While the global corporate community world aims for rapid growth, scaling your business towards growth does not come easy. In fact, not everyone is suitable for growth.
This is the main paradox the startup community faces when it comes to venture-backed businesses. For instance, angel investors expect a profitable exit within 5 years of the founding round, preferably sooner. Different VC studies report anywhere from 4 years to 6.3 years on average.
This requires a business growth plan that scales really, really fast, even at the expense of generating loss over the first couple of years. Loss is accumulated due to large hiring rounds, tons of marketing and ad budgets, a sales army, and different freemium offers or referral deals aiming at generating a massive user base early on.
The rapid scale-up is a dangerous choice affecting all internal processes, organizational hierarchies, and cross-department workflows. It presents challenges that will test the capabilities of a business and its adaptability to cope with significant changes.
What Does Scaling A Business Mean?
What do we refer to when we talk about “scaling a business”?
- Growing the operational capacity of the company
- Continuously handling more work without disrupting the ongoing processes
- Scaling while maintaining a positive ROI
- Hiring and retaining top talent
- Continuously developing and growing talent internally
- Automating operations and organization for success
- Outsourcing side activities while focusing on the core business
These high-level business strategy targets would differ across organizations in different industries and varying sizes. Scaling from 5 to 10 people isn’t the same as 100 to 120 or even 150. And doubling headcount for a 2-person shop is frightening, but nowhere near a multiplication of 1,000 people in a large corporation.
Additionally, scaling a company isn’t always tied to rapid growth through hiring. It’s possible to devise a strategy for scale that is smart, keeping manpower well-organized and processes automated. Of course, this comes with its own limits. You can suppress, decrease, or delay the hiring pace but not stop it.
Here’s what you need to know in terms of how to scale your business and avoid the most common business problems.
1. Overcoming Risk Management Challenges When Scaling
Business growth sounds exciting. More manpower, higher revenue, additional resources, faster turnarounds, bigger offices, top brands. However, rapid growth does not shield you from the most common business challenges (neither is slowing down, of course).
One of the leading factors is dealing with the “not so obvious” challenges. So let’s start with this category first.
Challenge #1: Increasing Cost
Scaling the firm is accompanied by increasing costs and varying financial challenges. This challenge cuts across the very anatomy of the organization and traverses beyond every department—from sales to legal.
Among the most common increase in business process costs are found in the following areas:
- Office expenses
- Growing sales and marketing teams
- The hiring of one or two new tier managers
- Accounting, and
- Legal retainer fees
Challenge #2: Demand for Deeper Business Knowledge
Rapid growth makes the learning curve both urgent and steep, affecting performance across the board.
Onboarding and training procedures receive priority for the sake of institutional knowledge. It’s no longer sustainable to hire one or two folks in a department at once, you may reach to hundreds within a quarter while scaling.
Challenge #3: The Need for New Skills
Your senior management may no longer be suitable to take on their positions. Growing companies often need to invest more in networking, PR, sponsorships, organizing charity events, or other initiatives that weren’t even on the roadmap a year or two back.
Hiring for creativity or innovation isn’t sustainable. You can’t hire A-players at scale, it’s unrealistic and certainly can’t happen in a short period of time.
Collateral damage is nearly inevitable but often justified for those pursuing the goal of infinite growth.
Aside from the aforementioned risk management elements we had to go through, there’s a lot more to unpack.
2. Creating a Fantastic Culture for Growth
One of the best ways to prepare for the challenges of a growing company is to establish the right culture in the workplace.
It is imperative to have the right mindset in establishing and shaping the right culture in the business workplace.
How Does Culture Affect Scaling?
It’s easier to build the culture first than reshape it later. A common misconception is altering the culture once the company scales to 50–100 team members, before raising another round or while forming a new board. Starting on the right foot will keep you aligned at all times.
The leadership core must live and breathe your business objectives. When you run a small team, you can’t afford to rely solely on “workers”. Scaling is contingent on iterating quickly. Communication gaps or misalignments may break a company for good. This is embodied in the recruitment process.
