Every entrepreneur wants to scale his or her business. From the first day, many are already thinking about getting a second location and continuing to sell. Scaling in business comes in many forms: a new branch, a new office, additional staff, etc. The decision to scale may come up at the 6-month mark, the 2-year mark or the 10-year mark. While the timeframe does not matter, for a business to be successful, it must scale in a strategic and controlled manner.
After 10 years of running my own marketing agency, I have learned that scaling a business requires numbers. Yes, hard numbers. The alternative is too risky. For a business owner investing in a new location, hiring new staff or buying new equipment, scaling on a gut feeling or an assumption is just as good as betting on the weather a year in advance.
As a young entrepreneur, I was overly optimistic and excited to grow my business. In just 2 years, I quadrupled my clients and revenue. At the same time, I doubled my staff, took on a new office lease, increased employee benefits and upgraded and doubled my equipment costs. All I saw were growing client numbers, which I thought meant I needed to scale to meet the needs of the business.
In just a year, however, I realized that the newly added costs of staffing, benefits, rent and equipment were eating away at the profit from the newly added clients. I was at exactly the same place as I was previously, but with increased overhead. Scaling based on revenue alone is not enough.
How I Used Numbers to Determine Business Needs
While it took a while for me to realize that scaling should be based on multiple calculations, being able to put a number on critical parts of the business means I know when I need to scale — whether that means hiring more staff, moving to a bigger office or opening a second branch.
I started by measuring everything that matters in the business. As a service provider, the biggest asset our agency has is people. But how do you put a number on people? We realized that each individual in our company has a level of expected output. Sales staff can only make so many appointments. Content writers can only write so much. Account managers can only handle so many clients. With that, we began associating numbers with these essential roles.
Understanding when we had more content than resources was critical to helping us decide we needed more content resources. Knowing that account managers can handle only so much in client revenue allowed us to understand when we needed a new account manager. And of course, when we saw our sales staff was maxed out, we searched for additional sales staff.
No longer were we assuming it was time to hire based on a hunch. Now we actually know when it is time. And more importantly, we can stay on top of numbers so we are never taken by surprise. We can actually plan ahead.
Using Numbers to Scale Wisely
Putting a number next to each job or role in your organization is not a simple task. However, that number does allow you to see how well optimized your business is and when you need to start thinking about scaling. Regardless of whether you run a call center, a nail salon or a restaurant, you can associate numbers with everything. How many tables can a waitress wait? How many phone calls can your operators take? How many customers can a nail technician take on? These answers will help you determine when you are ready to grow.
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.
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