One of the most important decisions that small-business owners can make is whether or not to scale their business. Scaling is the deliberate commitment to expanding the business through a combination of personal, market and product strategies that provide new opportunities for expansion and profit.
Broadly speaking, there are three major components of a successful scaling. They are:
- The wishes and capabilities of the owner/manager.
- The existence of an opportunity for a sustainable growth business.
- The capacity to develop the structure and process for growth.
Let’s take each area in turn and show how to develop an effective plan for scaling and pursuing new challenges and opportunities.
The wishes and capabilities of the owner/manager
Owner/managers must initially review their mental model for their long-term objectives and the desired level of personal achievement and associated risk. It must be clear that these processes can involve both changes in the desired outcome and the work to be done to achieve it. A statement of the expected rewards both extrinsic (financial, organizational) and intrinsic (respect, admiration) should be developed. Personal resources such a willingness and desire to learn, and perhaps even a desire to leave a legacy, can all be part of the wishes and capabilities of an owner/manager.
The existence of an opportunity for a sustainable growth business
An opportunity may come from anywhere and at any time. Opportunities are generally focused upon new products or services for which there is a sustainable business potential and which in terms of size and complexity are within the scope of the business and its managers. A good way to assess market readiness is to research the current market and its occupants. Are they expanding the market by introducing new products or merely processing orders for mature products or services? The key questions are:
(1) Can you supply the market with what it wants at a profit?
(2) Is your firm able to secure a sustainable competitive advantage and maintain it through consistent quality and outstanding service?
If so, scaling operations to meet existing and developing demand are warranted.
The capacity to develop the structure and process for growth
The firm can and should utilize new technology such as machine learning and artificial intelligence to transform and scale its internal operations to meet the demands of its market segment. Innovations in marketing, production, finance and operations can and should be scaled for maximum productivity and most efficient cost. The proper structure and most efficient process should be the guidelines used in capital spending for growth and profitability.
Scaling as a management system
Scaling is a powerful tool that can enable a company of almost any size improve its operations on a continuous basis. We should never stop scaling efforts because they are the lifeline to never-ending capacity improvement — not only for a business, but also for an individual. It may very well be that the greatest scaling opportunities are awaiting those who can see them and make the necessary plan and carry it out to reach any goal they can visualize.
Richard Walton has an MBA and is a longtime SCORE Certified Small Business Mentor.