Articles

7 Alarming Things You Must Know Before Scaling A Business

by DAVIS BROWN PRC Agency

Lots of people are asking for business advice, so I’m going to start giving some here and there.

Scaling a business is an incredible experience. 

While it can be both fun and rewarding, it’s also really challenging.  

See, scaling a business goes beyond simply starting that business and keeping it afloat; you need to be able to think big and make the strategic decisions that power growth. 

How can you diversify your revenue streams? What’s the best way to reinvest profits into your company? How can you scale without investor funding to carry you to your next significant milestone? 

In this article, I’ll answer these questions and share some of the things I’ve learned from my own experience scaling a business over the past years.

How to Scale a Business Without Investor Funding:

Let me start by saying this; I’ve never taken investor money. 

I’ve never been this person who has taken that $5M, $10M and had all this money to play with. We’ve always earned our way to the top. 

Raising capital has some benefits, to be sure, but it can be time-consuming, and it opens the door to outside expectations that might not align with your big-picture plan.

So, back to this idea of ratios. The reason it’s so essential to maintain your margins is that you can count on a steady stream of cash coming in each month and avoid overextending yourself financially. When there’s no seed funding to fall back on, you’ll need to be extra careful with your resources. 

As you grow, that 10% or 20% represents a higher cash number, and at a certain point, you’ll need to be strategic about turning those profits into growth. 

For example, you might say, “Hey, we’ve hit that 10, 20% profit goal, do we want to try to bring it back down so we can reinvest that money into other things?”

We try to maintain that same net profit target we did early on, but the game has changed. It’s no longer about survival or trying to maintain that $10k baseline; it’s about making sure you have the cash flow you need to support initiatives that can scale a business. 

How Do You Improve Your Margins?

Run routine audits. Track outgoing payments and incoming revenue. You’ll want to look out for costs that seem higher than necessary, as well as any areas where revenue has suddenly tapered off. 

Reduce your acquisition costs. How much are you paying per customer acquisition? To reduce your costs, you’ll want to identify your most profitable customers and focus your more expensive marketing efforts to reach more people like them.

Look at your existing sales mix. Do you sell different types of products or offer a variety of services? Identify which items bring in the highest profit margins, and which ones aren’t quite delivering the returns you were hoping for. From there, it may be time to shift your strategy so that you’re offering the right mix of items to maintain a certain level of profitability.

Reduce waste. Wasted inventory, spoilage, recurring payments for products you don’t use–all of these things take money away from those valuable profit margins. Waste also extends to time, so investing in the right automation tools might help you save money in the long run. 

If You Want to Scale a Business, You’ll Need to Diversify

When the business gets bigger and bigger, then you want to start diversifying. Many companies see this phenomenal growth early-on, then hit a plateau. 

Whether new leads stop coming in, there’s a new competitor in town, or you’ve maxed out on market penetration, failing to diversify means you’re at the mercy of all of these other factors that could claim your business.

Diversification allows you to tap into new markets and bring new customers into the fold. As you set up different services, you’ll also want to look at each entity as a business within a business, each with its revenue and net income. 

You can then pool the profits from each new initiative and use them to fund other growth areas. The reason I recommend tracking each entity’s performance separately is, it allows you to identify what’s working and what’s not. 

Start by Digging into the Data

Chances are, you’re already collecting a ton of data through website traffic, social media campaigns, online searches, purchases, or service requests. (If you´re not, then get in touch to BLOOX Media)

What kind of feedback are you hearing through these channels? Are there questions or complaints that seem to keep coming up? 

Use 


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About DAVIS BROWN Senior   PRC Agency

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Joined APSense since, February 4th, 2020, From California, United States.

Created on Oct 16th 2020 14:22. Viewed 283 times.

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