The processes you must get right when scaling your business

Are you going to scale your business?

Not every business owner tries to scale. Many small businesses sell their time and materials and must work longer hours to earn more revenue. That’s not scale.

Consultants, lawyers and accountants charge by the hour. They grow by adding more bodies to handle extra clients. That’s not scale.

So what do I mean by scale?

There are 3 elements:

• Rising sales

You must find more clients, or sell more products to existing ones to scale a business. The first requires marketing and the second more value to be added. They are completely different, so be cautious answering ‘both’ to the question of which do you want.

• Higher profitability

Scale means more profit per unit of sale. This is why working more hours or hiring more staff is not scaling. Both may increase profits but not profitability.

It’s important that all the additional costs of client acquisition and retention are factored into the calculation of profitability. There are important metrics to measure this and you must know them, especially if you have outside investors.

A rule-of-thumb is that selling more to existing clients is five times cheaper than finding new ones. To scale this way the additional service must be more valuable to both you and the client. A few additional items in an e-commerce basket is not the same as scaling.

• Increasing client satisfaction

Scaling a business means building a moat around your clients. Provided your additional services increase the value of the relationship, your clients will spend more with you through time and be less likely to leave.

The easiest way to ensure this is to capture clients with an initial low-priced offer. Once you have their confidence, increase the value and the price of what’s available. Most services businesses scale this way.

Scaling products is different. The marginal cost of selling more units to existing clients falls because there is an established distribution channel. Therefore, add-ons to products need not cost as much as the original and will still generate scale.

Scaling requires processes

I repeat a lot that a sales process must be designed by entrepreneurs before being taught to sales teams. This is because the biggest obstacles to scaling are the beliefs that good product sells itself and that you hire sales teams to find product market fit.

Leaders do not ask people to do things they would not do. They don’t set tasks without being confident that outcomes can be delivered. They do not delegate without showing and telling people what to do.

The first steps to scaling are to decide how to scale and then design and test the sales process to do it. Even if you are CEO of a large organisation, you can still pick up the phone to an existing client and ask them what they think of a new offer.

Thereafter you need the sales process running smoothly, whether that is through a new marketing campaign or contacting existing clients. This is important and should not be dumped on already busy executives.

Don’t be fooled by the eager volunteer who puts their hand up to run anything new. Most likely they are worried about missing out and are not the best person for this role.

If you need to hire people then the total cost of this must be factored into the budget for the new product. You also need a process to attract the right candidates.

Thereafter you need a process to onboard and train people in what they must do to scale. If you don’t have time to teach people then don’t hire them.

The final step to scale is the hardest for entrepreneurs to establish. They must trust the processes to deliver and leave people to execute. Don’t meddle and micro-manage.

Questions to Ask and Answer

1. Am I scaling my business with new clients or additional products and services?

2. Have I fully accounted for the all the costs of expansion in my budget?

3. Have I tested the process that will scale my business before hiring?

I’m Simon Maughan and I write The Profit Elevator as a guide for B2B firms seeking faster growth.

My six step system to scale any business is out now. If you prefer to work with me in person, please reply to this email.

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