Establishing your very own business comes with its unique set of challenges. However, those already running their dream small businesses will know that scaling it up is another ballgame entirely. Growing small enterprises into larger ones involves a whole host of decisions that aren’t always easy to make, but perhaps the most crucial one is deciding when to start.
While entrepreneurs naturally dream to make it big, scaling up at the wrong time can prove to be disastrous for any organization. As with all things, timing is key. BFS Capital recommends asking questions regarding opportunities in potential product lines or untapped industry segments. It is important to check how much capital your business has to work with, and what operational requirements will be needed to drive growth.
To help you answer these questions and decide whether it’s time to scale up to keep up with demand, here are some signs you and your management team need to watch out for.
You’re maxing out your capacity
One of the surest signs that it’s time to scale up is when your customers are coming to you in droves. During the first few years of running your business, you might find it unthinkable to politely decline business with a potential customer or client. But if you find yourself turning them down because you’ve already reached the limits of your business’ operational capacity, then it’s time to expand.
However, make sure that this level of demand is consistent, and not just a passing bump. Study your analytics and talk to members of your frontline to have a better picture of what’s happening.
By gathering more information, you’ll have a better feel of whether unmatched demand is simply a problem in efficiency and processes, or if there is really a need to scale up based on the growing popularity of your product or service.
Your industry and projected customer growth are set to grow.
Aside from assessing your internal strengths and weaknesses, it is also important to look at external factors that would affect the success of your potential expansion. This is especially true if you’re looking into entering a new product line or a new market, according to Entrepreneur Magazine
The second sign that it’s a good idea to scale up your business is that the industry you belong to is predicted to grow, along with your target customer base.
Before you decide to expand, evaluate current market trends as well as forecasts, and compare your existing customer base with projected ones. Forbes suggests assessing whether you can still provide the same level of service and quality of products once you expand, and whether the market is ready for your expansion.
You are the industry leader… or you’re lagging behind.
Even if your small business is thriving as the leader of the pack, Inc Magazine warns that it is not the time to relax. It’s a good idea to inject urgency and healthy paranoia into your team to be able to maintain your leadership status.
On the other hand, the opposite situation might also be a signal for expansion. If you’re competitors are going faster than you are, then you might be in danger of being gobbled up if you do not expand. Ask yourself what your competitors are doing differently and why.
For instance, your competitors’ e-commerce platform might be growing more aggressively than yours, meaning it’s time to beat them out and reach your customers through a platform upgrade or replacement.
In fact, it may even be more profitable in the long run. As we discussed in a previous post here, it’s projected that 17% of all retail sales in the U.S. will be done online by 2022
You have the means.
Last but not least, an important signal that it’s time to scale up is that you are ready. This can mean readiness in terms of stable financing and cash flows, having the right people on board, enough time to devote, and a clear vision in terms of the direction of your business.
For most businesses, the decision regarding potential scale-ups is not a question of if, but of when. If you don’t feel confident about scaling up your business now, then it might be because it isn’t time yet. At the end of the day, meticulous planning and careful thought would get you through.