You might assume that growth is always a good thing. But if you aren't prepared, rapid growth can lead to serious problems—and even cause your business to fail as a result of implosion.
Growth is only sustainable if you have the systems and resources to support it. As your company expands, so do your costs and workload. If you aren't bringing in enough revenue to cover the increased demand, both your costs and workload can quickly become unmanageable. This is where “scale” comes in.
Scaling your business is about planning for growth, so as your operation gets bigger, your costs and workload don't increase to unsustainable levels. Effective scaling involves increasing revenue at a rapid rate, while increasing costs at a comparatively slower rate. Or it might require taking on investment capital, debt, or other funding to make investments before revenue would otherwise justify investment.
Put another way, bigger is only better if your business is scalable. Here are 4 tips to help ensure your company is properly scaled for sustainable growth:
1. Clarify your capacity
To scale effectively, you first need a proven offer that you know the market wants. When it comes to pricing and packaging of your products and services, test, test, test before building the capacity to fulfill. And don't overlook the fact that your business entity and legal agreements are also part of your sales process.
Quite often, we see deals are lost when business owners have a great product or service offering, but their process of closing the deal and collecting payment isn't set up properly, so they lose buyers at that stage. We can help you get this process dialed in quickly, and it will pay big returns.
Once you have a proven match between market, offer, and price point, then it's time to forecast out into the future (3-5 years) and work backwards to determine what you'll need to increase capacity at each stage of upleveled growth. By doing this, you'll also be able to develop forward-thinking tax strategies for each stage of growth. When utilized wisely, saving money on taxes can help you finance additional capacity.
2. Standardize and automate processes
When you are just starting out, you'll probably find yourself handling many of the small, but vital tasks of running your business such as invoicing, payroll, and inventory. But as your business grows, neither you nor your team leads can afford to be encumbered with such mundane work.
To scale for growth, invest in technology that allows many of these tasks to be automated. For those tasks that can't be fully automated, implement standardized and repeatable processes to maximize efficiency and minimize costs. Depending on your business, this may require training and delegating these tasks to your existing team and/or hiring new support staff.
3. Secure your foundation
One threatening—but often overlooked—aspect of growth is the increased liability that comes with expansion. You may have highly streamlined processes and systems for delivering your core product or service, but you still face potentially ruinous risks if your business doesn't have the foundational legal, insurance, financial, and tax (LIFT) systems in place to support your operation.
Indeed, without effective LIFT systems, your company is just one accident, audit, or lawsuit away from failure. We specialize in helping small business owners establish and maintain an unshakeable LIFT foundation to ensure your business is protected from all of growth's potential pitfalls.
Call us today to take our free LIFT 20-Point Assessment, so you can identify the areas of your operation that need the most attention.
4. Form alliances
To grow your business, you not only need to focus on what's happening inside your organization, you also have to look outside your business to find partners who can support your expansion. If you are going to increase your sales and customers, you must have vendors and other service providers who can manage the increased volume.
Build strategic alliances with vendors, contractors, and fulfillment partners who can serve your growing needs. And before entering into any relationship, make sure you have airtight legal agreements in place to ensure that both the potential profit and risk are properly shared among both parties. Bottom line: Don't sign any legal agreements without having trusted counsel look over the agreement on your behalf first. We can support you with this, too.
Take your business to the next level
To be certain your business can effectively scale for your next level of growth, sit down with us as your Family Business Lawyer™. Whether it's shoring up your foundational LIFT systems, drafting airtight legal agreements that close deals and help you collect (and keep) money, or streamlining your workflow, we can help you ensure your company is properly positioned for sustainable growth.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.