4 Things to Consider Before You Scale Your Business

Updated: January 12, 2021
by Cristian Morales

The two main objectives of any business are profit and growth or, in other terms, revenue and scalability. Scalability can entail increasing revenue, boosting sales numbers, entering new markets, diversifying your portfolio, and more. However, there are several things a business needs to consider before scaling up or expanding its operations. The top four aspects you should consider while scaling up are as follows.

4 Things to Consider Before You Scale Your Business

1. Weighing the Risk Factors vs. Possible Rewards

In business, the higher the risk, the higher the reward. Similarly, when a business decides to scale up, the more it aims to grow the more the rewards. However, with scaling up there are three major challenges a business needs to address; the increase in the variable cost and the ability of the business to handle it, the demand for more competent and efficient human resources, and the necessity of having a more robust and deep understanding of the business. If the business can meet all three challenges, then it can take the next step towards scaling up.

2.  How Future-Ready and Innovative is the Company’s Framework?

Source of Finance and Longevity

Today, all companies boast of some form of an innovative program in their organization. However, the need of the hour is how future-ready or how innovative the plan is in the next 5 years or 10 years. Additionally, you must know if the innovation and research developed are feasible and if it can be implemented. An organization needs to have a structured innovative program and a culture that fosters new-age thinking and creativity to be able to take the next step.

3. Source of Finance and Longevity

The most important aspect of scalability is the source of finance, its repayment, and longevity.  While sole proprietorship and private equity play an important role in setting up a small company, when scaling up, entrepreneurs need to look for other means to manage their finances, such as registering as a Limited Liability Company (LLC). In such cases, when moving from a sole proprietorship to an LLC, it’s important to read the fine print and assess the long-term impact of making this decision. While private equity has many advantages, such as complete ownership, complete authority and power of decision making, no accountability on profits, and a debt-free cash-flow, it also comes at a cost.

The risk involved is quite high and one wrong business decision could spell the end for an organization. On the other hand, if the organization is an LLP, the entrepreneur will be relatively less exposed to risk and can concentrate on other key decisions, such as generating more leads and networking.

4. Scaling up Successfully Will Depend Largely on Your Business Connections

Scaling Up Business Connections

It is well known that big companies have CEOs and owners who have great networking capabilities which they leverage to get business and keep their clients happy. Networking is a soft-skill that every business owner should have if they are contemplating scaling up a business. Networking is not limited to potential clients; it includes all the stakeholders such as employees, regulatory officials, vendors and suppliers, board members (in case of an LLP), like-minded CEOs, and business owners.

In conclusion, scaling up your business is a great decision, however, if not calculated and planned for, it can go awry and spell the end of your business. In these times of digital and virtual innovation, one needs to be well-connected and always look for opportunities to establish solid business relationships with the right people and the right partners.

About the author 

Cristian Morales

Freelance writer and graphic designer with a can-do attitude. I became independent after spending 6 years in the hospitality industry and 5 years in banking & finance. I'm an all-rounder guy, open to working with like-minded people.

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