Early on with every startup, there is always a lot of doubt. How will you get your intended audience? Will your squad help you advance to the next level? Few things, then, are more thrilling than witnessing your business truly take off.
As Your Base of Customers Expanding
Your client base is expanding and you are beginning to turn a profit; it is only natural to begin considering your next moves. Like me, you will start really wondering: is it time to scale?
Starting a business calls for careful consideration of scaling decisions. With scaling mistakes accounting for as many as 70 percent of all company failures, premature scaling has been identified as the main factor causing firms to fail.
Effective scaling is fraught with difficulties. If you’re not cautious, it’s all too easy to make cash flow blunders, overvalue particular sales, hire the wrong personnel or even allow your customer service fall behind.
So how do you determine whether your business is genuinely ready to scale? Here are a few signals that can help you realize when you’re ready to develop.
1) You Have a Strong Core Team
Your startup is only as powerful as the individuals that help manage it. When chatting with my buddy Jason Bliss, co-founder of Healthy Living Network, he was quick to highlight his co-founders as a crucial factor to his company’s success.
“Even if you only have three other people working with you, it’s important that you have a team that you know is committed to your business for the long run,” he adds. “The people that have bought in to your startup and are equally passionate about your goals will execute better and be willing to adapt to the challenges associated with scaling.”
Of course, if your present staff are pushed too thin, it won’t matter how talented they are or how much they love your business concept. One Gallup study ranked “on-the-job pressure” as the #1 factor to employee discontent. Too much stress, too much pressure, and your key team members will become burned out.
Worse still, they won’t remain with your firm in the long term. On-boarding fresh talent will assist alleviate workloads so everyone can provide their best effort.
2) A Sturdy Infrastructure
Far too many firms fail because they get so focused on expansion that they forget about the essentials that are important for long-term success. Even something as relatively simple as identifying your target audience and value proposition may go a long way in helping you establish a proven concept.
Before you focus on expansion, you need to first establish that your product or service will truly sell. You need to have the correct organizational structure in place to keep things structured (particularly when it comes to handling cash).
Even your goal statement and corporate spirit should be properly set in place!
You shouldn’t be attempting to find the answers to these difficulties as you expand. Putting the correct foundation in place beforehand will help you to make better use of your time and energy as you strive to expand.
3) Positive Cash Flow
It’s one thing to create a profit. It’s quite another to produce a good cash flow for your firm. Cash flow represents the amount of money flowing in or out of your business – not payments that are still pending with clients, but payments that have really gone into your company’s bank account.
As angel investor Martin Zwilling says, “Good cash flow management, in simple terms, means understanding every inflow and outflow of cash, and never delegating this function. In essence, you must postpone every spending of cash as long as possible, while [incentivizing] everyone who owes you money to pay it as soon as feasible.”
Scaling will automatically increase the costs of your firm, typically before you will be able to earn extra money. Using your present financial condition to forecast future revenue and costs can help you prepare for unforeseen setbacks so your growth attempts don’t push you into bankruptcy.
4) You’re Turning Away Clients
When I originally started my firm, I was able to take care of most customer jobs on my own.
But I rapidly ran into a dilemma. I had more clients coming to me than I could handle by myself. This left me with two options: either I could turn away these clients, or I could engage extra writers to assist me manage the load.
Needless to say, I didn’t want to lose these fresh business chances. The fact that I had clients coming to me was a clear sign that there was considerable market demand for my services. It proved that the notion was viable and that I was producing great work.
Rather than become my own productivity “bottleneck,” so to speak, it was plainly time to downsize.
Regardless of your sector, continuous demand is one of your best signals that you’re ready to expand, especially when that need is outperforming your present supply capabilities.
Read Also: Unlocking Business Potential with Financial Seminar Services
5) You’ve Done Your Legal Research
With so much attention on preserving profitability, it can be easy for entrepreneurs considering scaling to ignore the legal implications of developing their firm. But this is one area you should never disregard.
“As business grows, the list of government regulations to which they must comply with also grows,” writes Lauren Gilmore. “This includes everything from laws concerning consumer and employee data security to minimum wage variances – and these regulation pressures do not disappear…if you’re expanding worldwide, things may become really ugly if you’re unfamiliar with the norms and regulations of your new target market.”
Regulatory difficulties linked with business development are just as crucial as analyzing whether you’ll be able to sustain a good cash flow. When you complete your homework, you can have assurance that you won’t go afoul of any local or federal rules that may put an abrupt (and perhaps permanent) end to your expansion.
Planning for the Future
It’s tempting to want to fast grow your business after you’ve tasted your first success. But I’ve watched far too many colleagues crash and burn because they tried to develop before they were actually ready.
At other times, a truism like ‘slow and steady gets the race’ may not be far from the truth.
When you take time to set the right platform for your own firm, you are in a position to develop structures that can be used to build on the strengths and on the weaknesses as well. This way, you can reach long-term success when building your firm, as your startup is actually ready for its expansion.
