Andrew Deen has been a consultant for startups in almost every industry from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business.
6 min. read
Updated October 24, 2023
“You never know with these things when you’re trying something new what can happen—this is all experimental,” says Richard Branson with a bright smile, as one of the world’s most recognizable and successful entrepreneurs.
The “things” he refers to are the numbered and dynamic variables associated with starting or building a business. Similarly, many of his quotes involve working hard, making mistakes, never quitting, and following your passions, especially in regard to startups and small businesses.
Over one-third of the United States’ working population happen to be employed by small businesses. The American economy is supported by small, private businesses that continuously prove that the “American Dream” is possible. In order to achieve the successful growth it takes to become the one percent of publicly traded U.S. businesses, startups must have a competitive edge and must take a healthy dose of risk.
Whether they know it or not, small business owners are entrepreneurs. According to the Merriam-Webster dictionary, an entrepreneur is responsible for organizing and operating a business, as well as taking on risks to do so. It’s about the business, the drive, and the risk it takes to succeed.
However, in 2016, the Bureau of Labor Statistics found that 50 percent of small businesses fail within the first four years of existence. Moreover, Forbes discovered earlier in 2013 that only two to three businesses out of ten will survive fifteen or more years.
Richard Branson may be right about never knowing and trying something new, but the odds of your small business’s survival are not great enough to “experiment” with, particularly when it comes to scaling.
Fortunately, there are signs to watch for that signal when it’s time to take the next step and grow outward in search of new customers, new revenue streams, and greater brand recognition.
As a small growing business, building a customer base is crucial to stability and assists with further networking opportunities. Your customers are the support on which expansion and income are founded. It is natural and necessary to accept every client that can be managed correctly to increase your foothold in the marketplace or area.
Over time, success will start to show through your business’s capacity. Your business should be creating a larger client network as well as nurturing the ever-increasing baseline. Eventually, the network will begin to overwhelm the business’s workforce, and rejections will have to be made.
If customers and clients have to be turned down due to a lack of inventory, lack of employees, or simply not enough time in the day, then it may be time to scale.
Knowing that it is time to grow is not really about your business rejecting opportunities because of its success, or about limiting opportunities because of its size. That’s a glass half full or half empty outlook.
Fledgling businesses usually don’t possess enough personal data that can forecast future events, revenues, timeframes, costs, and other variables that objectives are built upon.
Using borrowed statistics, an entrepreneur can estimate what the future of their business may hold and consequently set mirroring goals. The goals may not be met when expected or happen according to plan, but at the same time, these goals can be overshot due to your business’s success.
If you are attaining or surpassing your goals, then reevaluation is necessary and scaling up could be the solution. According to Rob Fulton, proprietor of Exponential Black, “Once you’ve realized you’ve made your original goals too attainable by the standard you’ve set, then scale.”
Instead of meeting expectations and comfortably reaching goals, challenge your business to be the most it can be. Goals should be difficult but attainable so that they can assist your growth. Set high goals, establish the proper growth to resources, and start expanding.
Simply being profitable isn’t enough to justify expansion. While “profitable” is a qualitative measure, the exact quantitative data representing profit in numbers can be a deciding factor. The numbers are critical to predicting further revenue, which can be just as important as the revenue itself. They also help predict future profits, costs, and stability.
When you have a strong understanding of the business model and its performance record, a more accurate and trustworthy forecast can be created. A forecast for one month, two months, a year, five years, and so on will be a more reliable representation of your business’s potential. Flexibility and adaptation are your allies when doing accounting, as the golden rule is to work toward the best, but plan for the worst.
If the ratio between best results and worst results is narrow, your business probably has a healthy consumer base and evidence of repeatable sales. These signs are indicative of prosperity and suggest it’s time to scale.
“Ask yourself, ‘Do I have proof of concept? Have I proved that the product will sell? Do I have the infrastructure in place to scale?’” Ben Rubenstein, CEO of Yodle, poses these questions as a framework for scaling. Before growth can occur, these questions help you identify easy pitfalls such as weak infrastructure or a premature product.
Proper staffing is critical to a small business, as everyone’s roles are vital and lackluster performance can be detrimental. Employees are an integral part of the company’s foundation as they reflect the mission and vision. Without employees who possess reliability and loyalty, failure is a strong possibility.
You will know when your team is ready for a change because of their attitude. They will be interested in more than just their job; they will be interested in the future of the company. They work day in and day out to achieve the company’s mission and communicate effectively as a team. They will also be proactive in their duties, jumping at opportunities to do more than just their share. If you have confidence in your team after close inspection, you may be ready to scale.
Your concept should be reviewed as well. Confirm that your product or service matches your quality standards and that it successfully removes your target audience’s pain points. Proving your business’s mettle on a smaller scale establishes the groundwork for a larger consumer base and precise growth predictions.
Richard Branson was quoted earlier, discussing that you don’t know what will happen when attempting something new—like scaling your business operations.
But he also said, “Focus on your passion, start small, dream big, and plan ahead. Scale-up only when you are ready—not just because opportunity knocks.”
To reiterate—scale up only when you are ready. Don’t create unnecessary risk in your business and its progress just because profits are up one quarter or you have a trustworthy team. It is important to note that you can’t achieve a few initial goals and then set out to attain an impossible one. Risk is inherent in business and there is no “sure thing,” but minimizing risk should be a priority before growing.
The signs telling you to scale up are not concrete, but if your business exhibits more than one of these signs, it might be a good time to evaluate your options. It is your decision as an entrepreneur to manage, lead, and—when the time is right and risk is minimal—scale up your business and achieve new heights.