Successful small business owners realize that eventually, they’ll have to come up with a strategy for business growth. Scaling up a business comes sooner or later and every owner must be ready for it. The necessity for business growth is a sign of good practice and effective business operations.
However, in order for your business to grow properly, you have to have a solid strategy in place. Otherwise, you may potentially hurt your business and in some cases, even ruin it entirely. Therefore, business growth is a great opportunity to thrive, but if you don’t execute it properly, it may easily turn into a disadvantage.
The main reason small businesses owners consider expansion is to improve the profitability of their company. But, you must be sure there’s profitability in the first place, before you decide to scale up. That being said, here are a few successful routes to scaling up a small business.
Always have a plan
Scaling a business isn’t easy. It requires a lot of effort, dedication and a lot of good planning. After all, it’s in your best interest to ensure that your small business can scale properly. Regardless of the strategy you choose for business growth, there are a couple of things you must take into consideration. For example.
- Estimate the costs of expansion vs. the potential sales increase. You can do so by conducting a sales forecast
- Determine if you’ll need a bigger office or if you need to switch to another location
- Consider bringing in new employees
- Consider additional operational and overhead costs.
- Additional office equipment and inventory
- Additional equipment for production, manufacturing and other business operations
- Introducing company vehicles
To effectively determine whether or not your expansion will pay off, you have to conduct a break-even analysis. In other words, you have to determine if the increase in sales will actually yield a return on investment from your business expansion.
The global market
Many small business owners consider expanding to a global market as a strategy for business scaling. While the global market offers numerous benefits and various other opportunities for business development, expanding to a global market is an uphill battle. You must familiarize yourself with how it operates before you decide to expand your business into international trade, as there are countless challenges you must overcome in order to succeed.
For example, you must have a solid logistic plan in place. Also, you must understand international rules, regulations and laws regarding the import and export of goods. Most importantly, your business must be financially stable enough to survive until you become profitable on a global scale. As a matter of fact, global expansion requires a hefty investment. Not only that but it takes around 10 years for businesses to achieve a +1% return on assets (ROA) when expanding to a global market.
Consider franchising
Another business scaling-up route you can consider is buying a franchise. Franchising is a low-risk expansion method that can help you maximize profits with a developed business model.
But what is franchising, in the first place? Simply put, it’s a business model where franchisors, i.e. trademarks or brands, sell licenses for operating under their name to third-parties. In other words, you buy a franchise from a franchisor and you get to run a business with ongoing support provided by that same franchisor.
This can be a great opportunity to explore a different business opportunity as a means of expanding your own. Franchises are oftentimes more successful opportunities than opening a new business on your own due to the fact that they come with a franchisor’s brand awareness and reputation. Moreover, a franchise business can be an additional revenue stream you can leverage to develop your own business further.
Market penetration
One of the safest options for business growth is to consider market penetration. Business scaling doesn’t only mean increasing production to meet increased market demand. As a matter of fact, business scaling can be achieved through market penetration. In other words, by introducing new products or services to customers or by introducing additional features to existing products or services. That means that you have to implement a strategy that will yield a greater market share for your products or services.
In order to achieve this, you’ll have to conduct thorough market research and identify potential growth opportunities. For example, you can identify common pain points your customers’ experience and try to solve those issues with your products or services. Furthermore, you can target a niche market and improve your existing products to serve the needs of niche customers. In any event, you get a greater market share through market penetration and thus you’re able to scale up your business accordingly.
Scaling up a business is a difficult challenge that small business owners must eventually face. There are a lot of risks involved ranging from scaling to fast to choosing the wrong growth strategy. That’s why you must plan for this step even before there’s an opportunity to grow. That way, you’ll be prepared when the time comes to grow your business further.
