Scaling a Business: How & When to Do It

Scaling a business can help increase revenue in the long run, but it takes strategic planning and extra resources to make it successful. Here’s a closer look at how to scale a business, when to ask for help and which types of industries are best suited for growth.

What is scaling a business?

Scaling a business is the process of expanding your company while maintaining a steady cash flow. Developing a scalable business can help you increase customer relationships, pursue new markets, design new products and services, expand the workforce and boost sales.

Some businesses are better suited for scaling, such as digital courses, event planning, renewable energy solutions and fashion services. In contrast, scaling a restaurant might be more challenging, since restaurants typically operate with lower profit margins. That said, success stories like McDonald’s show that with enough planning, grit and adaptability, scaling any type of business is possible.

5 signs your business is ready to scale

Here are five indicators that could indicate your business is ready to grow to the next level.

1. High demand. If you’re turning away clients because you can’t keep up, hiring more staff or opening a new location could be a great solution.
2. Increased customer retention rates. Having a loyal client base means your business model so far has been successful. If you expand, your current customers might utilize your services more, or at least recommend you to their friends.
3. Positive cash flow. Being in a good financial state could offer the safety net needed to take the risk of scaling up your business.
4. Market trends. Analyzing market trends could indicate if your industry has potential for growth in your specific area.
5. Company demands. Perhaps you’re running out of space in your current building, or you notice employees showing signs of burnout. Scaling your business and hiring extra staff could help alleviate some of these stressors while potentially boosting your overall profits.

How to scale a small business

After starting a business and seeing signs of growth, here are some steps to take to scale up.

1. Develop your strategy for growth

Develop a simple and clear strategy that employees, customers and vendors can understand and embrace. Think of this as an in-depth business plan that everyone can follow during each step of the scaling process.

Creating a good scaling plan is essential for ensuring you have the adequate funding and systems in place to succeed.

To build a solid strategy plan:

• Define your brand’s promise. You’ll have a better chance of connecting with your current customers and attracting a wider audience if you stay focused on your core products, brand identity and target audience.
• Review your revenue streams. Look for areas that need improvement, and consider cutting or revising products or ideas that don’t generate profits. If your business budget permits, consider adding new revenue streams.
• Research your competition. Look at successful companies within your area that offer similar products and services. What’s different about their business models? Is it feasible for you to shift and adapt in ways to help you stand out from the competition?
• Prioritize areas of growth. For example, you may want to hire employees before launching a new store so that everyone is trained and ready to go.
• Set goals. Focus on specific metrics to measure business growth, such as income statements.
• Improve staff meetings. Schedule regular meetings like daily huddles or monthly all-hands meetings to keep your team up to date on the scaling process. Don’t forget to cheer everyone on as each milestone is reached.

2. Make a finance plan

Scaling a business may require extra funds, especially if you need to hire more employees, implement new technology or build a new storefront. If your company has enough cash flow, you can use your own resources to bootstrap your business. However, bootstrapping can often slow down your progress, depending on how much profit you can afford to set aside.

Another option is to apply for small business grants through local and federal government agencies and corporations. You can search for grants based on demographics, location, industry and more. However, these grants tend to be competitive and may not deliver the full amount you need.

Alternatively, you can consider small business financing to fill any remaining financial gaps. Here are some options to consider:

• Short-term business loans: Ideal for short-term projects, with repayment terms typically ranging from three to 24 months.
• Business lines of credit: Great for accessing revolving funds on an as-need basis, with interest typically only charged on withdrawn amounts.
• Equipment financing: Get help acquiring or upgrading essential equipment and machinery as you scale your business.
• SBA loans: With a partial guarantee from the government, SBA loans are ideal for businesses that can’t qualify for traditional financing.
• Microloans: Loan amounts generally cap at $50,000, with options for startups, minority business owners and women-owned businesses.
• Invoice factoring: Use your unpaid invoices to access funds for your business, although be prepared to pay higher rates than other types of business financing.

3. Put together the right team

If you don’t already have a team in place, you’ll need to decide if W2 employees or 1099 workers will work best for your business.