Your ego is irrelevant. CEOs may guide the way but they are obsolete without their team. Be humble and respect the experts who have made the deliberate choice to work with you, despite the hundreds of competitive offers. Make sure they realize that and feel comfortable with sharing any kind of feedback, good or bad.
Understand what keeps the team around. Your company will keep evolving constantly: new team members, management tiers, departments, processes, products, operational activities. A major misalignment between the core objectives and what keeps your team driven may disrupt the founding team and cause irreversible friction. Make sure you’re in this together as best as possible, given the roadmap of the firm.
Don’t neglect sales objectives. Fantastic work cultures are only possible in profitable businesses. You won’t find a thriving team in a company going bankrupt in 10 weeks from now. While you fully realize where salaries come from and what makes free lunches or team-building events possible, your team should keep this in mind and make sure the revenue chart points up and to the right.
3. Hiring New People for Your Growing Business
Having the right team with the right skill sets is important to cope up with the challenges of a scaling business. Hence, you may need to consider hiring new people to join your team and keep up with its growing demands.
The best way to hire reliable talent is via internal recruitment through your own team. Studies show that 85% of jobs are filled thanks to networking opportunities (referrals and networking events).
But growing fast demands a more proactive approach, including an extensive interview process that can be hit-or-miss if you don’t stress enough on the preparation.
You can find and convert the right people by conducting a strategic interview process.
Most interviews revolve around these three categories:
- Standard questions: “Where do you see yourself in 5 years”, “What made you apply for us”, etc.
- “Random question of the day”: “If you were an animal, which one would it be?”, “What’s your favorite US state?”
- Situational questions: “How would you conduct a customer survey”, “What steps do you take before you commit a code change?”
Enter Behavioral Interviews
I prefer behavioral interview questions. Behavioral questions revolve around real scenarios. My favorite aspect of behavioral questions is looking for traits that are not obvious.
“How did you handle the most annoying customer ever? Tell me about them.”
On the surface, the question asks about the right process you employ during customer service. Behind the scenes, the interviewer gauges the most intense situations you’ve dealt with at work and compares them with the day-to-day on the job.
Behavior questions will reveal the right traits your employees need right now and during your rapid scale cycles. A common problem during hiring is onboarding staff that fits the bill now but doesn’t align with the expectations of the future roadmap. Make sure your interview is designed to filter out people who can’t adjust to a scaling business.
4. Hiring a Consultant to Scale The Business Growth
Find the “right fit” consultants and make sure that your business is ready for it.
For instance, given my tech background, a good chunk of my clients are technology startups or tech-based SaaS platforms. Even though my advisory services cover other areas (such as recruitment, management, business strategy, marketing), I thrive when it comes to tech integrations. However, my clients see my background as an essential starting point to effectively align the other areas of advisory tailored well enough to what a technical startup should do.
Many years ago, someone recommended me to a prospect. Picking up the phone, the client said, “We want to rank on page 1 in Google”. Having heard these dozens of times, I asked some follow-up questions to find out what’s going on.
They don’t even have a website.
More importantly, they didn’t want one. “It is a bloody scam,” they said.
So it’s a Catch-22.
- Consultants are always, always pitching their services as it’s a matter of survival (and protecting their name).
- Businesses can’t realistically assess where they stand.
- Some consultants are fake and give consulting a bad name.
As a result, estimating ROI early on is nearly impossible. It’s a leap of faith, a risk assessment, and buying into the projections of each and every marketer. Additionally, different skills (and levels of expertise) are applicable to different stages of the process.
SMB consultants can’t help enterprises. And some of the marketing leaders I’ve been following (and am lucky to interact with occasionally) primarily work with 8 or 9-figure businesses.
The right consultant at the right moment can help the business tremendously. But nailing the match is a combination of risk and luck.
To further explore the process of hiring a business consultant, check out this long-form guide.
5. Expanding Your Business Network
No viable platforms for “business networking” exist.
(Trust me, I’ve tested a lot of them – including Slack communities, Facebook groups, closed masterminds… All of them come with pros and cons.)
If you want to network with business professionals, try LinkedIn. This is the largest business network worldwide. AngelList may be a close second, but that covers the online spectrum.
