Marketing Strategy: What Does it Mean to Scale a Business?

 

Scale is the very first thing I talk about with a new client. I cannot create a marketing strategy for a business unless I know exactly how they plan to scale the business. Once I discover it, it’s then up to me to build a marketing strategy that serves as a bridge to take them from where they currently are to where they want to be.

 

What does it mean exactly to scale a business?  Scale is often confused with growth, it’s not growth.

Scale is about control of the growth.

Consider growth as an airplane and scale as the yoke or the wheel. The yoke guides the growth and tells it where to go. The yoke can make the growth go higher, hold it steady, or go lower.

 

Scalability is about capacity and capability.

 

The question is to what capacity can you grow your business?  Additionally, what is your capability to grow at that rate AND be profitable? (This is the magic question.)

Marketing Strategy: Operations and Process

What is your process in the business? What are the operational expenses that have to be considered?

Potential Growth Expense Considerations:

1. Cost of goods sold (inventory)
2. Any equipment or supplies required to produce and deliver a product or service
3. Labor and all costs associated with it
4. Insurances or licensing
5. A need for increase of space like warehousing etc.

These are just a few examples.

The consideration is, with every step of growth there is an even step in scale.

If you are just focused on growth and not paying attention to the process and what the impact of that growth has on things like daily operation and the capital required you will create what I call a hamster wheel business.

You will work your butt off because you have all this new business but you won’t get to feel the success of it. Your costs will rise and eat up all your revenues. So, you end up making the same amount despite all the growth.

When the time comes whereas the hamster wheel eventually stops – let’s say something like the coronavirus shutdown hits – you have an opportunity to see the error of your ways and then you’re like what the heck has happened?

 

Marketing Strategy: An Adaption to Growth

Scalability means making your process adaptable to support the business when growth happens. It means having the ability to grow while being profitable.

Scale requires planning and growing IN purpose. When I say IN purpose – you are growing as a purposeful effort. You had a plan and you carried out that plan.

So, for every uptick in revenue needs to be offset by updating the operations of the business.

 

Scenario 1: New Growth & Operational Expense Even

To put it in laymen terms and keep this super simple, let’s say you experienced 50K in annual growth. However, you then had to hire a new manager with a 50K salary as a result. The company’s gains and operational expenses are evened out in this scenario.

So even though there is growth, there was the need to hire someone to manage the growth, so the businesses value didn’t change.

Let’s say instead you had a $150K increase in annual revenue and you still hired a new manager at 50K.

Here in this scenario the value of the business has risen. This is the ideal situation.

 

Scenario 2: Revenue Growth & Stress to Operational Side

What if you have been super-focused on growth and bringing more customers into your business, however, you have not made adequate changes on the operational side to offset it?

This scenario will of course have a good rush of revenue but if changes are not made it will put stress on the operational side. This is another cause of the proverbial hamster wheel. You’re going to work yourself to death to compensate for what is missing because you did not lay a good foundation under the growth.

 

 

 

Scenario 3: Operational Heavy & Inadequate Revenue Growth 

The majority of small businesses I come into contact with tend to fall in this category.

They have the process and staff in place capable of much more volume than they are producing. This means their volume is not properly offsetting their operational expenses.

 

When we have some sort of burp in our economy like the coronavirus shutdown, or any number of things  than can happen – you’re going to experience an “oh crap” moment.

You will realize you’re under-capitalized and had you built your business more assertively you would have more revenue to pad your business during a storm.

Most of the time when this happens the solution is simple – the business doesn’t have a marketing strategy in place they are just taking business in as it comes instead of pushing that process purposely.

 

To share a personal story with you as an example, husband has a small business he is a ceiling contractor and from hello before he made a dime or even knew if he would make money, we decided exactly how we would scale his business.

We decided he was building a small lifestyle business. I also have a small lifestyle business so we wanted to be matched and have freedom to travel and take off together whenever we wanted to. He wanted a business that would not require a team of employees – because he just didn’t want to deal with that.

So, we weren’t aiming for millions, instead we were aiming for comfort and his escape from corporate, that was 5 years ago. His business is well-capitalized and still to this day every 6 months or so we talk about it. Just so happens I am his marketing strategist. So, I ask him the questions just to make sure we are still on the same page.

Do we want to branch out? Do we want to explore other things he can bring into the business to stay busier because his niche is small. So far, his answer every time has been no. I am happy with where I am – let’s just sustain it and build incrementally.

So yearly if we experience a gross income increase of 7 to 15% we are happy with it. Who knows maybe next time I ask him that question the answer will be different? Only time will tell.

Marketing Strategy: Scale and the Sales Cycle

There’s one more element in scale that some businesses don’t consider when they are planning in their business, the sales cycle. The sales cycle is the length of time it takes to convert a lead to a customer.

If your service or product is at a higher dollar figure, chances are the consumer does not immediately buy. The new potential customer has a longer decision making process – this is a sales cycle.

Sometimes the cycle can be much longer than a business owner contemplates or they don’t consider it at all. I have seen this cause a new business to fold. They couldn’t create cashflow fast enough and ran out of credit.

Always consider the length of time it takes to turn a lead into a customer in your overall business and growth strategy.

 

Where Does Your Business Fall?

Is scale something you consider when you make decisions in your business? Which scenario does your business fall in?

Is your business experiencing growth at a pace that is even with your process and operational expense? Is your business bringing in new customers at a rate that is putting stress on the operational side of your business?

Or are you like most small businesses – your lead and revenue side is too light for your current operational process and expense? Could you take on new customers and not have to increase the expense on the operational side?

If so, it’s time to start marketing your business in a strategic way to even things out.

Hey if you need help reach out to me it’s what I do! Click here to send me an email.