Scaling your start-up is not usually something that happens overnight. Scaling your start-up can be a steady process, gradually increasing profit while keeping costs as low as possible. It can require careful planning and monitoring. Scale too fast, and your start-up could run into cash flow problems. Too slow, and competitors may overtake your business.
Scaling a business is different to growing a business. Growth is where revenue might increase, such as through increased sales, but is matched with increased costs. Scaling focuses on profit growth, where costs are minimised and profit maximised, which can be invested back into your start-up.
It’s important to recognise when your start-up may be ready to be scaled up. Attracting more customers, selling more and having a positive cash flow are healthy signs of demand and a solid business model.
As profits increase and your start-up starts to scale, you should consider some important factors that may reduce the risk of problems.
Learn how to scale and grow your business with our free Entrepreneurship – from ideas to reality course opens in new window. As part of our Learn with Start Up Loans opens in new window partnership with The Open University, our online course is free to join, delivered by experts and includes a free statement of participation on completion.
The do’s of scaling your start-up
It can be easy to get lost in the excitement of scaling your start-up, but there are some essential factors you may need to consider.
Always manage your cash flow
A significant step towards scaling up is managing your cash flow. Aiming for a positive cash flow should increase the amount of money coming in compared to the amount going out. You should plan and forecast your cash flow to help avoid running out of cash and carefully plan investments, such as buying new equipment so you have the cash reserves to fund them.
Consider obtaining funding
Securing funding, such as through a loan or investment, can provide the resources your start-up needs to scale, such as acquiring equipment, more staff or a wider marketing reach. Investors are usually interested in businesses with the potential to scale, as it means they can make a return on their investment.
Your options can include:
- Debt such as a Start Up Loan or a bank loan.
- Equity from angel investors and venture capitalists (VCs).
- Crowdfunding with reward or equity.
- Grant funding from the government and other sources.
The options referred to above may not be suitable for all businesses and independent advice should always be sought if you are considering any of the options above.
The government also has a helpful guide to sources of business funding opens in new window.
Loans can also be given to help support business scaling. Some banks and companies offer loans for smaller businesses and start-ups. Start Up Loans, for example, has loaned over £600m to over 80,000 start-ups, and the government has detailed plans for Start Up Loans funding to support an additional 33,000 businesses over the next three years.
For start-ups scaling to larger businesses, research by the British Business Bank opens in new window found that 25% of SMEs used loans in 2020/21, and 31% of companies make use of grant funding.
Hire the right staff or outsource to specialists
Hiring staff to cope with business growth means you can bring in specialist skills and offload some of your duties, so that you can focus on scaling your business.
Start-up owners may have to handle various tasks in the early stages of their business, such as bookkeeping and marketing. Delegating tasks to others, such as using an accountant or hiring a marketing specialist, leaves you free to concentrate on the parts of the business you are best at. Figure out the roles or tasks you need help with, along with the skills your business would benefit from and hire accordingly.
Develop new markets
Businesses can scale by selling to different markets. As you’ve done the hard work developing your product or service, looking for new markets to sell to can pay dividends. These can be geographic, such as opening a new shop or restaurant, or a different demographic, such as targeting a younger market.
Research other markets to see where your business may attract customers. Consider researching consumer demand to see if you can adapt your business to trends. For example, creating more sustainable products could win new customers – over a third (34%) of consumers now look for brands with sustainable credentials, according to research by Deloitte opens in new window.
Download the Start Up Loans business plan template to help you get started.
The don’ts of scaling your start-up
Several pitfalls can get in the way of successfully scaling up your business, potentially exposing your start-up to financial risks.
Don’t ignore the warning signs
It can be unwise to ignore warning signs that your business could be at risk, and it’s essential to tackle them as soon as possible. Warning signs can be an over-reliance on one customer, late payments from clients, rising costs such as energy bills, or new regulations that govern the market your business operates in. Keep an eye on expenses and cash flow and look to diversify your customers to help reduce the risk.
Don’t underestimate how long it takes to recruit
Finding suitable candidates takes time – and even hiring the right freelancer or outsourcing to an expert can take longer than expected. Have a consistent process to make hiring more efficient and acknowledge that it may take time to find the right people. Plan ahead and anticipate when your business might need extra help to cope with increased customer demand, so you’re able to fulfil customer sales.
Don’t do too much at once
Doing or changing too much at once may negatively impact your business. It can be an idea to develop a new market, test it out, measure its success and then commit resources to reach new customers. Simply jumping into a new market without research may not work out, leaving you wasting time and money on a failed venture.
Don’t ignore staff
A team of skilled and motivated employees can help with business growth. While hiring people with the necessary skills provides talent, they need to be trained in the basics of how you want your business to work. Training them also ensures everyone works towards the same standard keeping the company consistent and efficient.
Want to market your start-up business? Check out our free online courses in partnership with The Open University on effective marketing techniques.
Our free Learn with Start Up Loans courses opens in new window include:
- Managing and managing people opens in new window
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Plus free courses on finance and accounting, entrepreneurship, project management, management and leadership.
This article and the content provided therein is exclusively for informative purposes. Nothing in this article or in its contents is intended to provide advice of any kind (including legal, financial, tax or other professional advice) and should not be relied on as such. You should get professional or specialist advice before doing anything on the basis of the content contained in this article.