Effective business networking happens through:
- Offline events (conferences, meetups, other gatherings)
- Industry-specific groups (closed Facebook groups or other community for micro niches)
- Mastermind groups by top industry influencers
- Vendors and their own communities (gathering other folks in your niche)
- Strategic partnerships
- Press and media exposure bringing awareness to you
- Thought leadership or public speaking (and other forms of branding)
Networking is really paramount for your growth process. Why?
A growing business is in need of new staff, new partners, new vendors, more clients, brand recognition, new legal regulations… The list goes on.
And you iterate quickly, launch new features, acquire small companies – and generate buzz. Tapping into this endeavor through PR activities, webinars, case studies and podcast interviews works super well when growing.
Once the time for onboarding new vendors comes, you want to be as prepared as possible. Maintaining a healthy network facilitates this process as you end up appointing leaders you’ve already met at the roles you know they can fill.
6. Promoting Constant Innovation
Innovation is not the be-all and end-all solution to all problems. As others have pointed out, you have to execute successfully, care about customer satisfaction, start with effective funnels and expand after.
However, you may have lost half the battle during the recruitment phase.
Hiring non-creative team members will be a critical roadblock to success in scaling.
I’ve seen this mistake done over and over and over again. The recruitment process is structured around checklists, skills, experience — instead of a healthy mix of case studies and the right personality.
7. Retaining Top Talent
Increasing retention rates is integral to building a strong team and maintaining the culture across the organization.
Moreover, as the business grows, a lot of intellectual knowledge is not documented yet. Losing key talent early on will impact the business decisions and internal processes maintained internally without giving a second thought.
As a result, businesses need to work on retaining top talent by focusing on several areas:
- Providing growth opportunities for key talent
- Building career plans for years to come
- Inventing new positions for talent in management roles who feel they have reached a ceiling
- Conducting regular feedback sessions to ensure everything is running smoothly
- Maintaining a healthy culture at all costs
- Improving communication between all key hires and management to avoid disconnects
- Always working on work-life balance options for strategic hires who are frequently overwhelmed
- Working towards vision statements that reflect the growth plans of key talent
Retention periods are decreasing due to the vast demand for talent from massive corporations and funded startups providing incredible opportunities. Staying afloat and being competitive is a key goal for successful entrepreneurs who care about their teams.
8. Building a Strong Financial Foundation
As a company grows, it’s important to have a solid financial foundation in place to support the increased demand and growth. This includes having a strong balance sheet, access to capital, and a sound financial strategy.
While building your forecasting plan (or an annual roadmap with financial projections), here’s what to consider before scaling for growth:
- Develop a solid business plan. A clear and comprehensive business plan can help ensure that a business has a solid financial foundation, as it outlines the company’s goals, strategies, and financial projections.
- Establish a budget and stick to it. Developing and sticking to a budget can help a business stay on track financially and make informed decisions about how to allocate resources.
- Maintain accurate financial records. Keeping accurate financial records is crucial for understanding the financial health of a business and making informed decisions about how to grow and scale.
- Manage cash flow effectively. Effective cash flow management is essential for a business to remain financially stable. This includes monitoring incoming and outgoing cash, paying bills on time, and collecting payments from customers promptly.
- Consider seeking professional advice. Seeking advice from a financial advisor or accountant can help a business better understand its financial position and make informed decisions about how to grow and scale.
- Plan for unexpected events. Having a plan in place for unexpected events, such as economic downturns or natural disasters, can help a business remain financially stable in challenging times.
- Build a robust financial reporting system. A robust financial reporting system can help a business monitor its financial performance and make informed decisions about how to allocate resources and grow.
9. Improving Operations and Processes
Large enterprises cannot survive without strong operational frameworks and well-structured processes. These are integral to day-to-day actions, customer support, hiring and onboarding talent, promoting staff members, building new divisions.
Each of these frameworks has its own strengths and weaknesses, and the best framework for a particular business will depend on the specific needs and goals of the company.
Some popular frameworks that corporations use are Lean Six Sigma, Total Quality Management, The Business Process Management framework, or Kaizen. Certifications and training programs exist to onboard managers and consultants within every organization.
