This guide has everything you need to know about scaling up your business.
So if you want to learn how to scale up your business, you’re in the right place.
About the Author
Hi everyone, I’m Alvin Poh.
I started a hosting company from $0, and grew it to Singapore’s largest, with 35,000 clients and a team of 150. I sold the business for $30 million, and went travelling around the world.
Today, I’m going to show you why you need to focus on scaling up your business, how to do it, and the common mistakes that entrepreneurs make while trying to scale up their businesses.
Scaling Up Your Business: Growth vs Scale
There’s a big difference between a company in growth mode and a company in scale mode.
Growth only means increased size. Scale means increased size, exponentially. The limits are your overheads.
Vanity metrics are metrics that seem to be useful, but are in reality just metrics that make you feel good without any actual use. In companies that are in growth mode, it’s common that vanity metrics are prioritised instead of actionable metrics.
Vanity metrics are things like more revenue, more clients, more employees, or more offices or office space.
An actionable metric is more exciting and interesting. An example of an actionable metric is your net profit.
Smaller businesses get into the dangerous trap of focusing on growth, which results in growing the business in size, but having little or even negative change in profits. Yes, their business might get much bigger, but their profits decline!
When you break away from growth mode and go into scale mode, you focus on increasing revenue with minimal (or none at all) increases in your costs.
The way this is done is by systems. Systems are the only way to exponentially grow by allowing you to handle more revenue without increasing your costs proportionally.
Challenges of Scaling Up Your Business
Once they have been growing for a period of time, business owners need to switch to scale mode ASAP. This is urgent because of two main issues that plague most businesses when they are in growth mode:
- Almost everything has been done manually or on an ad-hoc basis
- Everyone wore multiple hats and handled everything
If these 2 areas aren’t resolved, the business will continually feel like it’s going nowhere.
Work piles up. You and your employees get frustrated and frazzled. You take on more clients but lose drastically more time and don’t make much more profits.
That’s why you need to commit time, resources, and effort into making sure that these following areas are your priorities.
Common Mistakes While Scaling Up Your Business
There are many mistakes that businesses make as they try to scale up. These mistakes are common, and cause the business to suffer from delays, stagnation, spinning its wheel aimlessly, chaos, and possibly even catastrophic business failure.
StartupGenome studied 3200 high-growth technology startups. Their research found that the primary cause of failure is premature scaling. In fact, these findings show that you need to learn how to be scaling up your business properly:
- 70% of startups fail because of premature scaling
- 93% of startups that scale prematurely never break the $100k revenue per month
- Startups that scale properly grow about 20 times faster than startups that scale prematurely.
Fortunately, if you approach scaling in a systematic manner, you can make the right preparations so that you don’t make the following mistakes. If you can find a mentor who has done it before, you can save tremendous amounts of time, money, and grief.
- Spending too much on customer acquisition before validating product/ market fit
- Overcompensating for missing product/market fit with marketing and press
- Spending in poor-performing customer acquisition channels
- Building out a product without having validated problem/market fit
- Spending time and focus on “nice to have” features
- Hiring too many people too early
- Hiring expensive specialists before they are critical
- Hiring managers instead of do-ers
- Hiring fast and firing slow
- No planning
- Not having a regular feedback loop
- Not adapting business model to a changing market
- No focus
- Managing instead of leading
- Owner not letting go of roles
Scaling Up Your Business The Right Way
Transitioning from a growth company to scale company will not be an overnight thing. You’ll need to be committed to the process needed for scaling up your business, and be ready to embark on doing these things.
Commit to scale
The first thing that you need to be prepared for is having a vision. This vision answers the “why” behind all you’re doing to scale up your business. You must have the desire to really impact your industry and customers.
This desire must be big enough for your business to scale up to. If your vision is only to make a salary of $10,000 a month for yourself, then scaling up might not be for you. If, however, you have dreams of providing for your entire team of 30 and being the top brand in your niche, then wanting to scale up is perfectly aligned with you.
A Vision For All To See
The one thing that binds a team together and keeps everyone working in the same direction is a vision.
