Most entrepreneurs have the dream to one day grow their products and services to the point where they become bigger than themselves. Even sitting at the kitchen table, writing that first business plan, it would be a rare person who hadn’t sat back and dreamed of the bigger picture.
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Growth is the imperative of all good business – and it’s certainly what investors want to see. Indeed, even when you first start looking for investment finance, you may find that the question of scalability is one that often comes up. Demonstrating that your business idea has this potential is often the key to ‘selling in’ to investors.
Put simply in this context, scalability means that the likely possibility exists that your business can multiply its revenues without much additional cost. It might only be a theory at this stage, but it must be a workable one.
From that point on, you’ll be operating with the goal of getting into a position where you are ready to scale up – a proven demand for your product or service and a business model that would allow you to quickly replicate that in new markets. This applies whether you’re operating in an almost entirely digital field, such as software development or building an Amazon selling business, or whether you need a physical location.
The concept remains the same – a tried and tested idea that can be replicated in new territories to provide accelerated profitability. Where it doesn’t apply is where you have specialist, expert knowledge as a service that can’t be quickly replicated with easy training – so something like a consultancy business.In that case, you will have to look at other, more scalable routes, such as creating e-books or templates that share a small part of your knowledge and promote your other services. Most other companies will have some areas where scalability is possible.
If you can figure this out, then you have a business model that is ripe to make money with the right conditions – and this is exactly what investors are looking to see. So, how do you make sure that your start-up has scalability built into its core from the beginning?
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It all starts with the right idea, of course. If you have a business start-up idea that has no inherent scalability, it’s going to be more difficult to grow it or even to attract much investment. Any growth will be very gradual or achieved through routes which aren’t necessarily the core business. Investors like to see ideas which can make money if handled in the correct way.
This means products and services which can be grown in a fairly short timescale. In these cases, it’s best to start off with the opportunity and work from there, rather than developing an idea in your head and then finding there is little growth potential further down the line. Start with analysis and market research to investigate the growth opportunities there are likely to be in the market sector you’re interested in, through sources like Gartner and Mintel.
These will point you to the opportunities that are ripe for accelerated growth due to various consumer and macro environmental factors. Building your business idea around one these growth opportunities is extremely smart. Potential investors are likely to already be aware of some of these and your plan will chime with them as something scalable and ripe for investment.
Once you’ve identified what opportunity exists, the next step to quick growth is to make your business model as attractive as possible to potential investors. Remember, it’s all about the bottom line. A focus on customer benefit is great, but only to the extent of how it will help to drive sales, from the perspective of an investor.
Don’t make the mistake of confusing your business plan with a product plan geared towards customers. Going too far down the route of free services and promotions risks alienating angel investors and banks that want to see a clear route to profitability.
You need to aim for a business model with high margins of 50% or above, where low customer support is required, and that can be operated with the minimum of staff. This kind of very lean model is ripe for high growth potential as it’s easy to see how it can be scaled up to meet whatever demand is encountered.
So now you have the opportunity, and the business model. It’s time to take the first steps to prove that your research is correct, and that there really is a profitable appetite for what you’re supplying. No matter how good the potential opportunity, it’s still unproven in the real world. This is the step that truly makes your business scalable.
You need to show your product or service working, building a customer base, shifting what you have to sell at full price at a sustainable level. This process validates your business model, giving you a set of figures that act as evidence for the likely success of your growth plan – and they are the golden ticket to securing investment.
You may need sector-specific support in this – whether it’s working out a viable dropshipping profit margin or even finding a restaurant budgets made easy guide. This process may take a while. There’s always some trial and error involved in getting a new business off the ground.
And any company worth its salt will be keen to get customer feedback and implement changes based on that rapidly. The process of optimization should never have an end point. But once you have a track record and a basic model that is proven profitable, then you have the chance to seek investor funds to upscale operations.
Business growth can be a little chicken-and-egg. You need the funding to make an outlay on resources to enable you to grow. But you also need the profitable growth in order to secure those resources. This is the point at which high-growth business grants can bridge the gap as a short-term measure. Building a strong team to enable delivery of the work needed to seize the opportunity is a critical step.
Many entrepreneurs struggle with the mindset required to make this step, as much as any financial dilemma. After all, when a business idea is your baby, and you’ve put blood, sweat and tears into getting it off the ground, handing over the reins is a big deal. Learning to delegate effectively can be a tough lesson to learn.
However, the entire point of building a high-growth business is quickly getting to the point where you can hand over some control. You will need to demonstrate to investors that there is a plan in place to recruit the right talent to enable your company to grow fast.
You can’t be required everywhere and involved in every operational decision – instead, you will need a strategy for onboarding staff and empowering them to make choices in line with your vision for the company. You don’t want to unwittingly become the blocker to progress in your own organisation.
A really smart solution for a business on a high growth trajectory is to look at what can be outsourced effectively.
Trying to do every single thing in-house is only going to slow you down. It means having the cash and the time to employ expert staff, which is a long and cash-heavy process.
To keep the business scalable, it needs to be light on its feet and quick to move, while still benefiting from expertise in specific areas. This means bringing in outside resources to support growth.
There are a few exceptions to this. Firstly, it wouldn’t be wise to outsource anything relating to your core competency as a business. Not only does this raise the possibility of giving away some of your opportunity inadvertently, but it also leaves you reliant for a key part of your business on a third party, and subject to far too many factors beyond your control.
Secondly, avoid relying on any intellectual property that you do not directly own, as this can also create a huge area of vulnerability in your business model. All other areas, however, are ripe for outsourcing and should be seriously considered.
You are going to have a core need to communicate your offer to potential customers, in order to build your client base quickly. So getting your marketing strategy firmly in place is an integral part of building a high-growth business.
Making a new company visible is a challenge, but it can be approached well. Relying on social media and other channels to build a buzz is something you should try, but it will usually need to be coupled with some advertising spend in order to raise awareness and get people talking in the first place.
Leveraging relationships with third parties, partner networks and member organizations can also be a good route to go depending on your sector.