BY OLUFEMI ADEDAMOLA OYEDELE.
All businesses, like human beings, have three-term goals: short, medium and long term. Short-term goals include the birth and ability to survive start-up start-up issues, such as paying taxes and worker wages and profitability of invested capital. Mid-term goals include the ability to make a profit after meeting legal financial obligations and long-term goals include moving upmarket and being able to outpace other similar businesses. Companies are primarily designed to withstand PESTLES risks (political, economic, social, technological, legal, environmental and security). The secondary objective is to be competitive and generate a profit which is the cost of capital (income above the break-even point) and the tertiary objective is to be “a force” to be reckoned with.
Scaling a business is the process of increasing production, sales volume, size, number of workers, number of tools, quality of technology and performance of equipment. commercial organization or carrying out two or more of the above. Companies are behaving like a newborn; they have a lifespan and exhibit different characteristics at each stage of their life cycle. According to ‘Scaleup Nation’ magazine, in an article titled ‘Growth vs Scaling’, by Patrick Whatman, a scale-up is “an entrepreneurial enterprise that has achieved product-market fit and is now facing either the ‘second valley of death’ or exponential growth. To put it another way, once a startup has proven they have an acceptable product (first valley of death), the next step is to expand their market share by offering its product to the masses (Second Valley of Death).
Scaling is strategic because many successful businesses “fall” because they tried to grow without planning. Scaling up means there will be more customers and more challenges. “Big Biba” was a fashion commodity in central London that had an impact on the London shopping environment in the 1960s. Owned by Polish immigrant, Barbara Hulanicki and her husband, Stephen Fitz Simon, Biba was to London what Michael Jackson was to pop music. Biba was a one-stop-shop for clothing, furniture, and home decor materials. Big Biba decided to expand by introducing new owners to the business in 1969 to expand its capital. British Land Company, a property investor, acquired shares in Big Biba and for a good seven years gave Barbara Hulanicki and her husband no carte blanche to run the business. Barbara and her husband left the company in 1976 and this led to the end of Big Biba.
The benefits of scaling include increased revenue and profit. It can also mean better goodwill for your business. Business process efficiency can be achieved through scaling. Scaling up can also help you become independent in your business, as scaling up means you can get new hands that will help you run your business successfully. Expanded production means you can count on economies of scale when buying your raw materials in bulk and reduce the unit cost of purchase as well as the unit cost of production.
To scale, you must carefully examine your business process to see if you are ripe for growth or change. Develop a strategy on what you need to do to grow, i.e. to increase sales, increase production, expand premises, etc. Expansion should be planned. The best planning starts with a detailed forecast of sales growth, broken down by the number of new customers, orders, and speculated revenue you want to generate. Developing a business requires financing. Your growth plan may require hiring new workers, purchasing more vehicles for distribution, deploying new technologies, adding equipment and facilities, and creating reporting systems to measure and manage the results. You also need to find the money to invest for growth.
It is also advisable to secure your business contacts because a business cannot survive without income. Will your expansion mean more sales or is the perceived sale a mirage? Growing your business obviously means selling more. Do you have the sales structure in place to generate more sales? Do you have sufficient product stock or a solid production structure? Do you have: sufficient information to generate the desired number of prospects; marketing systems to track and manage leads; enough sales people to follow up and satisfy prospects; a robust customer order management system; and a distribution system that can ensure that products are distributed quickly? Technology is now being used as a catalyst for business growth.
Technology makes it easier and cheaper to grow a business. Invest in modern technology. You can achieve huge economies of scale and more output, with fewer resources, if you invest in technology wisely. Automation can help you run your business more cost effectively and efficiently by minimizing manual labor. Systems integration is a primary area of improvement in most businesses. Small businesses have independent challenges and little communication. Expansion means you may need an intercom system to communicate with a remote office and employees.
Evaluate new products on the market that improve quality, save time and money you can acquire. Look at customer relationship management (CRM), batch processing, marketing automation, sales management, inventory, manufacturing, accounting, human resources, shipping, and other technology systems .
Consider buying more machines, acquiring new warehouses or outsourcing your work. Assess whether the new jobs created by your “new expanded organization” will be filled by additional permanent or temporary workers. Technology gives tremendous leverage, but at the end of the day, you still need people to make the technology work.
Ask yourself if you have enough customer service staff? What about operating expenses? Look at the local laws. For example, in Nigeria, having more than 500 workers means you must provide a staff housing program by law. Do you have sufficient security personnel to secure business expansion? Check if you will need to train your new workforce on the new company culture and how to handle machines or customers. Don’t forget the management requirements of the new expanded business. Developing your business is good, but you have to manage it well.