What does “scaling” a small business mean?

I used to think this was obvious. To scale your business, surely, is to grow it?


Duh!


Then I consulted a few people who really know about this stuff and learnt there’s a significant difference between growing and scaling.


Growing your business is simply increasing your revenue with more sales. And of course, hopefully, your profits too.


Difference between Growth and Scale


I've learnt that focusing solely on growth can also bring a lot of hard work with it. Long hours. Stress. More staff. Bigger premises. Increased costs and overheads to service the extra sales and so on. As you grow, you may find yourself with less money, even making a loss.


Whilst ‘scaling’ your business involves growth (as you'd expect), a key differentiator is that it removes the dependency on you, the business owner.

We should be leveraging other people's time, money and relationships. The idea is to earn more money with less effort. Making our business more efficient as it gets bigger. It’s where the phrase ‘economies of scale’ comes from. Scale is about increasing revenue at a quicker rate than costs. Where gains outpace losses.


Perfect! More cash, less work!


How?


How do I scale up my stallholder business?


Not every business can scale up. Or wants to.


Scaling isn’t for everyone.


For one, it depends on what you want and what your motivations are. For some, being in the business is a lifestyle choice and an end in itself. For others, they want to create value.


Then some businesses may have fundamental limitations which mean it is never likely to grow beyond a certain size.


Data is key. You need to know your numbers, as the Dragon's would say. Understanding which metrics to track is vital. And you need to be very clear on your 'value proposition'. These two, tracking your numbers and understanding your market-fit, are giant topics which I will explore in another post.


For now, know that your value proposition should have a combination of appeal, exclusivity and credibility. Your customers must really want your offering (appeal). Believe yours is the only solution (exclusivity). And trust your brand as reputable and responsible (credibility).


Before you can scale, you need to know your product or brand is viable and sustainable.


You may think scaling is the preserve of tech start ups. But it is achievable for those selling physical inventory too.


Tom Joule kicked off at country shows and equestrian events with Joules and pink wellies and now the business is worth around £50m. Innocent Drinks began as a stallholder. As did SuperDry. And Jo Malone.


Once you've validated your value proposition and core competence, most pundits all agree that the first requirement is mindset. You need a 'growth mindset'.


Then you need the right people or mentors or experts you can call on if not employ. And build collaborations with partners across the board.


Your business will need the right tools and processes to create efficiency. From marketing to warehouse to accounting, see where you can automate and set up 'standard operating procedures' (SOP).


Yes, even our little businesses need military-grade SOPs!


Write down your processes. Delegate them. Control them. As a solopreneur, this may seem over the top.


But it goes back to what your motivation and ambition is.


Flexibility and bespoke service can seem like a good thing. But flexibility can be the enemy of growth! SOPs create efficiency, quality output and uniformity of performance, while reducing miscommunication and failure to comply with industry regulations. With this comes control and delegation.


Your numbers become even more vital: measure the right things. Know what your customer acquisition cost is and their lifetime value.


Ensure your entire business is customer-centric. Getting a new customer is good. Keeping them is essential


What next?


This is all good and well, but what should I do now?


A good place to start is profit.

As a marketeer, I would advise investing in marketing to discover what works, what doesn’t and focus on that which gives you the best return. This needs to be funded.


You can fund this by bootstrapping the business, reinvesting your profits, or from external investment.


Either way, you need a good gross profit margin. If funding this from the business, you need to cover your overheads and pay yourself something too - as well as fund the growth. And if you’re tapping up an investor, well, they want to see a return after all the expenses too so they will be looking for a healthy gross profit margin.


Which begs the question: what IS a healthy margin?!


Coming up next I will explore:

  • Have I sufficient margin?

  • What margin should I have?

  • How can I put my pricing up?

Scaling your small business
Avoid growth for growth's sake




27 views0 comments

Recent Posts

See All