Small businesses are a major part of our national economy and becoming a publicly traded company isn't easy. Only 1% of businesses achieve this IPO status, but there are many hopeful companies out there working towards it. Startups have to be competitive, opportunistic, and not afraid to take risks in order to succeed.
Many small business owners aren't aware they're entrepreneurs, but everyone who builds a business from the ground up is considered an entrepreneur. It's not an easy path—the 2016 report from the Bureau of Labor Statistics found that 50% of new small businesses close their doors within 4 years. More intimidating still: Forbes discovered that only 2 or 3 of 10 small businesses will survive for 15 years or more. It's important for businesses to innovate, but during the scaling process, it pays to be cautious.
The good news is that there are several signs businesses can watch for before starting to scale up. Timing is everything, and scaling up at the right time will help a company grow quickly, acquiring new customers, revenue streams and recognition.
When building any business, gaining clients or customers is one of the most intimidating and important challenges entrepreneurs face. It's only natural to instinctively take on any customer that comes along, and in the beginning, this is a good strategy—building credibility and revenue for ongoing growth.
However, when your company grows a bit more, you'll start to notice you don't have the ability to take on new business all the time. Once you reach capacity for the work you and your staff can handle, it will be time to say no to some projects or customers (such as lack of time, resources, or staff). When this happens, you'll know it's time to start scaling up and hire new employees to increase productivity.
Realizing it's time to scale up doesn't mean your business is rejecting opportunity due to its success, nor is it due to the limitations of your business's size. You should consider the bigger picture instead: is your business profitable, stable, and ready for scaling? Interest from external parties in purchasing your company can be a good sign that it's time to start your preparations for scaling up, which includes reinforcing your infrastructure, reevaluate your goals and make plans for the future.
Using data to forecast future events, timeframes, expenses and revenue isn't typically an option for new businesses, which can make it difficult to set realistic goals. Because of this, benchmarking or “mirroring goals" is a common strategy—using borrowed statistics to make future predictions, providing a baseline for your company's goals.
If your company is starting to attain or surpass your goals, you should take some time to reevaluate those goals and consider whether scaling up could be part of the solution. Challenge your business—don't just settle for meeting expectations, try to get the most out of your business that you can. Setting goals that are challenging but realistic is key to your business's growth and scaling efforts.
Before you start scaling up, you will need to consider whether you're bringing in enough revenue to consider expansion; profitability alone isn't enough. You'll need to actually crunch the numbers and make a judgment about whether your business is bringing in enough to predict further revenue and justify scaling while remaining stable.
Understanding your business model and performance is your first step, and being flexible and adaptable are key to setting your predictions and evaluating them. Set several predictions—for a month, several months, a year, 5 years, and beyond to calculate your company's potential. Of course, you're working toward success, but have contingency plans for when things go wrong.
A good sign? Having a narrow ratio between best and worst case scenarios shows prosperity, and indicate it might be time to scale up.
If you're still not sure if you have proof of concept, it's best to wait to scale up until you know your product or service can sell successfully. Once you have that proof of concept, make sure you have the infrastructure and patent rights in place which are needed for scaling.
Staffing is another concern, and in a small business, every employee is essential. Having the right people is key to scaling up, as they reflect its core values and make the machine work. Knowing when you have the right team for scaling up isn't difficult: they will have an interest in the future of the company and the proactive drive and skills to help it succeed.
Finally, review your concept. Do you feel it lives up to your standards for quality? Is it ready for more? Prove these standards to yourself and your team, and take a calculated risk—scale up and take your business to the next level. It's all up to you.
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