Scaling is a natural step in business development, but it doesn’t happen on its own. Many people think that opening branches or selling franchises is scaling, but these are just tools that need to be used wisely. Marina Dyachenko, founder of the audit and consulting group of companies “Business Expert”, tells what the owner should pay attention to when developing a business.
From a startup to a scale-up: a checklist for successfully scaling a businessDaria Myznikova
Audit and organizational structure
The first thing to do before scaling is to tidy up all the processes in the company. This is important, because if you have chaos in your organization, then that is what you will scale. And here there are a number of factors worth paying attention to.
It is necessary to conduct an audit to understand if the company has real problems. The audit of financial statements is necessary to minimize the risks of claims from regulatory authorities.
Initially, there should be a transparent organizational structure, where each employee clearly understands his place and responsibilities. These places and responsibilities will change as you scale, but initially there should be a clear distribution of powers and responsibilities.
Employee motivation and planning
Employee motivation is equally important. And this is not only about material motivation: when everything changes, the backbone of the company should remain – people who are really interested in business development. Therefore, pay attention to why people work in your company, how important it is to them, whether they share the goals of the business.
Our company had eight salespeople who had a fixed salary of 40 thousand rubles and 30% of the sale. Then we began to transfer employees to remote locations and look for ways to motivate them. We have cut the fixed part of the salary in half, but only two of the eight people remain. As a result, we decided to take a different path: we divided salespeople into hunters and closers, who were paid a salary that depends on KPI.
For hunters, we made a KPI divided into seven subsections (including the number of calls and appointments), and for closers we added percentages, but made a fix that can vary up or down. And this system has brought its results. Now we have more than 100 sales people, and we have launched an affiliate program that has a positive effect on the motivation of people. Such innovations in the company took place in less than a year.
Another point is financial and tax planning. Financial planning is necessary for the successful development of a business, as it is necessary to clearly understand where and for what money is directed and, if necessary, regulate cash flows. Errors in tax planning, or lack of it, is always a loss of profit for the business.
Business processes and sales strategy
It is worthwhile to correctly and clearly define business processes. This must be done in writing so that there is an understanding of how and what works in the company. This point is neglected by many, and the result is confusion. An effective strategy should also be in the marketing and sales department. You can’t just spend money on advertising and increase sales, but not understand exactly how you are going to grow your customer base and conquer the market. And only after all these factors are in order, you can choose the view and scaling tools.
One of our clients was a beauty salon, which initially had revenue of 1.5 million rubles per month. The company had four points (in Novosibirsk and Ufa), and the request was to expand the business by selling franchises. But in the end, we did not only complete packaging of the franchise, but also analyzed the competitive environment, developed business models and helped to improve the business as a whole.
We found Chinese suppliers of products that made the salon their own brand. In addition to franchise sales, the products began to be sold to showrooms, including Moscow ones, which led to an increase in the company’s profits. As a result, the company now has 78 million rubles in profit and about 70 operating points. This result was achieved thanks to the competent use of franchising as a scaling mechanism and the correctly chosen sales strategy.
Startup growth and scale-up
Scaling is always a company’s growth, but the forms and goals of this growth can be very different from each other. At the initial stage of development, companies usually use the classic growth of a startup or scale-up. In the first case, scaling is a controlled process with a specific result.
In other words, it is effective growth that reduces uncertainty, solving a specific problem, or meeting a need. Performance is preferred in this case, as the market as such has not yet been determined.
Then the startup turns into a scale-up. And with the traditional growth of the scale-up, the focus is already on increasing efficiency. At this stage, the company has already gained some stability: it has counterparties, specific external conditions, and organization of activities. At this moment, the business begins to grow in a qualitative sense, an increase in gross profit, and the definition of a strategy for optimization.
Fast and blitz scaling
In large companies, when growth is needed in a short period of time, two types of business expansion are usually used – fast and blitz scaling. The first option is used when rapid growth is needed and the company is willing to sacrifice efficiency for the sake of pace. But here, too, there are frameworks and directions, an understanding of where to go, what market is and what kind of market to conquer. The main thing is that there must be a specific goal, for example, to win some market share or increase profits by 10 times.
Blitz scaling is different in that there is no certainty where the company is going. This is the most risky, but also the most effective option: all billion-dollar companies (both domestic and foreign) used this particular model for growth. Moreover, access to capital opens only with blitz scaling. But you need to remember about the high risks that are present in such a business development option, so this strategy should be chosen only after weighing all possible dangers and nuances.
For scaling to be successful, it is important not only to understand what it is, but also to clearly define the company’s goals: what exactly you want to achieve from growth. And the choice of the type of business expansion will depend on this. It should be clearly understood that scaling is not a way to correct errors. If there are any problems in business processes, then these problems will scale with the company. Therefore, all parts of the business must be put in order, and only then develop it.
It is worth paying attention to the business model, which should grow with the company. And here there are several options: it can be an innovative business model, strategy or management area. This is important, since scaling is not just the growth of a company, it is a business going to a new level, so there must be an element of innovation.
And it is imperative to understand that any scaling means fundamental changes in all processes of the company (for example, the launch of its own production), for which you need to be ready – both the management and all employees.
- Conduct an audit. Check if there are any risks of claims from regulatory authorities.
- Engage in financial and tax planning. All cash flows must be regulated.
- Build a motivation system for employees that will ensure their interest in the company’s growth.
- Choose the type of scaling – depending on the features and capabilities of the business and your goals.
- Clearly define the business model and business processes that will scale with the company.
Cover photo: Shutterstock /Guguart
Source: Rusbase by rb.ru.
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