You may be experiencing the great feeling of satisfaction that comes when your small business is up and running. Now, like many other entrepreneurs, you will be wondering how to smoothly scale up a small business from the startup phase. If you are a savvy wholesale or online business owner you will most likely already have your eye on the next phase.
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At TradeGecko we've looked into how other business owners have managed to do exactly that, and we aim to walk you through some of their best practices.
Scale versus growth
Let’s get started by settling some of the confusion that surrounds the terminology and often misunderstood differences between scale versus growth.
Larger premises, an increased labor force, and more clients are all physical signs that a business is growing. However, what benefit is there in all that growth and the administrative headaches that often accompany it if it fails to impact the bottom line.
In many such cases, there is a real danger that an operation can end up turning over more business, employing more people, and increasing its overheads but actually be making the same or even less profit than it was when it started up. Incredible as this may seem, it is a common trap that many SMEs initially fall into.
Scaling, on the other hand, involves increasing sales or services while reducing the cost of doing so. In many cases, this is achieved through systems that exponentially add revenue without the need to increase costs in equal proportion.
A scale up business model example
Companies such as Google and PayPal have been able to expand their client bases at a rapid rate over a short period of time through using this ethos of scaling. And we all know their profits have soared along with it. It isn’t just mega companies that benefit from clever scaling:
“If there is one home-grown Australian company that is able to boast growing from the humblest of beginnings, it has to be Nudie. Starting up in 2003 with a juicer in a kitchen, the brand initially hand-blended and bottled 256 pieces of fruit into 40 bottles in their first week of business. Since then, Nudie has grown to become a market leader in the manufacture and supply of pure fruit juices and other natural products. They now supply to over 5000 stockists throughout Australia”
Scaling up business through wholesaling
There are plenty of high profile examples out there that have exponentially increased their profits through focusing on scaling over growth. In fact, it appears to be the rule rather than the exception. Many SMEs have utilized the tried and tested method of scaling up business through wholesaling and they too have seen turnover increase and profits soar.
Wholesaling can be easily added as another sales channel to an existing business, and with the right systems in place sales can be increased without any steep increase in costs. Through the implementation of eCommerce and automated inventory management systems from TradeGecko, wholesaling could provide a real workable scaling option for your business.
The most daunting thing about scaling up your business is not knowing where to start. TradeGecko's inventory and order management software takes the pain out of growing.
Taking risks when scaling up a business
Being in business can be a risk, especially when scaling up a business. As a business owner, your aim is to take calculated risks while ensuring that these are kept to a minimum. The hard reality that business owners always have to accept is that even controlled and carefully managed scaling does cost money and resources. Bearing that in mind, the size of the risk needs to be carefully balanced against the projected returns on the successful scaling up of the business.
Scaling through networks and communities
From service providers and sales channel partners to other entrepreneurs, establishing a two-way flow of information and resources can only have a positive impact on how the scaling of your business flows. Regardless of whatever type of business you are looking to scale up, there will always be like-minded people in the business community that are moving in the same direction as you and identifying and collaborating with them is likely to prove extremely useful to your business.
Financial options when scaling a business
According to Harvard Business Review, the riskiest period for a growing business is not actually at startup but during the scaling for growth period. This is because with scalability there will be a need for financial investment to provide the infrastructure and resourcing to service the increased demand. Therefore, the question that many business owners will need to answer next is: what are the best options for small business financing?
Apart from looking to existing options that may include overdraft funding and bank loans, businesses might want to consider multiple equity investors, employee stock options, or even risk-sharing venture capital. Ultimately it is all about cash flow and how innovative your accounting can be. Some businesses are able to slow down the cash leaving the business through negotiating more favorable terms with suppliers and even delay some payments without damaging working relationships.
Weighing up your best options for successful scaling
When done in a well thought out and controlled way, scaling up has the ability to jump-start a business to the next level. Once the ball has been set rolling, scalable growth can provide the seemingly impossible leap that takes your business from startup to scale up.
Scaling up your startup business has never been easier!
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