How to scale a business

You’ve taken the big leap of starting your own business. Maybe it’s your new full-time career, or perhaps you’ve brought one of your side hustle ideas to life. Either way, one of your top priorities will be to take the business from strength to strength, rather than hitting a plateau.

In other words, you’ll want to maximise your revenues and increase your customer acquisition in a way that is manageable for you. To do this in a sustainable way over the long term, you’ll need to know the principles of scaling a business.

But what exactly is scaling in business? What’s the difference between growing and scaling a business? And what are the core strategies and considerations to keep in mind? Read on for a full breakdown of what you need to know.

What is scaling in business?

It’s easy to see why the terms “scaling” and “growing” are often used interchangeably in relation to business, because they both refer to processes that will increase the revenues of an enterprise. But despite some overlap, scaling and growing are different strategies, with different implications for a business.

Growing a business

When you implement business growth strategies such as paying for search engine adverts or broadening your product portfolio by devising new things to make and sell, your focus is purely on boosting demand for your products and services, even if that means you’ll need to spend more on resources to meet that demand.

Say you’re exploring creative ways to make money and start selling handcrafted jewellery and homeware products online. This may be one of your side hustle ideas at first, but you may then embark on a social media blitz, showcasing your items on Instagram and creating some TikTok guides to home crafting.

As a result, your orders start to accelerate, which means you’ll need to invest in more raw materials like metals and gemstones, rent a dedicated workshop, or even take on a worker to assist you. In other words, you’ll be investing more money to accommodate this expansion. This is business growth.

Scaling a business

Scaling a business is a form of growth where your revenues increase at a faster pace than your expenses. Or, to put it another way, your running costs won’t rise in proportion with customer demand. Importantly, your business will also continue to perform comfortably even as your workload increases.

Let’s imagine you’ve been pondering how to make money from home and decide to monetise your computer programming skills by launching your own web development business. At first, you only have a couple of clients and are able to handle the entire workload yourself. Then, after implementing the principles of email marketing for small business success, you gain more clients.

At this point, you might hire other coders, either as employees or on a freelance basis, to help you handle the new work. The size and revenues of your enterprise will increase, but so will your expenses and resources – in other words, you’ll have undergone business growth.

However, an alternative path might be to utilise AI coding software such as Amazon CodeWhisperer or GitHub Copilot. These are new generation tools which can boost your efficiency by churning out code automatically, reducing the time you spend manually coding, freeing you up to take on more work without extra staff.

Even if you do eventually end up investing in expanding your team, the use of the technology can reduce how many people you need to hire or how much you spend on office premises. Your overheads will be kept lower without compromising your business capacity, meaning you’re successfully scaling your business.

The benefits of scaling a business

As an entrepreneur, the full extent of your success can depend on a number of factors, such as knowing how to do market research for small business, implementing the best pricing strategies and customer retention tactics. Here’s why scaling up should also be included on the list.

It increases profits

Growing your business increases your revenues without necessarily increasing your profits, since your overheads will rise in line with increased sales. By contrast, scaling a business means your revenues will outpace your costs, resulting in bigger profit margins. This is arguably the primary reason why scaling is so fundamental to long term success.

It encourages efficiency

Whereas growth can be achieved by simply investing more and more money and time into your business, scaling will require efficiency in order to work. 

In order to fulfil rising demand without incurring extra costs, your operations will need to be as streamlined as possible, with clear systems in place for dealing with orders, delegating tasks, and managing small business finances.

The very act of scaling up can therefore encourage better operating practices and ease some of the pressures and stresses of running your own business.

It can give you space to innovate

Increased efficiency and productivity can mean that, rather than having to focus all your time and attention on business operations, you (and your staff) will have more time for brainstorming ideas and exploring new business opportunities.

This can lead to a diversification of the services and products you provide, allowing your business to prosper while spurring the professional growth of your team.

It can boost your brand

Learning how to advertise your business can absolutely get your brand on people’s radars, but it’s important to remember that scaling your business can also do wonders for your visibility. The more you sell, the more likely it will be that you’ll enjoy word-of-mouth success and come to the attention of potential customers and clients.

3 signs that you’re ready to scale

Even in the earliest phase of working for yourself – when you’re planning how to start a business, weighing up business name ideas and what your business website or online store will look like – it’s wise to consider how you’ll potentially scale your enterprise, further down the line.

But how do you know when the time is right to begin the scaling process? Here are some green flags for taking the next steps in your business journey.

