling to the right people is the most important thing in business, which is why you must assess if your team is generating enough leads.
A lead generation rate of 5% is enough to maintain your business, but scaling will require a higher rate. This can be accomplished through a combination of identity resolution, behavioral data, and InMarket Targeting. Our technology solutions will help you turn every click into a lead. If interested, Let’s Talk about our lead generation services and take a step closer towards scaling your business.
3. Should you change your legal structure?
Small Business Administration stresses that a business’ legal structure has legal, financial, and operational implications. While most small business owners start off with a sole proprietorship or partnership structure, these could work to your disadvantage as you and your business are considered as one entity—making you personally responsible for any losses and liabilities you might incur in a botched scaling. Given that risk, shifting to an LLC may be more advantageous.
One of the main benefits is that you don’t have to worry about your personal assets should the business go bankrupt or be served a lawsuit. Fortunately, registering your business as an LLC is quite simple, with the process nearly identical in every state. An example of a slight difference would be that LLCs in Pennsylvania are required to provide a registered office instead of an agent, which is required in states like Maine or New Jersey. The rest of the process is pretty straightforward too, so do consider changing to an LLC before scaling.
4. What lies ahead for the future?
Scaling requires careful planning, both short- and long-term. And by thinking ahead, you can plan your process in a detailed way, including timeframes and expected milestone dates.
This must be formalized through an official business plan, outlining your plans in terms of changing the organizational mindset, acquiring new technology, recruiting talent, sourcing additional funding, and marketing the business.
5. Can you afford to scale your business?
Remember, scaling involves plenty of changes, so it’s best to ensure that you can, indeed, afford this process. As emphasized in an All Business guide on scaling, very few businesses are self-funded, which means you’ll need to explore your funding options—bank loans, angel investors, and crowdfunding, to name three—if you truly want to scale.
The idea of scaling can be exciting, but that excitement can leave you vulnerable to making rushed, uninformed decisions that might compromise your efforts. So, keep an even keel, evaluate your situation, and ask these questions before making a decision.