At a small scale – along with some new edge tech companies (such as Google or Oracle), other methodologies like OKRs or EOS make a ton of sense.
OKRs are a simple framework around developing quarterly goals as Objectives and a subset of Key Results. It provides great management velocity toward goal-setting and KPIs for the leadership team.
EOS involves a similar concept (called Rocks) but builds on multiple foundations – from the introduction of weekly L10 meetings for leadership and each department through employee evaluation with Core Values and competencies, to comprehensive scorecards keeping everyone in the business accountable and responsible.
Deploying a management methodology is important before considering the business for scale.
10. Identifying New Markets and Opportunities
Scaling a $500K to $3M business usually goes through one of the two following initiatives:
- Refining and optimizing what works and improving efficiency for the core target audience served by the business
- Identifying a new lead generation channel or a new way to package the product/services for a different target segment
The latter can yield great opportunities.
If you are trying to go broad and capture everyone out there, this won’t carry enough value for most prospects. Niche solutions are better refined and tailored to specific businesses.
If you are still exploring the right value proposition for your business, here are several actions that could help refine the sales offer:
- Conduct market research. Conducting market research can help a small business understand its target audience, identify trends and shifts in the market, and uncover new opportunities. This research can be conducted through surveys, focus groups, and competitor analysis.
- Keep an eye on industry trends. Staying up-to-date on industry trends can help a small business identify new opportunities and stay ahead of the competition. This can be done by attending industry conferences, reading trade publications, and following thought leaders in the field.
- Engage with customers. Working closely with your customers can help a small business understand their needs and identify new market opportunities. This can be done through customer feedback, surveys, and customer service interactions.
- Collaborate with partners. Collaborating with partners, such as suppliers and distributors, can help a small business identify new market opportunities and expand its reach. This can also help the small business tap into new customer segments and access new markets.
- Leverage technology. Technology can be a powerful tool for identifying new market opportunities. This includes using data analytics to identify market trends and customer behaviors, as well as leveraging social media and other digital marketing channels to reach new audiences.
By implementing these strategies, a small business can stay ahead of the competition and identify new opportunities for growth and success.
How to Keep Innovating Your Company Culture
Culture is paramount for every organization. Ignoring culture is like gambling.
If your business doesn’t emit “innovation” when a recruit heads into your office, they won’t get the right first impression of the team. Unless you vet them against behavioral questions seeking creativity and logical thinking, your process is flawed again.
Now, there’s a good chance that some of your employees are hungry for innovation. But there are several things you need to do now and plan in the long run:
- Find the most creative hustlers. Assign them exciting and challenging tasks within their corresponding fields.
- Design a process for rewarding innovation. Could be bonuses, an “Employee of the month” award or another gamified experience for thrill-seekers.
- Organize ongoing innovation challenges. One experiment per month per employee is a good starting point. Start with a kick-off, gather ideas, and assign a side activity suggested by each of your members.
- Consider leadership roles for your top talent. Breeding inspiration starts from the top, and rewarding top performers (as long as they have the right leadership skills) will help you scale.
- Make sure your recruitment process looks for innovators, not implementers.
- Think carefully about the team members that don’t innovate. This doesn’t necessarily make them bad. Some may complement the creative ideas suggested by others, and make sure they happen. Others may need to be transitioned to a different department or a new one for repetitive ongoing work.
- Ensure that successful innovations are credited. Write case studies, praise your performers in social media, organize interviews within the company. It’s their ideas first and then yours.
- Lather, rinse, repeat.
Think Twice Before Scaling a Business
Companies that care about their culture and solving a niche problem can definitely thrive while staying small — especially in less competitive markets. Growing requires a certain attitude that brings risks.
Once you take the high road of scaling fast, it’s hard to stop. This could send the wrong message to the media, your existing customers, and your staff internally.
Sure, if you pivot and the experiment fails, it’s MUCH better to pull back and try to recover. Burning your staff out is trivial if you need to double the workload until you hire new staff and onboard them properly.
Given the complexity of scaling a business in the long run, mastering the broad suite of skills for managing a company is integral to the founding team and its senior management. Sign up on my free 8-week course to fill in the blanks and prepare your business plan for success.