When Is the Right Time for Your Business To Scale?
By Moira Alexander, Founder of PMWorld 360 Magazine and Lead-Her-Ship Group
Every business naturally needs to grow to succeed, but scaling a company doesn’t just happen on its own.
An estimated 80% of start-ups fail to see new products or services through to full scale-up. According to McKinsey, established businesses are no exception, with 65% of portfolio company failures attributed to people and organizational issues. During both the best and worst times, new and well-established companies can experience growth. However, companies still need help determining the right time to start scaling their organization.
Scaling vs. Growth
Growth and scaling may seem the same and are often used interchangeably by companies, but they differ. Growth can often happen organically through new or increased sales or acquisitions to increase revenue, but it may not be structured beyond the business simply getting bigger. There are implications associated with growth that make scaling necessary. Growth alone isn’t enough. Nearly 40% of CEOs don’t believe their organizations will be economically viable in 10 years if they do not transform, which involves effectively scaling. Scaling is strategic, intentional growth that focuses on ramping up and managing resources to sustain efficient growth and maintain business integrity.
For businesses looking to evolve and keep pace with the acceleration of products or services, knowing when to scale – and when not to scale – is of the utmost importance. In this blog, we’ll discuss some triggers associated with and benefits of scaling, when to start, and why an intentional scaling plan and process are necessary for long-term sustainable growth.
5 Signals That It’s Time To Start Scaling
Because scaling is an intentional process, it should have an official starting point. The following are signals that it’s time for your business to scale.
1. Changing Environment
Change is one of the most significant catalysts. Leaders must constantly monitor and track economic, political, and other external conditions that can impact fluctuations in risk tolerance, the products and services that customers value, and the broader company strategy.
2. Unmet or Changing Client Expectations
If client expectations or demand for products and services change or go unmet, it’s time to consider scaling your business. If customer success teams receive complaints about product or service quality or scarcity, it’s a good time to gather, track, and analyze the reason to identify where scaling is necessary.
3. Continuously Exceeded Business Goals
Exceeding financial targets is something to celebrate, but when it comes with ease continuously, it can be a signal of lost opportunities. Innovation may be lacking in some business areas, which could pose challenges if competitors push beyond current boundaries for new growth areas.
4. Increased Turnover
When employee turnover increases, it is sometimes due to poor leadership, but it can be symptomatic of boredom, not being challenged, or being overwhelmed and overworked. A Forrester Consulting study commissioned by Kantata shows that 53% of companies surveyed find employee retention a major challenge. Employee turnover can signify that scaling is needed to improve resource efficiency.
5. Outdated Technology
It can be a red flag when tech support teams are overburdened, indicating that current systems and applications might not be cutting it. Companies often prefer to avoid addressing this issue, but they should. It’s about reducing support costs and increasing team effectiveness and bandwidth to support current and future clients properly.
These aren’t the only triggers; any marked change impacting business operations should be monitored and analyzed to determine its long-term growth potential. Business leaders need to be on the lookout for signals like these so they can spur conversations about whether it is or isn’t time to scale.
When Should a Business Not Start Scaling?
While unmet customer demand, complaints, inefficient processes, or production bottlenecks can signal it might be a good time to scale, it can also mean the opposite – that it’s not the right time. Identifying the reason and appropriately investigating each issue is a vital first step. Before kicking off intentional scaling initiatives, know the root cause for each trigger. Also, recognize that scaling for the right reason at the wrong time or in the wrong place can introduce new challenges and even business failure. Resist the urge to rush into scaling initiatives without proper due diligence, a well-prepared plan, and sufficient resources and budget.
The Dangers of Poor Scaling or Refusing To Scale
In addition to scaling too soon, the implications of ineffective scaling or refusing to scale can be similar in nature or severity.
- Poor Scaling: Improper execution can exacerbate any previous operational challenges. Companies can quickly burn through limited resources, miss long-term goals and strategies, decrease client and employee confidence, and lose both, leaving competitors to scoop up market share. Poor scaling can be just as damaging, if not worse, than doing nothing.
- Refusing to Scale: Refusal creates a scenario where rapid growth becomes an out-of-control fire without the resources to manage it. With no resources to support it, growth eventually stagnates, and investors, employees, and customers lose confidence and go elsewhere.
In both scenarios, whether a slow or rapid decline, the result is a business with decreased integrity and weaker long-term viability.
5 Significant Benefits of Scaling With Intention
Scaling doesn’t just happen. It takes intentionality. Businesses that scale with intention will be better positioned to unlock the following benefits.