Permanent employees are often more committed and dependable, which can benefit your company in the long run — but the hiring process could slow down your timeline. If you need extra assistance for a short period, recruiting temporary contract workers could be the fastest way to tackle your most urgent tasks. Just make sure you understand the IRS rules regarding worker classification.

Here are some questions to ask as you form your scaling team:

• What’s the ideal number of customer service staff for your business size and industry?
• Do you have enough team members to keep up with an increase in manufacturing, inventory and delivery of services and goods?
• Can you offer a decent package for full-time employees, including fringe benefits like paid vacation days and 401(k) matching?
• Do you need more managers to oversee the extra workload? Remember: it’s essential to avoid worker burnout (including taking on too much yourself).

4. Evaluate your technology

Scaling a business can often create more administrative work, especially during the early stages. Even if you already have software and apps in place, now’s a good time to evaluate the efficiency of these programs. Automating systems can help alleviate manual tasks, allowing your team to focus on more essential tasks.
Here are some ways to improve your business’s technological systems:

• Upgrade hardware: Make sure your team has up-to-date computers, functional printers, and everything they need to accomplish their tasks. If not, you can use equipment financing to help fund new equipment for your team.
• Use a payroll service: Consider using a payroll service instead of a payroll team, redirecting these workers to other hands-on tasks.
• Streamline bookkeeping and accounting: As your business grows, so will your financial transactions. Utilizing a bookkeeping service and account software can help keep everything organized while reducing the need for additional employees.
• Incorporate project management systems: Even if you have project managers on your team, using a system-wide program like Asana or Trello can ensure all departments are on the same page.
• Use inventory management software: If you need help tracking and fulfilling orders, an inventory management software like inFlow or Zoho can automate these tasks, giving you more time to focus on scaling your business.

5. Consider outside help

As an entrepreneur, it can be tempting to take a DIY approach to scaling a business. And for some tasks, it makes sense for you to take the lead — such as creating the overall growth plan, fine-tuning the budget and applying for financing.
However, if you want your business to continue to grow, there may come a point when you need to outsource and delegate tasks.
Here are some examples of when you might want to hire outside help:

• You need an expert or specialist. Even if you have basic social media marketing skills, delegating this task to a seasoned professional will likely generate more leads while saving you the headache of figuring out your next ad.
• Your team is overloaded. Don’t wait until everyone reaches their limit — being proactive and hiring extra help can ensure your team stays happy and healthy while boosting overall productivity.
• A third-party service could save you time and money. Instead of spending time and resources on training internal staff for specific skills, it might be more efficient to hire a reputable third-party company. For example, you could use an outside HR company to vet and hire staff instead of creating your own HR department.
• You’re not sure what to do. If you get stuck when putting together scaling plans, or your plans don’t go how you expect, consider hiring an outside consultant with experience scaling small businesses.

6. Adjust the plan as you scale

While having a detailed growth strategy plan can help keep everyone on track, it’s normal for the trajectory to change throughout the scaling process. Perhaps you need to hire more staff than anticipated or the lease for a new location unexpectedly fell through. In reality, there’s no predicting how a scaling plan will play out.

The best you can do is maintain a flexible and adaptable attitude. Continue to review your plan on a regular basis, making adjustments as needed. If your cash flow takes a sudden dip, an emergency business loan could help keep you afloat.

You can also get additional support from a Small Business Development Center (SBDC), such as assistance with business growth planning and management.

Next steps after scaling a business

After scaling your business, there will be more moving parts within the company that you’ll need to manage. You may decide to create a new business owner title for yourself or move into a new role. This could also be a good time to implement training tools to bring all long-term and new staff members up to speed.

Be sure to keep an eye on accounting and financial reporting within the larger organization. With more people involved in the business, there’s a higher risk of things going wrong. Consult with a tax professional to ensure you follow all requirements for your type of business structure. You can also get a head start by following our business tax preparation guide.

After scaling your business, it’s important to keep your expectations realistic. Some business owners are overly optimistic based on prior success, but it can take time to find your footing as a larger operation. Overall, it’s wise to move slowly instead of trying to expand too quickly.