Here are some ways to know.
High tech startups are notorious for growing fast, and often trying to scale as soon as growth seems consistent. But if you’re wondering “when to scale my business,” it’s in your best interest to tread carefully with the timing. One of the best business growth tips is to find the right pace as you scale that allows you to maximize your growth potential while balancing speed and quality.
After all, a large percentage of high-growth startups fail due to premature scaling, and we don’t want you to be one of them. Here’s how to avoid the common business mistakes that contribute to scaling too soon, too fast.
- Consider your motivation.
We’d be lying if we said the thought of scaling isn’t exhilarating. Many business owners love the idea of expanding locations, adding on team members and growing their business presence because it feels like it’s synonymous with success. But, not having the right motivations for scaling can backfire.
Your reasons for scaling must be about serving your customers better, or it won’t serve your business in the long run. And it’s imperative to have a solid strategy in place, informed by demand, before you begin the process.
- Review the health of all aspects of your organization.
Your entire business must be running smoothly and prepared to scale, from the inside out. This means starting with a thorough review of where everything stands. First, take a look at your team members. Are they skilled, organized and in the right roles? Is there anyone you’re missing who would be crucial to executing your scaling strategy?
Second, scrutinize your business to determine how organized it is. Do you have systems and processes in place that will grow with you? Is your tech stack sufficient for where you’re aiming to go? The better you can systematize, organize and optimize before your scaling journey, the better the outcome.
- Ensure you have enough liquid capital and accurate sales projections.
Unfortunately, many startups are guilty of jumping the gun when they think their cash position is better than it really is. It’s all too easy to look through rose-colored glasses and assume that profitability is just around the corner, and that your sales next year will be on par with this years. But use caution here.
You should already have achieved consistent profitability before you attempt to scale, and should also have ample liquid capital for operations should a dry sales spell come your way. Many times, early adopters can cause an early, large influx of sales for a startup that is neither sustainable nor realistic on an ongoing basis. So be sure your sales projections are rooted in reality, and not unintentionally skewed by something like this.
- Put checks and balances in place.
Once you feel confident that it is the right time to scale, make sure you’ve set accountability measures in place so you can rein yourself back in if needed. As Bob Sutton, organizational behavior expert at Stanford’s School of Engineering, says: “The hallmark of successful scaling is knowing when to hit the brakes so you can scale faster later.”
This can mean setting revenue and time thresholds for your company that you can gauge regularly, to make sure you’re meeting your goals before taking the next step. It also means staying on top of your profit margins and your team’s workload to ensure you’re moving at the right pace and not burning out your cash position or your employees. Scaling in stages is often the best way to proceed because you can dial efforts up or down one at a time as the numbers and health of your company dictate.