Up to 70 percent of start-up businesses fail within the first five years. Most small businesses don’t fail because of a poor concept, a lack of contingency planning, or insufficient capital. They fail because they’re not ready to manage success. The most common reason is a business plan that doesn’t account for scaling up.
Scalability is about planning for success rather than only building contingencies against failure. Look at the resources and systems you’ll have in place to get started. Ask yourself how they will scale up once demand for your product or service increases beyond first projections. How will you manage supply if orders exceed your forecast production rate? How will you make your business more streamlined and efficient, save money, preserve quality, and expand?
There are three essential strategies start-ups and small businesses should focus on to make sure a profitable business can grow: cash flow efficiency, quality control, and project management. Your business plan should include forecasts of how you will manage these elements if your business is successful.
Cash Flow Efficiency
The baseline need is cash flow efficiency. Constant monitoring of your business practices is essential to understand where you can make savings. While any start-up will need investors and credit to bankroll the project, the first aim should always be to clear the debt and make a return on investment. Ironing out any problems in your cash flow efficiency while you’re still a small operation will save you future headaches.
Your cash flow forecast should be under constant monitoring and revision. Forecasting capital and cash requirements at least six months in advance will help you to make better decisions about where to get the money. To be ready to scale up, you should always try to reinvest from internal resources before taking on more debt. Manage your cash flow well, and your systems will be healthy and effective to manage the future growth of your business. You may want to look into using software like Float or Pulse to help you achieve your cash flow goals.
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If you’re offering a high-quality product or service, your business will probably do well. Unfortunately, quality is often the first thing to go if demand outstrips supply. Planning for unforeseen difficulties, business losses, and failure is wise, but it’s equally important to plan for success, which is only possible if you can sustain the quality of your product or service. Careful monitoring and continuous forward planning is the key.
It’s natural to want to accept every client when you’re just starting out. However, to scale effectively, you must be in control of the speed at which your business grows, even if that means admitting to potential clients that you’ve reached capacity for the time being. It’s better in the long term to scale up slowly, and keep quality high, than push your business beyond its limits and disappoint your customers.
Careful project management strategies should be in place before you even open your doors to business. On Day One, you should begin monitoring every aspect of your operation, from sourcing materials to cash flow balance, as well as debt reduction, client acquisition, production or provision of goods and services, human resources and investor relations.Effective analysis and skilled project management will enable you to keep on top of every aspect of your business. Check out PC Mag’s roundup of the best project management software for 2017.
Being prepared to scale up takes a lot of extra work. But the time and effort you put in at the beginning will save you a lot of anxiety in the end. With these three essential scaling strategies of a successful business in place at the outset, you’re already primed for scaling up. Don’t let unexpected success be your downfall.