Starting and running a business isn’t easy. After all, about 20 per cent of small businesses fail within their first year according to data from the U.S. Bureau of Labor Statistics. But growing and scaling a business is often harder still.
By the end of their fifth year, roughly 50% of small businesses fail. After ten years, the survival rate drops to approximately 35%.
So, how do you scale your business successfully and sustainably to ensure it not only survives but also thrives?
1. Get your recruitment right
Chances are you won’t be able to scale your business alone. You’ll need to recruit a team of highly motivated, highly skilled talent that can drive your venture forward. Bear in mind that high performers are 400 per cent more productive than the average employee.
“You need to set a high bar for the first few recruits in the venture,” says Harvard Business Professor School Professor Jeffrey Rayport. “You can’t compromise on that first wave, because they’ll be the ones who propagate the values of your organization. Pretty soon, they’ll also be hiring the next wave, and they’ll hire performers who are a lot like them.”
2. Adapt the organizations structure
Whether you like it or not, you won’t be involved in every decision or detail of the business once scaling begins. This means you’ll need to look at the organizations structure so that decision makers and seasoned leaders can be accommodated.
Similar to your approach to recruitment, you should be creating leverage to deliver on the business’s original vision. By structuring the organization to facilitate and encourage growth, you’ll avoid the temptation to micromanage, safe in the knowledge that your leadership team is aligned with operational objectives.
3. Identify areas of expansion
From entering new countries and markets to selling additional products or services, you’ll need to identify areas of expansion that can provide effective growth.
“One way to start categorizing your options is by asking, ‘Will I grow by extending existing products into new markets or by selling new products to existing markets?’” Rayport says. “Make decisions rigorously to set your path.”
4. Invest in technology
By investing in the right technology, you can gain huge economies of scale and more, with less labor. This makes it easier and cheaper to scale your business.
Start by exploring ways in which automation can help run your business at a lower cost and more efficiently. You should also consider systems integration, as technology that doesn’t work together creates silos, which in turn multiply communication and management problems.
5. Get your finances in order
Because hiring more employees, building the right infrastructure and implementing new technology requires capital, it’s crucial to understand how your financing strategy aligns with your growth capital. This includes everyday financial considerations such as payroll and tax too.
“Founders often make the ill-advised decision to convert variable costs into fixed costs too early,” Rayport says. “For example, many e-commerce ventures have rushed too quickly into owning their own fulfillment centers rather than relying on third-party vendors.”