1. Renewed or Expanded Vision, Mission, and Values
A company’s vision is often viewed as static, but the world has and continues to change. Today’s mission, vision, and values must change to match today’s context. Intentional scaling provides a means to re-evaluate and support a renewed or expanded vision, mission, and values.
2. Operational Effectiveness
Intentional scaling takes a business from out-of-control growth to calculated, manageable, measurable, and sustainable strategic growth and operational effectiveness.
3. Ability To Accommodate Changing Client Demands
Intentional scaling ensures that changing client demands can be met as circumstances and times change.
4. Sustainably Serving a Larger Market
Remarkable growth increases internal resourcing demands. To keep up with a rapidly expanding client base, scaling must be targeted, placing resources where they are needed most. This helps companies fill gaps and ensures larger markets can be sustainably served.
5. Improved Brand Confidence
By helping companies achieve operational effectiveness, meet client demands, and expand their offerings to a larger market, intentional scaling gives companies the tools they need to increase client confidence in their brand. The benefits of scaling are many but only achievable with effort, a plan, and the right process.
“Scaling is not luck, scaling is a decision.”
– Daniel Marcos, CEO of Growth Institute
10 Steps For Intentional Scaling
Scaling must be intentional to work. It doesn’t just happen. Long-standing successful businesses that have survived economic downturns, catastrophic events, and internal turmoil all have one thing in common. These businesses are led by strategic thinkers who recognized the need to remain strategic and intentional about scaling and understood these critical factors.
1. Adopt the Right Mindset
The first step is adopting the right mindset. It’s about committing to being intentional about scaling and knowing why it is necessary, choosing the right time, and understanding how to execute effectively.
2. Gain Clarity About the Drivers
Know the drivers or triggers behind scaling and become clear about how scaling will address those drivers. Take the time to understand everything impacting plans to scale, as it can be time- and resource-intensive.
3. Engage the Right Expertise
Ensure Subject Matter Experts (SMEs) are involved in all business areas from start to finish. Remain flexible and adjust throughout the process to bring in more people as needed to ensure scaling considers everything.
4. Evaluate the Impact of Scaling Triggers
Involve SMEs and other stakeholders in closely evaluating every trigger and the impact each might have on operations, clients, and long-term strategy.
5. Set Clear and Measurable Goals
Before jumping into planning and execution, ensure there’s clarity around the goals behind scaling. Each goal in a scaling initiative will need to be S.M.A.R.T.
6. Develop a Solid Plan Before Acting
Make sure your scaling plan is solid before taking action, taking the time to get input from stakeholders across the business to ensure all aspects of the business and changing internal and external factors are incorporated.
7. Rethink Internal Processes
Processes are almost inevitably impacted by change. Revisiting existing and proposed processes allows relevant stakeholders to find and target inefficiencies that might be overlooked.
8. Assess Existing Employees and Leadership
Scaling will require a closer look at existing leadership and employees, with a focus on intentionally scaling leadership capabilities and reskilling to align talent with your organization’s long-term vision and strategy.
9. Re-evaluate Existing Technologies and Data
Business leaders should re-evaluate existing technologies and their value when looking to scale. Poor quality data increases the complexity of data ecosystems and negatively impacts decision-making.
10. Execute, Monitor, and Adjust
After understanding the drivers, planning, and re-evaluating processes and technologies, it’s time to execute the plan. Don’t forget to monitor the results and use information gleaned from that analysis to make necessary adjustments.
How To Remain Profitable While Scaling
Scaling offers a way to grow efficiently to outpace costs. Leaders need to leverage valuable insights using real-time relevant data to determine which products or services are in demand and ensure adequate provisions are in place to cover the required costs. Here’s an example by globally recognized business expert Tony Robbins:
A professional services company just won a $100,000 contract, but to fulfill that contract, it must hire two new employees at salaries of $50,000 each. This adds to the company’s revenue, but they’re breaking even in terms of profit margins – they’re growing but not scaling.
If they win the $100,000 contract, invest $5,000 in a new enterprise resource planning software solution, and only need to hire one employee at $50,000, they’re saving $45,000 and scaling the business. By scaling, they’re growing but doing so efficiently and intelligently.
It’s important to note that scaling any business can present risks, pressures, and increased costs. Scaling intelligently to remain profitable rests on knowing when and where to focus efforts and resources.
Scaling Successfully in a Changing Industry
Successful scaling requires impeccable timing, intentionality, and the right software solution to help put your best plans into action. Kantata works extensively with businesses navigating their scaling journey, and we’ve authored a new whitepaper collecting our tips for successfully growing and scaling in a changing industry.