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How to know when to scale your business?

DATE: 22/02/22


You’ve conquered the initial hurdles of launching your business. Researching your market and your customers, developing your business plan and setting up the infrastructure you need to kick start your business idea. From there you’ve established a steady business, your audience is growing, your brand recognition is spreading and your sales are increasing month on month. So what’s next? Are you content to stay within this initial launch and steady growth stage and just see how things move forward? Or would you like to scale your business to reach the next level? If the latter is where your business head is at, when do you know if it’s the right time to scale? When can you manage the risks involved and be confident about the potential to grow?


The quick answer? 

Strictly speaking, there’s one shorthand formula when it comes to the potential to scale and that drills into the ‘cost’ of growth across your business. If, in order to scale your output and sales, you need to grow at the same rate your operating costs (sales, marketing, administration, staffing, research etc), then the time is not right to scale. If on the other hand, you can grow your revenue through requiring only small additions to your operating costs, then you can consider scaling as an option.

This may be a slightly abstract guideline for many entrepreneurs so if the formula doesn’t fit your particular business, there are some other factors to look out for when you’re making a decision to scale.


Meeting goals and beating goals

Through launch and the early days of your business, you will (ideally) have been working alongside some goals and markers for success that serve to keep you accountable to the original business plan and also to remain flexible to opportunities and threats in the market. If you find you’re consistently meeting and beating your goals over a period of several quarters – sales targets, customer growth, social spread, regional visibility etc – then you have good grounds to consider scaling. Think carefully about next steps and you can challenge your business to hit new goals through informed expansion.


Cashflow and growth sales

This one is arguably the most obvious and one that many entrepreneurs use to make decisions at the exclusion of other factors. Of course, cashflow is key, that goes without saying, but being profitable alone is not sufficient so be sure that you consider this factor as part of a wider business view. Dip deep into your financial tracking and projections. Having in mind your financial records, set about forecasting the next 1 – 3 years ensuring you build in in adaptability and flexibility to allow for changing market conditions. At the end of those projections, if you’re still seeing the potential to scale, then you’re on the right track.


Get close to your data

It’s never not about the data when it comes to business planning. Right from day one, your business should be collecting, managing, and responding to data – who your customers are, what they’re buying, when, where, how your network is growing, how your figures respond to the market, to competitors, what marketing routes work best for you, open rates, social spread, everything you can get your hands on. Gather it all and consider it with a view to growth. Is there a sufficient market for you to scale your product offering and your reach? Are your customers repeat buyers, or are you seeing a one-off purchase pattern? Be objective. We all want to see the best in our figures but looking at your data with a critical eye can help you make smarter decisions when it comes to the right time and the right way to scale.


Ideal Infrastructure

One of the most common failings of small businesses is the lack of infrastructure to respond to growth. It’s all very well securing great press or having a campaign go viral but do you have the correct infrastructure in place to cater to demand? Is your team ready? Do you need to recruit in order to scale? What about your supply chain? If your customer base increased by 50% could you respond properly? It’s helpful at this stage to identify any potential weaknesses in your infrastructure and put in place plans to address those before you scale.


Turning down opportunities

A particularly strong sign that your business is ready to scale is that you’re turning down opportunities. You’ve been working extremely hard to build up your customer base, to grow your brand and to increase demand for your product or service, but what happens when there are too many to respond to? If you reach the point where demand is outstripping your ability to respond whether that is due to a lack of inventory, a lack of time, or a lack of employees and infrastructure, then scaling your business may be your next move.


Weigh up the risk

It’s true that you never know unless you try and many famous entrepreneurs talk of just taking the risk and working hard to make sure it pays off but making a calculated decision is smart here. There is always risk in business but if you spend time understanding your finances, your projections, drilling down into your data, and really understanding your market, then when you do decide to take the next step to scale, you’ll be taking the lowest risk you can. Having in mind the risks involved and planning accordingly – work towards the best but plan for the worst – means you’ll be moving forward but protecting yourself at the same time.

Making any big business decision involves a lot of consideration and a redoubling of research and a decision to scale your business, while exciting, is no different. Being a master of your finances and mitigating the risks as far as possible through understanding your market and your own customer data will set you on the right path to grow your business.


Whatever your business idea, whether it’s just something you’ve been mulling over or whether you’ve taken some steps on the entrepreneurial path already, we’d love to help. Read some of our Go For It Success Stories [] and get in touch [link}. Our business experts will be delighted to hear from you and to talk you through everything you might need to know to move forward with your business concept.