1. There is clear demand

Scaling a business only makes sense if there is something to scale. In other words, you have an initial level of success which you want to increase.

Whether you’re pursuing one of your ideas for second income generation online, or boldly opening your own retail premises, it’s important to bear in mind the old adage that you mustn’t run before you can walk. Once you’re experiencing clear, sustained demand for your products and services, you can consider shifting gear and starting to scale up.

2. You have positive cash flow

Cash flow refers to the lifeblood of your enterprise – namely, the money entering and leaving your business account in a given period of time. Having positive cash flow means that you’ve earnt more from your business operations than you’ve spent on things like equipment, rent, travel, and staff wages.

By definition, scaling requires less investment than growing a business, but there will still be costs involved. For example, purchasing new tech to streamline operations, or hiring more serving staff when scaling up a food and drink business.

Having a positive cash flow means you can feel secure in the knowledge you have the cash reserves to cover new purchases, loan repayments and other costs while scaling.

3. You’re turning down opportunities

Having to turn down business because you’re too busy with your existing workload may sound like a luxury problem to have. But it’s also a big flashing sign that it might be time to start scaling up.

The issue can manifest in different ways, depending on the business. Entrepreneurs pursuing online business ideas like social media marketing services or web design may find themselves literally turning down potential clients who’ve come their way due to word-of-mouth praise.

Meanwhile, café owners may be so busy dealing with queues of hungry customers that they lack the time and energy to, say, expand their menus or branch out into food delivery.  

In these kinds of scenarios, implementing some basic scaling strategies can allow entrepreneurs to take on more business and increase their revenues without compromising the quality of their current output.

How to scale a business

As we’ve seen, there are some excellent reasons to scale a business when the time is right – but the majority of entrepreneurs never get around to doing it. According to research by international management consultancy firm McKinsey & Associates, only around a fifth of new businesses successfully scale.

There are a number of ways to maximise your chances of being part of that select cohort of businesses that make it to the next level. Let’s consider the framework for scaling a business.

Set out your business plan and goals 

Every entrepreneur should know how to write a business plan. It’s useful to write one, even if you’re happy to keep your enterprise as a casual, secondary source of income and have no plans to expand its reach. If you do intend to scale, then a business plan becomes especially important.

It’s fairly simple to put together, and will serve as a foundation for your future expansion plans. So, take the time to sit down and write out a plan which includes the following pieces of information:

• A summary of what your business is about, detailing what products and services you’re providing

• The legal structure you’ll be operating under, or are currently operating under – it’s important to be clear on what is an entity in business so you can make an informed decision on whether to work as a sole trader, a partnership, or want to take the step of setting up a limited company.

• How your business is organised and what the specific responsibilities of each staff member are (unless of course you’re working completely on your own).

• A financial analysis of your business as it stands, including details of savings, business loans and other sources of income.

• A summary of the most relevant rivals in your business sector – knowing the key principles of how to do a competitor analysis, such as assessing their websites and social media usage, will yield valuable information.

• Your marketing plans, noting down the various routes to getting your brand known, such as utilising social media and online marketplace sites.

• Your business goals for the months and years to come.

That last point is particularly significant, as your business goals will serve as your roadmap for scaling up.

In other words, these are the goals you’ll be working towards as you expand the scope of your business. Your goals should ideally be SMART – all capped not just for emphasis, but because it’s a well-known business acronym which stands for Specific, Measurable, Achievable, Relevant, and Time-Bound.

Specific

Your goals when scaling shouldn’t be vague or abstract. Rather than simply aiming to “make the business more successful”, “increase profits” or “bring in more customers”, you should set specific objectives.

Examples here include expanding your food business to provide home deliveries, broadening your portfolio of online services for business clients, or targeting an entirely new customer demographic (say, a different age group or geographical territory).

Measurable

As well as being specific, your goals should ideally be quantifiable so you can have tangible proof that your scaling efforts are paying off.

You’ll need to record your benchmark figures – that is to say, the status quo statistics of your business – before scaling commences. For example, if you’ve created a podcast business, benchmarks can include the number of downloads per episode, the number of subscribers, the number of mentions on social media platforms, and number of sponsor ad clicks. 

Or, if you’re interested in passive income ideas and have set up a dropshipping site, benchmarks can include number of site visitors, completed purchases and positive online reviews.

You can then see how these metrics evolve after commencing scaling strategies like embarking on social media marketing campaigns and implementing new technology.

