There comes a time in every entrepreneur’s journey when they ask themselves – “Am I ready to scale my business?” And, because entrepreneurs tend to build businesses for growth, the answer will usually be a resounding “Yes!” But with growth comes challenges – both planned and unplanned. As you are thinking about how and when you scale, start by asking yourself these questions:
Do I have a plan to scale my business?
Whether your growth is organic or planned, knowing how you want to scale your business is important when you’re mapping out your growth. Business plans don’t need to be formal, but they should be written down. Knowing where you want to go (and how you think you want to get there) will help you navigate the growth journey. You’ll know when you have a win and when you feel frustrated or deflated, you’ll know exactly what you’re working towards.
Do I have the capital needed to scale my business?
Most growth plans require capital. Some businesses use the capital they’ve built up in their business to support their growth and others seek outside financing to help fuel their growth (you can find our four-part series on capital here: Part 1, Part 2, Part 3, & Part 4). Regardless of how you raise capital, think through how it will be used and then plan accordingly. At a minimum, you should plan on the following areas:
- Direct growth costs: These are the costs associated directly with your growth – new people, additional materials, real estate, etc. These costs must be incurred if you want to grow.
- Operational costs: While you’re in growth mode, you still need to continue your current operations. Make sure you set aside or plan for the operating costs associated with your growth. For most businesses, these costs increase faster than the return from new growth.
- Marketing & Sales Costs: How will you let the world know of your new product, new people, new location, etc.
How will my company culture evolve as I scale my business?
Your team can be your greatest asset. And as you grow, you need to consider how you’ll maintain the culture that got you to this point as your team expands and management layers get added. Done wrong, and your turnover rates will be high, employee satisfaction down and your growth can stall. Done right, and you’ll be amazed at how much you can accomplish.
How long will my growth plans take?
Growth takes time. Even unicorns have to slog through early stage bumps and bruises before they “make it”. It takes time to get products to market and for the market to respond. It takes time for you to onboard new team members and have them learn your culture, systems and products. It takes time to find new locations, build them out and have your customers frequent. Build this “time” into your plans – and be realistic. In fact, plan for your best case and worst case scenarios, and make sure you have contingency plans (and capital) in place for both.
Have I evaluated the risk associated with my plans to scale my business?
As entrepreneurs, we tend to look at the upside of every business decision and gloss over the risks involved. Entrepreneurs are known for taking risks and when these risks pay off, they can pay off big! Calculated risk is required for growth, but for most businesses, unbridled risk can be catastrophic. How do you balance?
- Talk through all major decisions with your key management / employees and your external advisory team (attorney, accountant, marketing professional and, if you have one, business coach).
- Make informed decisions and ask questions.
- Once you make a decision – sit on it for a couple days before you commit.
- Understand your own risk tolerance – its one thing to say you’re ready for growth and another to live through the growing pains that are associated with it.
Working through these questions will help you and your business prepare for growth. And if you need help along the way, let us know. We work exclusively with businesses who are looking to grow and have innovative and new ways to help you get the legal assistance you need in a way that works for your and your business.
This article is for informational purposes only and does not constitute legal advice nor does it create an attorney-client relationship. Always consult appropriate legal counsel for specific questions related to your business. Some states may consider this attorney advertising.
Linden Legal Strategies PLLC is a Richmond, Virginia-based law firm focusing on business law and development. To learn more about how Linden Legal Strategies can help you start, grow and protect your business, or to schedule an initial consultation, contact us here.