Business growth and expansion is something all startup owners hope for, but it's important to properly plan for how you'll scale up without compromising elements such as customer experience, product quality and value for money. In this article, Huw Moxon from Informi takes a look at some of the most common mistakes business owners make when scaling up.
Lack of planning and research
It would be wrong to suggest that business owners do not plan or research. But, it’s also fair to say, that running a business makes it harder to take a step back and properly strategize. When you’re scaling up, it’s all too easy to rush into potentially costly decisions. Here are three specific areas which you should allocate extra attention to in terms of planning and research:
Recruitment: An expanding workforce is one of the main components of an upscaling business. The risk here is you expand beyond the rate at which the business is growing. You end up taking on too many people and their wages become an expensive overhead. To avoid this happening you need to have a fully-costed recruitment strategy in which roles are only created when there is defined purpose with a business KPI next to it. It's also worth considering if you could save money by hiring freelancers, especially if you need work delivered on an ad-hoc basis.
Cash flow: A growing business will invariably be working with an expanding roster of clients and suppliers. As this happens, cash flow management and forecasting becomes more complex. Without the right systems and processes in place, it’s easy to run into cash flow issues. Remember, prevention is better than the cure. You can avoid this situation by putting in place a tightened credit control system – e.g. strict credit terms, credit checking new customers, and automated invoicing.
Funding: In order to upscale, you’re going to need to invest – to purchase new stock, expand product lines and buy new equipment etc – and that may mean turning to lenders to raise capital. It's always better to plan ahead and be prepared for when you'll need extra funding. For example, if you’re a seasonal business, borrowing money to pay for stock you know you will sell later in the year may help you in the long term. Overall, it’s about making sure you invest where you’re going to see the best ROI.
Tunnel vision syndrome
We’ve already touched on how hard it is to take a step back. This can mean you’re not able to look at your business objectively and instead fall prey to tunnel vision syndrome. It’s an understandable situation. You’ve invested so much time, energy, and passion in making your business a success, you can no longer see the wood for the trees.
In an extreme scenario, it might be that despite your efforts the business is actually failing – but you’re ploughing on regardless. Or, less extreme, you might be focusing your energy on the wrong activities, perhaps unable to see revenue-generating opportunities elsewhere.
The simplest way to avert this happening is to get a fresh perspective from outside. Your accountant should be able to offer independent financial advice based on your business data – leaving emotion and sentiment at the door.
Another popular avenue for advice is by talking to other more-established business owners, with whom you can develop a mentor-relationship. Ideally, they’ll have gone through similar challenges as you, perhaps work in the same industry, and can offer relevant insights. There are a number of ways to find a business mentor:
- Attending local networking events
- Joining business groups on social media
- Signing up to dedicated mentor programmes
- Speaking directly to specific business owners you know and respect
Finally, don’t forget the valuable insights you have within the business. You’ll have staff members who are on the frontline dealing with customers and clients and their feedback can prove invaluable in shaping your decision making.
Be ready to adapt to change
One of the major advantages startups have over established businesses is their agility. Startups can be more responsive to the market and more readily innovate without being encumbered by legacy systems and processes.
However, maintaining that spirit of evolution and innovation isn’t always easy, and staying true to your values can be challenging when growth opportunities come along. For example, if you pride your business on delivering first-class customer service, clearly that becomes harder when your resources are at full stretch.
Similarly, not keeping an eye on the market and your competitors might mean your product becomes stale in the eyes of customers. It helps here if you have a business mission that can be summarized succinctly and be a guiding principle for everything you do. A mission that inspires and reinvigorates you to keep challenging, evolving and developing your business. That mission can be something you come back to when evaluating your direction of travel – i.e. does this decision conflict with our mission?
It’s important to note that these days business owners have so much more support on hand. There’s a wealth of useful information available online from YouTube videos to business advice websites. And then there’s the interconnected world of social media, making it easier to reach out to other like-minded professionals. You’ve also got access to endless digital tools and software, much of it free, that can help you to run your business more efficiently – whether that’s web analytics, email automation, or cloud accounting apps.
About the Author
Huw Moxon is Marketing Manager at Informi. Informi is a free online resource for small businesses and sole traders, providing crucial guidance and technical support on everything you need to know about starting a business from finance and legal advice, to profit boosting tips on marketing and technology.