This is a common statement I read from emails, DM’s and form submissions we receive at Tale Alimi Global.
Statistics show that 70% of businesses find it hard to scale their business; this is because scaling is not for amateurs.
Most people who say they want to scale their business, are really more concerned with growing their business.
Are they not the same? Not really.
Growing your business is what I call Arithmetic growth. For example: if you made five million in 2016 and seven million in 2017, then we can say your business revenues have grown.
Scaling up your business is exponential growth; so if you made five million in 2016 and fifty million in 2017, then that is scale! That was a big jump or like some people say, a quantum leap between the two years.
The primary focus of a business should be to maintain steady growth and if you are in a mature industry, maintaining steady growth is a feat in itself and will ensure that your business remains a going concern.
So why should businesses scale?
Economies of scale
Do you remember this term from your secondary school economics class? This is when a business produces higher volumes at lower cost per unit.
During a strategy session with one of our clients who is into paint manufacturing we came to a conclusion that he would be able to reduce cost per unit by 25% percent if he could increase his monthly production from 1,000 gallons of paint to 10,000 gallons of paint.
This is the competitive advantage large companies have over small companies and why they can get similar raw materials at lower prices because they can buy larger volumes.
High growth industry
If you are in a high growth industry like technology, it makes sense to scale your business to meet up with industry demands.
A typical consumer-focused technology company can grow from 10,000 users to 100,000 users in three months because of the ease of adoption of their services.
Some industries like telecommunications were forced to scale up fast in their early days because of the cost of buying additional infrastructure to support new users.
Bigger attracts bigger
I coined that statement as a way to explain that when you want to scale a business, especially when it has the capacity to scale, you are most likely going to attract bigger funds, bigger infrastructure, bigger customer volume and bigger staff strength.
With the right mix of all these factors, you actually reduce the risk of failing more than if you were growing your business on a normal rate.
As attractive as scaling a business is, it comes with its fair share of problems if it is not managed well. Some of which are: hiring wrongly, improper business structures to support scale, increased and unmanageable overheads and even managing company culture in a fast growing prganization.
To scale or not to scale?
This decision is something you have to think about critically and examine your business and industry to see it is scale ready.
Take our ‘is your business ready to scale’ quiz HERE to find out.