Achievable

It’s good to think big, but your goals should be feasible. Setting overly grand and unrealistic scaling goals can backfire as you’re likely to get demoralised if they don’t come to pass.

For example, hobbies that make money in parallel to your primary career are unlikely to see a doubling of profits in a short time frame, since there’s only so much time you’ll be able to devote to side hustles. However, aiming to increase sales by, say, 10-20% could be considered an achievable goal.

Relevant

When formulating your goals, you should always ask yourself if they will be of real, tangible use to your business. Will they make your brand better known and/or bring in more revenue, or help your internal processes run more smoothly? If not, the goals may not be relevant.

For example, if you’ve set up a small graphic design agency, then creating fun and frivolous Instagram or TikTok videos showing off your workplace culture probably won’t help bring in new clients. But if you’re running a hip cocktail bar or café, then such videos can certainly help attract customers.

Time-Bound

You don’t necessarily have to set fixed deadlines for your goals. After all, this is your business, you’re your own boss, and you can shift your priorities if you need to. That said, it can certainly be beneficial to have a timeframe in mind, as this can be a motivating factor encouraging you to really focus your efforts on achieving success.

Create a cash flow statement

As we touched on earlier, having a firm grasp of your cash flow is important because you’ll know if you’re in a good position to scale, financially-speaking. This is where drawing up a cash flow statement can be very useful, and for a small business this isn’t as complicated as it sounds.

All you have to do is open your business account and check how much money entered and left during a recent time period – say, the past quarter. These transactions can be segregated into three categories to provide a 360-degree overview of your accounts:

• Operating activities, which are transactions related to your core business operations, such as the money earnt from selling products and services, and money spent on suppliers and staff.

• Investing activities, which are transactions related to the buying and selling of long-term assets like equipment and rent.

• Financing activities, which are transactions related to your business finances such as selling equity to investors, or paying off loans.

Once you’ve collected this data, you simply subtract the total outgoings from total incomings to see if your total cash flow is positive or negative.

If it’s negative, you may want to postpone your scaling plans to a future time when you have cash assets to play with. If it’s positive, you can set aside some of this money for financing your scaling plans.

Invest in the right technology 

Implementing the most relevant technology is one of the best routes to scaling a business. Cost-effective software and hardware can allow you to provide a more efficient service for customers, optimise financial transactions, and automate processes that would normally need to be done manually. As a result, you’ll be able to ramp up your productivity without a concurrent rise in spending.

Here are just some of the processes which the right tech can render much more efficient.

Taking payments

These days, with cash being used less and less, any business involving face-to-face interactions with the public will absolutely need to offer a range of payment options – especially if it’s seeking to scale up operations and attract more customers.

Having a portable card machine for taking debit and credit card payments is no longer the preserve of large companies. You can now get efficient, easy-to-use card readers with no binding contracts or monthly costs.

On top of this, Tap to Pay on iPhone or Tap to Pay on Android by SumUp will let you take card payments as well as digital wallet payments, all through your Apple or Android phone. Such payment solutions will allow you to provide the kind of convenience that can inspire customer loyalty as your business gets bigger.

Processing payments

Knowing that your business payments are being processed promptly and cost-effectively will be a load off your mind when you’re taking your enterprise to the next level. It can (literally) pay to think outside the box and investigate what options are available.

For example, a SumUp One subscription plan will provide significant savings on payment transaction fees, and guarantee that the payments will be in your account by 7am the following day – even on weekends and public holidays. This can make all the difference to maintaining positive cash flow while scaling a business.

Automating invoicing

Sorting out invoices is nobody’s favourite part of being an entrepreneur, but it’s one of the first things you need to get to grips with when looking into how to start an online business. After all, being paid on time by your clients can be vital to your ongoing success.

Fortunately, invoices can be automated with the right software. This means no more wading through numbers on Excel spreadsheets and no more worrying that you’ve got some calculations wrong.

Smart invoicing software will even customise invoices with your logo and business details, assign invoice numbers, and provide status updates on when they’ve been paid. As well as helping ensure reliable cash flow, automating invoices can reduce your mental load, freeing you up to focus your energies on your core business operations.

Automate orders

If you’re running a hospitality business like a café, bar or restaurant, one of the barriers to scaling can be the expense of taking on more staff as your venue gets busier. 

While hiring employees can be an unavoidable part of the scaling process (as we’ll discuss more in a moment), you’ll obviously want to keep outlay as low as possible. A prime example of tech that can help do this is the self-service kiosk. 

