How to Scale Your Small Business Profitability in 5 Steps
Growing a small business can be challenging. When many small business owners start out, their primary concern is whether their business idea is going to succeed or not. Success is never guaranteed, but as a small business, there’s often a lot on the line. Many business owners will come up with a great idea that they know has the potential to work, and they know how much it could help others if they could reach the right people, but it’s still hard to know whether that great idea is a viable business idea.
Since most small business owners are not finance professionals, they don’t know where to start with their financial planning, or how to organize their company for growth and profitability. For small and family-owned businesses especially, one simple misstep can be the difference between success and failure. When your business is the only source of income for your family, failure can be detrimental.
Scaling a business is really about growing a business, and under ideal circumstances, growing it quickly. When you’re looking to scale, you’re not just looking for business expansion, you’re also looking for increasing revenues and, more importantly, increasing profits. Depending on your industry, scaling might mean you require a bigger facility, or you need to add another production line. Perhaps you’ll need to open a new location, launch a new product, hire additional staff, implement new software, or any number of other activities. But all of these initiatives come at a significant expense. This shouldn’t be a reason not to scale, but it should make you think about planning for your particular initiatives so that your business is able to recoup on any expansion expenditures.
Are you considering scaling your business in some way? If so, we’ve outlined 5 steps that will help you to scale your business profitability.
1. Take a strong look at your business goals
When considering any type of business growth, it’s important to establish your personal and professional goals first. It’s crucial for business owners to know where they want their business to go before they can develop and implement a plan to move in that direction. It’s equally as important to think about your personal goals and how business and pleasure may compete for time. We’ve observed in today’s general working world that a lot of business owners are spending way too much time at work. They’re missing out on family activities, they don’t have a good work life balance, and that kind of time and energy investment is not sustainable for the long term. When we work with clients on goal setting and planning, we talk to them about their professional and personal goals. If they have kids, it’s likely they want to spend more time with their family, so that’s something we build into their plan. If they have a serious hobby they love, we try to carve out spare time to pursue that interest. We do a deep dive into their business, their lives, their goals, and their priorities, and then we develop a plan with them. We ask a lot of important questions, and provide our expertise, but each business owner is deeply involved in developing their own plan.
2. Identify where your gaps are and hire any missing expertise
Small businesses can also really benefit from growth and profitability consulting to help scale their business if they’re looking to move to that next level. Some business owners are comfortable with where they’ve grown their business to and can see themselves retiring happily in that current state. But many other business owners want to really grow their businesses and watch them prosper. However, when you start to consider hiring more staff, staying compliant across your company, and borrowing money to make those big changes, it can become overwhelming.
Before you jump in headfirst with any major changes, it’s important to take a step back and identify any existing gaps in your processes and expertise. Are you or someone else on your team a bottleneck within the company? Do you lack experience or strategic insight into any key functions in the business? Sometimes small business owners want to do it all themselves because that is how they got to this point. To take your business to the next level, however, the answer might be to bring in an expert. It’s also important to quickly identify when the expert is not performing as expected, so you can quickly shift gears before you’ve invested too much. Fortunately, we’ve worked with many other small businesses through their growth from one stage of business to another, so we’re able to help ease the tension during the scarier times and offer advice and counsel throughout the entire growth process. Through proper planning and preparation, we’re able to help small businesses take risks without it feeling quite so risky.
3. Leverage technology
Technology is another huge factor in scaling your business, and while it can be truly transformational, it can also be intimidating to those unfamiliar with it. When looking at how to scale your business, it’s really important to make any assumptions for planning purposes with accurate data. For example, it could be easy to assume that more foot traffic coming into your retail store means more people are buying your products, but that isn’t necessarily true. In this scenario, if you implement the proper technology, you’re able to prove or deny that theory with certainty.
We are huge believers in leveraging technology to assist your business, especially when working with small businesses as it’s typically more cost-effective to implement technology than to hire the people resources to do the same work. And by using technology, we’re more easily able to gather data that you can use in any decision-making scenarios. In the retail store example, when you start to gather and analyze sales data, you’re able to come up with a much more concrete picture of how all that foot traffic translates into actual sales than you would be just by counting the number of customers coming in and out of your store. The goal is to bring foot traffic in that will translate into higher sales. This data helps you target areas for improvement and growth, and often gives you more ideas for how to scale your business.
Technology can also enable a business to automate some of the processes and tasks they’re accustomed to managing manually which can reduce the need for human capital. It is almost more accurate than humans for processing large amounts of data. For your most critical human capital, it can also help increase productivity and help maximize your resources.
4. Forecast, Implement, Report, and Course Correct
Once you have developed a plan and implemented any necessary technology to execute it, the next step will be to forecast your revenue, expenses, cash flow, and utilization which you can use as KPIs (key performance indicators) to help you measure whether you’re on the right track. With this process in place, you’ll be able to easily measure progress towards your goals and know if/when you need to course correct. If you fail to forecast and report, it’s nearly impossible to make necessary changes to your plan because you don’t have any actionable information to rely on. We often see business owners wait too long to see if their plan is working before assessing any changes, and by the time there’s a problem, it’s usually much harder to make necessary adjustments.
Working with a business consultant can make this process more feasible for most business owners by taking the burden off their plate. By delegating this forecasting and reporting work to someone with deep expertise, you’re able to focus on the areas within your business where you hold the expertise. Owners are still heavily involved with the planning — we prepare a written document that we review with all clients to be sure that goals are aligning correctly and they’re happy with the projected path — but it relieves any stress you may feel associated with managing all of the financials alone. Working with an advisor to help you with this process can alleviate the time spent and introduce a new level of expertise to the mix that may currently be lacking.
5. Stay passionate
At the end of the day, the number one thing we love about working with small business owners is their abundant and obvious passion for what they do. Passion can really drive creativity which can help with differentiation in the market and has the potential to make your business stand out and become more sustainable in the long run. And as passionate as these business owners are about making their businesses succeed, we feel that same passion about helping business owners to realize their dreams. Small business consultants are really just here to guide entrepreneurs towards their desired outcome. We have a lot of technical and industry experience to bring to the table which marries nicely with the passion and dedication a small business owner has for their business. When we can combine passion and experience, it proves to be a really powerful model. We’re here to make you aware of and help you navigate all of the areas that need to be considered when you’re putting a plan together.
It’s a pretty exciting time when you’re thinking about scaling your business, but it can be simultaneously anxiety-inducing and perhaps downright scary. While being intimidated is completely normal, we want you to know that it is possible to grow your business profitably and come out on top. By following these 5 steps and working with a trusted business consultant, we’re confident you’ll be able to move the needle in your business and start to achieve the things that you, until now, have only ever imagined.