The Benefits of Scaling Your Business For the Long Term
The term “scaling up” can apply to a number of different concepts that are used within the context of business. A lot of companies have heard of “hybrid scaling,” which simply means increasing the level of available resources in an attempt to improve the overall effectiveness of a business. Or perhaps “scaling down.” Here’s an example that should explain the difference: Let’s say you own and operate a small pizza store in a small town.
You currently operate with a small staff (four people). However, if you use some sort of marketing automation software solution (robot), you can scale up to a thousand employees. Does this necessarily mean that you will make less money? Of course not – You’ll continue to make more pizza per day and serve more customers. The important thing to note is that you have now scaled up – You can now serve more customers per day AND increase revenues per customer.
Many businesses think about scaling up or down in terms of their bottom line revenue. This means they consider everything from their shipping costs to employee salaries. While this is absolutely critical to any business, just remember that this is only one expense. You may also want to scale back on some areas of your business to retain sales growth. These are all valid concerns, but don’t worry – As your business continues to scale, the revenue will continue to rise as well!
Scalability can also refer to the ability to change financial data so that it reflects actual growth instead of just revenue growth. There are many uses for financial data in a business (i.e., the ability to calculate the profitability of a new product line versus a previous product line). However, if you cannot easily make adjustments to this financial data, then you are losing the opportunity to leverage new revenue opportunities as well as making the wrong types of business decisions. Therefore, scaling your business means the ability to make informed decisions about the important areas of your business.
Another key component to successful scalability is growth. Many businesses fail because they focus on profits alone. In order to realize growth, you must add employees (which incur costs) and simultaneously promote new products or services (which incur expenses). Thus, if you want to successfully scale up your business, you must grow. While this might seem like a lot of work, it really is not as hard as it seems.
One way you can leverage your growth is by adding resources like trucks, office space, and marketing equipment. In addition, you can also add new personnel (since most first time employees don’t make much money). As mentioned previously, most growth strategies are all about adding resources to improve productivity, which should have an positive impact on your bottom line. If you do not already use these types of tactics, now is the time to implement them.
In addition to growth, scaling means adding revenues. Scalability is typically considered a long term strategy that will take time to see results. However, if you are in a business that is growing at a rate that is faster than you currently plan on, you are likely losing out on additional revenue in the near future. Therefore, by implementing revenue building techniques early on, you are optimizing future profits. This is the opposite of what most businesses do, since they prefer to wait and hope that revenue will increase naturally over time.
Finally, when you implement growth and revenue building tactics early on, you are optimizing the potential for future growth. Ideally, you want to grow your business for the long term, but in order to do that you must grow at a rate that is faster than your revenue growth rate. In other words, scaling requires patience. It is not easy to achieve, but once achieved it will provide an excellent return on investment. Ultimately, it is all about making smart business decisions. If you make a wrong decision, then you may be disappointed with the results, but if you take the right ones then your business can become a very large success.