Touchscreen, self-service interfaces are synonymous with the world’s biggest restaurant chains, but these days they’re readily available to small business owners too. As well as allowing you and your staff to get on with other tasks, a self-service kiosk can cut queues by up to 50%, further enhancing the efficiency of your business.

Strategically expand your workforce

Taking on new colleagues, either as full-time employees or on a freelancer basis, can be nerve-rackingly expensive, but it is often part and parcel of the scaling process. 

After all, even with the best technology in the world, there are limits to how much one entrepreneur can accomplish on their own, and you may need help with the extra work that comes during a scale up.

The question of how to hire employees who best fit your business always requires careful thought, but you’ll need to be particularly strategic if you’re recruiting in the context of scaling.

While businesses embarking on a straightforward growth strategy may be happy to spend on new staff even if it significantly narrows their profit margins, scaling a business requires a more cautious and selective approach. Each hire must provide the maximum return on your investment, so that your revenues continue to outpace your expenses.

You should carefully assess any pain points your business currently has. Are there particular areas which are lagging because you don’t personally have the time or expertise to tend to them?

For example, say you were motivated to look into how to come up with a business idea because of your expertise as a professional chef, and you’ve since launched your own private catering business.

With word-of-mouth only leading to so much business, you recognise that online marketing will be essential to increasing your revenues. However, your strengths lie in the kitchen. You know how to make a perfect pistachio souffle and glossy beurre blanc, but not so much how to use social media for small business.

So, while it might certainly be handy to hire a sous chef to assist you on catering jobs, the wiser decision might be to hire a marketing professional instead. With any luck, their efforts will allow you to scale your business to the point where you can then incrementally expand your workforce even more by taking on fellow chefs.

Pursue organic marketing strategies

Organic marketing is all about reaching out to potential customers and clients without paying for promoted posts and adverts. It’s a great marketing strategy for small business scaling, since your bottom line won’t be affected.

One of the great advantages of being an entrepreneur in the digital age is that there’s an unprecedented wealth of organic marketing channels at your disposal. Many of these boast huge pools of users you can reach out to. For example, Facebook alone has more than three billion monthly active users.

Virtually all types of enterprises, from low cost business ideas run from spare bedrooms to big and bustling restaurants, can leverage social media platforms to boost their profit margins, although patience is key to the unpaid organic approach. It can take months or longer to build followers and enhance your brand visibility online, but it’s well worth putting the effort in.

The rules of thumb are to:

• Make the time to post diligently – it doesn’t have to be every day, but you don’t allow weeks to elapse between posts.

• Adopt the appropriate tone – a cheeky, irreverent posting style can suit if you’re launching a funky clothing brand, but a more neutral and grounded approach may be needed for B2B businesses.

• Utilise the right platforms – creative, customer-facing businesses may want to showcase their wares on the likes of Instagram and TikTok, but if you’re providing online services for other businesses, you’re better off sticking to LinkedIn and X.

• Keep up with hashtags and social trends – you’ll need to be aware of what competitors are posting about so you can be part of any online discourses relevant to your business.

Explore crowdfunding options

As we’ve been discussing, when planning how to scale a business, your emphasis needs to be on getting the most bang for your buck with every move you make.

Whether that’s purchasing new technology to eliminate workplace bottlenecks and optimise processes, or hiring the right person to deal with a weakness in your business, each investment you make has to earn its keep in the immediate term and not deal a heavy blow to your profit margin. You should take a similarly thoughtful, frugal approach to obtaining extra funding. 

There’s no denying that many entrepreneurs may find that bootstrapping – that is to say, relying on their own savings or business profits – may not be enough to finance expansion. But the most traditional option of taking out a business loan might not be the most cost-effective solution.

Instead, you may want to consider small business crowdfunding, which allows ordinary members of the public to invest amounts both large and small into a vast range of businesses.

There’s a number of different popular platforms available, with the main categories including:

• Equity crowdfunding platforms like Seedrs, where people can invest in your business in return for shares

• Reward crowdfunding platforms like Kickstarter, where people can invest in your business in return for specific rewards – you might send them some of the products your business is making, for example.

Since reward crowdfunding won’t cut into your business earnings, it can be a more advantageous funding source when scaling. However, equity crowdfunding tends to attract bigger amounts of investment. As the business founder, it’ll be down to you to calculate which route is the best match for your business aims and cash flow.

As with other aspects of scaling a business, it will require serious thought – but the rewards can be well worth it.