If you’ve ever wondered about how to scale your company profitably, this article is for you. We’ll cover the most important things to know about scaling a business. There are two perspectives: the entrepreneur and the investor or CEO. By following these simple guides you’ll be able to take your business from startup to global domination in no time!
What it means to scale your company profitably
Scaling your company profitably means that you’re achieving the goals and objectives of your company that maintains profitability. If you’re not profitable as you’re scaling, you’re going to run out of money. It means you won’t be able to sustain the business. These profits will most likely be chase after by investors or other businesses. Unless of course you find a way to generate them on your own.
Most tech and business startups start off with a few employees and it’s their first customer base. For the last 10 or so years, I’d estimate 94% of the businesses that ever made it to IPO actually had a customer base. It can be anywhere from 10–30 employees. However, that customer base is expensive to maintain them for.
Cost factor in scaling your company
This is where expenses comes into play. These costs can be categorized into two main bucket:
- fixed costs
- expenses related to customers
Specifically, fixed costs are costs that you’re committed to, fixed expenses are expenses you’re actively paying for, and variable expenses are money you’re spending that’s variable depending on the demands of your business.
Fixed costs and fixed expenses can be confusing to understand the different parts of.
Fixed costs are the costs you’re actually paying for; what your company calls “fixed costs” is typically not what your customers think of as “fixed.” These costs are your:
If you’re starting a business with no customers or customers in a product/market outside of your core, you’ll be collecting all fixed costs in this section. Your expenses (or “fixed costs,” if you can pay them) include:
These fixed costs all mean the same thing. Over time, these fixed costs totaled to around 70% of the company’s expenses, and even that percentage was growing. However, many of the costs types weren’t increased. Working in full-time staff was the standard when I started my own company, with most places offering 10–15 employees and no free cash flow except the CPAs fees.
How to scale your company in a way that suits you, as an entrepreneur and investor or CEO.
There are many ways to scale a company, there is no one way. However, the most important thing is to find a way that suits you as an entrepreneur and as an investor or CEO. Your company is your baby and if you don’t scale it in a way that suits you, then it will be too stressful and you won’t succeed.So here are some of the most important things that you need to know about scaling:
Let’s take a look at this step-by-step guide and then I’ll tell you about my personal experience that helped me scale his business to become one of the top ten global digital marketing agencies.
Unlimited resources allows you to work on multiple projects simultaneously. We all know that it’s extremely crucial to have many redundant resources for any business project. For example, if you have one team behind you and two teams behind you on any particular project, it will surely be overwhelming for your team and will likely fail. However, if you have unlimited resources, then yes, you’ll have more chances to succeed.
Access to resources
How do you access these unlimited resources? Well, by outsourcing some of your activities to external experts. It’s especially true when you scale your business. Production will be outsourced, marketing will be outsourced, operations and so on. There are many possibilities on how you can scale your company and make it global. Slow and steady is more efficient than a big bang startup.
It’s easy to find mistakes in the process of scaling a business. Most notably, let’s say that you find some new inspiring projects or metrics to use. You might even decide that those projects are indeed necessary to scale your business. That’s great, effective, and all good, however, you still have to take into account your limitations. For instance, if you want to scale your business through selling digital products or merchandising, you’re gonna run into certain limitations that you didn’t think of. One of them is location limitations, which we’ll talk about in the next section.
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The important things to know about scaling your business so that you don’t lose control of it
You could have the best product in the world, with an amazing marketing team and the best people working for you. But if you don’t know how to scale your business then you won’t have the best business in the world. So what is the first thing to scale a business eventually, in case you don’t know how to do it?
This is the question most people ask themselves when they think about scaling a company.
- Is it possible?
- Can it really be done?
Scaling your business is basically the process of obtaining additional resources in order to scale. The goal of every company is to grow and adapt to the changing market as society and society needs it to.
Now that we know what we should do to scale and establish an agency, let’s see what goes wrong:
Let me first tell you about my own experiences when I first started with advertising.
To begin with, in 2015 I was working as a customer support department manager at a PR agency. My job wasn’t that important but I still had to constantly respond to leads that came into the agency because they had a query about a company they worked with or an article that they wanted to write. My day started at 7 AM sharp and I didn’t leave my house until 9 PM. Since my days consisted of basically just answering phones and writing emails, I knew that scaling my business involves more than just adding employees and setting up a website.
I guess when you’re an employee earning minimum wage and you know that you’ll have your salary taken care of by the company but that you won’t be allowed to go on vacation or go on dates once you reach the level of executive. Then you have all the perks of an employee, such as not having to commute a lot, not having to worry about looking good at work for the clients since they were paying you minimum wage.
How to make the right decisions about scaling up your business
When you’re ready to take your business to the next level, the best way to do it is to hire people who are smarter than you to help you do your job.
Scaling a business is not easy and it involves making some tough decisions. It can be especially challenging if you’re just starting out and don’t have the capital to hire an in-house team or invest in the infrastructure needed to grow your business. But if you’re not afraid of attempting the unknown, you can make it work. In this article, we’ll discuss some of the most unique strategies that entrepreneurs like Elon Musk have employed to scale their companies financially by minimizing costs and pulling in outside capital. We’ll cover some of the indispensable skills you’ll need to know, some of the crucial metrics you should track consistently and what to do when faced with significant setbacks or unexpected events.
In this adventure, you’ll have to learn how to struggle until you find the right solution. If you’re not skilled in the art of scaling a company, you won’t succeed.
So, let’s get into it!
Things you should know about cost cutting
Cost-cutting is widely believed to be the best strategy for any business to scale. In fact, Steve Blank published an article in his legendary business newsletter, The Infinite new frontier, 10 years ago called “Why Companies Fail.” In his article, he talked about the 10 most common things that doomed businesses during their initial expansion and how those mistakes are easily avoidable if a business understands what the wrong decision is.
Cost-cutting after a raise is one of those mistakes that can bring a company down. Gratitude is a great way to stand out when raising money and ensure your investors are happy with the decision you’ve made. But most CEOs don’t follow a strategy of significant cost cutting post-merger.
Following these steps will guarantee that you don’t make those same mistakes and it will put you in a good position to comfortably raise another round of funding at a high valuation.
During the early days of scaling a company, most entrepreneurs jumped into things with little-to-no economic or financial experience on the company or faced no competition when they did it.
Scaling a business involves making some tough decisions, but it can be done successfully if you’re not afraid of attempting the unknown.
I have recently indulged myself into writing content for blogs and have been doing so for the past 12 months now. My interests are digital marketing, analysis, eCommerce and social media marketing. I’m a SEO consultant & content writer @ Koaas