Bigger business isn’t always better — before you decide to scale, here are three things to consider.
When you’re on the cusp, deciding whether or not it’s the right time to grow your company, it can be easy to assume that of course, you want to grow.
After all, who doesn’t want to grow their business?
But, by growing your business, you might end up with a business you don’t really want to run — it’s not fun anymore, or it’s not the company you envisioned — or it’s not profitable, but on a bigger scale.
Here are some questions to ask yourself to see if you’re really ready to start scaling your business. If you can’t answer with a “hell, yes” to these three questions, then it’s probably not the right time.
1) Can your operations handle the growth?
If you are struggling to handle the quantity of business you have right now, the answer is probably no.
More business = more busy, if you’re not careful
If you’re already working 100 hours a week, and you’re working nights and weekends to try to handle the stream of business you have right now, you aren’t ready to scale — yet.
You don’t want to grow if you’re just going to be working more and more and more. Eventually, you’ll break. No one can sustain truly top-notch work at that rate for very long. That’s just a fact of life. Sleep is a thing. Trust me on this. You have to sleep, you have to eat, you have to see your family and friends. You have to have a life.
If those things aren’t happening now, they will get 100 times worse if you try to scale your operations. Before you decide to scale up, you have to make sure that you can do it - without melting down yourself or your team.
But… if this is your problem, it’s an easy one to fix. You just need to get your systems, processes, and team set up properly. Then, scaling will be a breeze.
2) Are you profitable?
This is a really big one, that we sometimes forget to consider.
If you aren’t profitable, don’t scale.
Because if you’re losing money on a small scale now, you’ll lose money on a big scale if you grow. What might be a $500 a year loss right now, easily turns into a $500K loss at scale.
Let’s look at what this looks like in real life.
Take Uber. They are a huge company, with a huge valuation (even after all the issues) — their business is worth millions of dollars, and yet they lose even more each year. They haven’t figured out a business model that actually makes money, and yet they decided to scale.
But what would have been a small loss, maybe 100K, in a single market, becomes a $20 million loss on the global level. So they require more and more cash to pour into the company just to keep operating. They grew (and are continuing to grow) before their business is really sustainable.
Now, maybe they had a justification for that (we need more clients to make more money, so we need to expand quickly). But, in the end, that’s really just an excuse to lose large quantities of money. There are plenty of successful companies that waited to grow until they could do it profitably, and they are arguably better companies (since they’re actually making money).
More sales doesn’t equal more money, it’s just more sales. So each sale that you do, at a loss, takes that money out of your pocket.
If you’re not already profitable, with a good, strong cash flow, you definitely should not scale. Instead, take the time to really examine your business model. Where is it weak? What about it is causing you to lose money? What could you focus on to make sure that you’re creating something that WILL generate profit?
3) Do you actually WANT to scale?
Often scaling requires taking on organizational complexity. You might have to hire employees or find contractors or other business owners to outsource some of the work to. You might have to implement new systems to handle the complexity. It might require a different set of skills and it might require giving up some of your own personal control over your business.
That’s not a bad thing — it means that you get to focus on the things you do best in your business, and get rid of the things you don’t do as well. But you will probably be placed in a position of managing a larger operation, with more moving parts.
If that doesn’t appeal to you, then don’t scale. You don’t have to, it’s not a requirement. You can CHOOSE to stay small and that’s ok.
It’s your business and your life — you get to choose what happens to it. So, before you let the world convince you that you have to scale, think about whether or not that’s what you really want.