This needs to be communicated to everyone in your team, from their first hiring interview and regularly after that.
How do you do that? You’ll need to create the tools and systems that allow you to achieve this in the fastest and most structured way.
Assign Clear Job Responsibilities
In growth mode, your business would typically need help everywhere. That’s fair – work loads haven’t grown enough to justify full-time employees working on them.
As a result though, your team members don’t have clear accountabilities. In scale mode, you have to quickly switch to building up systems to resolve all these legacy methods.
Shift from Brute Force To Scalable Systems
When scaling up, your business becomes a different kind of animal. You’ll also notice that decisions are more complex, and involve more stakeholders and consequences. In addition, your business growth will demand for more cash also, stressing your cash-flow.
These problems cut across IT, marketing, fulfilment, and other departments.
This is why systems must be properly built and introduced into your business. Manual, ad-hoc processes are no longer sufficient to handle your business’ evolving demands.
Systems are repeatable processes that people can follow. This reduces human error, frees up manpower, increases productivity, and releases resources. Focus on investing in IT and training to help you achieve this.
When businesses do not switch properly to scalable systems, service quality and fulfilment times suffer. When this happens, businesses spend more money to throw manpower at problems, and spend increasing amounts of time on fighting fires.
Systems are the bedrock to scaling businesses, but people are necessary for driving those systems, strategy and innovation. The key is to find the right people to fit the right roles in your business.
You’ll need to evolve your HR systems to ensure a proper onboarding. Roles and responsibilities are more complex and no longer something that new hires can understand by “just diving into it”. Onboarding also means that you need to ensure and track that your new hires are performing well in the roles that they’re in.
Having scalable systems doesn’t mean that you will no longer need manpower.
Scalable systems mean that your manpower will be effective and productive. You will still need to have capable people in your business.
You, and the people who grow with the business, must also evolve to match the leadership demands. Most businesses find that the people who performed well in the past, no longer perform in scale mode.
That’s why there is always a pressing need to attract the right talent and retain them. A right talent is basically the right kind of person in the right kind of role.
In growth mode, you’d be focused on core functions such as developing your product, finding whatever sales you could, and marketing. In scale mode, you’ll need to develop those further, and in addition, start looking at non-core functions such as administration, payroll, accounting, and HR.
Become A Leader
You might have founded and grew your business till this point. However, scaling up a business requires you to evolve with it as well. What used to work for you in the past will not be sufficient when your business scales up.
One of the facets that you will need to have is great leadership skills. To improve this, start finding mentors, reading books, taking courses, studying great business people, and join entrepreneur communities.
Collaborate With Others
No scale company exists by themselves. Collaboration is one of the keys for scale. You will need to build up collaborative partnerships within your company, and with partners, suppliers, complementary service providers, and customers. This creates a network of value, which feeds your business.
Engage Your Customers
Detail your customer journey and ensure that you improve every step of it. This includes things from increasing effective marketing campaigns to improving customer satisfaction. This results in an turn-key, holistic view of your entire business.
Scaling Up Your Business
You were the founder and you did a great job of growing your business. To scale, don’t be the person still in charge of everything. Let your people take over responsibilities from you so that your time is freed up for strategic work instead.
Don’t make grave mistakes such as hiring the wrong people. It will drastically and negatively impact your business. This is just one example of the wrong things that you can do that will drive your business further into chaos.
Focus on the sequence of scaling too, because doing things in the wrong sequence will cause you to be even further away from your desire to scaling up your business. The big lesson: DO NOT efficiently execute the irrelevant.
The journey to scale up your business is a rocky and uncertain one. Look for help and support before you come across obstacles.
You want to be prepared for the unknown. Never test your reaction only when the situation demands of it. Remember that you don’t know what you don’t know.
There are entrepreneurship coaches, mentors, and communities out there that have gone through the whole journey. Learn from their experiences and lessons so that you don’t have to suffer the same mistakes.
I do provide mentoring, but due to constraints on my time, it’s selective and highly limited. If you’re like to see how I can help you scale up your business with the 5E Scale Engine, please send in a mentorship application.