- Small businesses that are ready to scale up must consider multiple factors before expanding.
- Financials and the cost of hiring more employees play a part in figuring out business development.
- It's also crucial to outline any new responsibilities to new and existing staff members.
- This article is part of "Talent Insider," a series containing expert advice to help business owners tackle a variety of hiring challenges.
For most business owners, scaling up is a part of their long-term goals. But for small businesses, successful expansion can be like walking a tightrope.
It requires a delicate balance of nurturing existing customers and implementing a strategic plan that includes hiring talent and making sure both new and established employees are committed to the company's vision for growth. Scaling up needs to be executed carefully to minimize risk, maximize profitability, and protect the company's future.
For small companies ready to expand, Business Insider spoke with four experts about implementing successful hiring and managing strategies.
When to scale up
Scaling up is best done after a careful look at your company's financials and an analysis of whether the company's growth rate is sustainable and could justify the cost of hiring more employees and offering additional products or services.
Daize Washbourn, the CEO of the creative-communications company Bacchus Agency, realized it was time to scale up his London business when clients asked for services in the US.
"The first indication that it's time to scale up is when the business model proves sustainable, there's genuinely a market for the goods or services offered, and the company is generating both consistent income and profits," Washbourn told BI. "Our clients' demands for new services provide us with a compass to navigate market trends and shape our hiring strategy."
Roza Szafranek, the founder and CEO of the human-resources-support service HR Hints, says another indicator that it's time to scale up is when customer demand surpasses your business output or your business model can be sustainably replicated in another market.
"Scaling up should be done before you're in a situation where you can't keep up with your customers' demands," she said. "Also, if you see that there's potential to execute your business in another state or country, and you don't want your competitor to 'do it for you,' you should think about scaling."
"In terms of hiring, it's crucial to foster awareness through a monitoring tool to track company growth, which should be put in place when the organization is ready to plan scaling and filled in after closing every quarter to assess hiring needs," Szafranek added.
The importance of outlining responsibilities
When it's time for expansion, small businesses often face the challenge of outlining responsibilities with new hires and current staff.
"When small businesses scale up, they often face problems in three areas: leadership, talent acquisition, and organizational culture," Szafranek said. "The hardest thing for small businesses is knowing how to delegate responsibilities. Founders are often the first people responsible for given areas, and they're often the experts in their company's field. Therefore, handing over responsibilities is often a big challenge."
Leonie Stewart, the global HR manager of Bacchus Agency, echoed that sentiment, explaining that founders had to be willing to give up control. She added that small-business employees would often have multiple roles and that scaling up required both current and new employees to know their responsibilities.
"During startup, founders are often multitasking across different roles, sometimes serving as legal and financial, HR and marketing, and they are often stretched to a breaking point," Stewart said. "Scaling up necessitates devolving power and responsibility to a new team of experienced and skilled employees."
Ensuring a smooth transition for all employees
In the excitement of hiring new talent, experts advise business owners to help their existing employees with the transition, as even the most motivated employees might resist change. During the transition, leadership should help employees buy into the bigger vision of the company.
"There's typically a bit of a culture shift as an organization grows. As processes and structures are put into place, expectations around work and the employment relationship inevitably shift a little," said Jennifer L'Estrange, the founder and managing director of the human-resource consulting firm Red Clover.
She added, "Communicating company values and how they come alive through behaviors — and how those behaviors may change over time — can go a long way to paint a picture of the future that employees can understand and align with."
Another tip? Don't forget the good practices that made your business successful in the first place, which will help the company through the transition period.
"As difficult as it is to change individual habits, organizational and company change is even more difficult because it affects a larger number of people operating within it for a longer period of time," Szafranek said. "Enthusiasm is always the highest at the beginning of the change, and the most important thing is maintaining good habits.
"How will you function after three to four weeks, after two to three months, or, in larger organizations, after half a year? We must not forget about small routines, weekly statuses, and regular updates because the success of the change is based on them."
How to minimize risk
While running a business comes with inherent risks, small businesses don't have the same resources as large corporations. So it's in the company's best interest to proceed conservatively. L'Estrange said before scaling up, small businesses should start with an analysis of the company outlook and finances using a third-party company.
"Small businesses can minimize risk by hiring outside experts, mentors, or a peer advisor group to advise leadership," L'Estrange said. "We've worked with companies that don't have a good handle on their financial statements or are inadequately funded, and they start to scale without having planned for it and find themselves short on cash. As a result, they start taking on debt at a rate that they can't service, and it becomes very hard to correct."
Experts also advise small businesses to implement changes slowly, create a well-researched plan, and set up a timetable of what needs to be done successfully at each stage.
Bacchus Agency, Washbourn said, uses an 18-month timetable that includes three months of planning, three months of hiring, and a 12-month implementation period, which allows the company to make sure there's a solid plan in place and helps the company stay flexible when expanding.
"The biggest challenge we face in scaling up as a small company is resources," Stewart said. "When entering a new market, we have a thorough plan that has been well researched. We look at things like how much talent costs and the market value of our services. There will always be issues that happen, but you can avoid the most common ones by doing thorough research before expanding."