5 Key Challenges That Affect Business Scaling Strategies (And How to Tackle Them)
in Business by Alister Esam
No small company wants to stay small forever. They want to grow, scale and thrive, but there can be barriers to moving up to the next level, making scaling up risky and difficult.
But, these challenges shouldn’t put a stop to your dreams of becoming a behemoth. Even companies like Amazon and Google began in dorm rooms and garages. So, what obstacles stand in the way of your business scaling strategies?
Here, we’ll go over business scaling, the difference from growth, and how to tackle the five key challenges that affect your scaling strategies.
What is Business Scaling?
Scaling means ensuring your business can handle increased workloads in a cost-effective manner without being impeded by available resources.
It means that your company can handle growth without struggling, for example, increasing product demand without this leading to high-stress environments with employees struggling to keep pace.
It’s a process that sets the stage for business growth and requires proper planning, funding, and strategies to be successful. Technology has also been an important factor in successful business scaling strategies as it alleviates pressure from employees in key areas, such as customer service and marketing.
It’s important to note that there is a difference between scaling and growth. While the two terms are used interchangeably, they have separate meanings in business.
Growth vs Scaling
Growth is when revenue increases with increasing resources, such as capital, additional staff, or technology.
For example, imagine your ecommerce site ventures into a new market and doubles your customer base. For your customer service and sales teams to keep up, you might invest in a virtual agent to relieve the pressure and bring in more revenue.
However, scaling uses limited resources, maximizing revenue. It focuses on what your business looks like in the long term and doesn’t just satisfy short-term growth needs.
Developing the right business scaling strategies to ensure your company can deliver rapid growth and maximize revenue is vital to success. But understanding the challenges business owners face is also essential to avoid the pitfalls of failing to achieve scalable growth.
5 Key Challenges of Business Scaling Strategies
1. Scaling too Early
Premature scaling is one of the biggest challenges small companies and startups face. Demand for products and consistent growth doesn't translate into a readiness to scale.
It’s tempting for businesses owners who want to grow their companies to consider a jump in sales reason enough to start working on their scaling strategies, but this can lead to lower profit margins and increased operational costs.
It can happen for a number of reasons, such as not having a product-market fit or expanding to new markets before the company is ready.
Before considering your scaling strategies, take a step back and take stock of your business. Work with your employees, sales, and marketing teams to gather and analyze data to see if your company is ready to scale.
Don’t just focus on one aspect or one metric. Exponential growth will show your business is on the up and up, but consider other metrics:
- Customer loyalty/retention
- Conversion rate
- Sales revenue
- Customer acquisition cost
- Lifetime customer value
- Product-market fit
Ultimately, your business is ready to scale when it is both capable of growing and has the capacity to accommodate that growth. Studying vital metrics will help you determine when that is.
2. Talent and Skill Shortages
When businesses first go through a rapid growth phase, they employ staff to fill immediate needs without thinking about a long-term plan. So, when they want to scale, they discover their current team lacks the required specialized skillset to get them to the next level.
It could mean a shortage of strength in the marketing, sales, human resources, or customer service areas, leading to employee turnover and suffering departments. Your scaling strategies can be excellent, but without the right people to run your business, you’ll fall at the first hurdle.
When it comes to recruitment for a growing business, always look for quality over quantity. Every company needs a strong team of employees. While you’ll initially require employees to plug the gaps, keep your long-term plan in mind during your hiring process.
Look for leaders and employees that align with your company culture and can take you to the next level. Create training programs to drive employee development, preparing them to take on more or new responsibilities as the business scales. It could be as simple as providing the best management book for them to work through.
Ensuring you hire both for your immediate growth needs and your future scaling ones will ensure you have the right people at the right time to drive your business upwards.
3. Failure to Adapt to Change
In evolution, failing to adapt can mean the end of a species. The same applies to businesses.
For example, brands like Blackberry were once synonymous with mobile phones. While the world opted for touchscreen devices, Blackberry persevered with physical keyboards. By the time they caught up, they were already too late.
Adapting to change has long been a business challenge. When companies scale, they have to change their business processes and adapt to new demands as people and technology develop.
For example, small businesses have a flatter management structure allowing the CEO to hold meetings with individual employees. As the business grows, this practice becomes damaging and ineffective.
Failure to make the changes necessary can be due to:
- Poor planning
Not thinking through your scaling strategies and approaching them with an ad-hoc attitude.
- Lack of resources
Sometimes, companies don’t have the resources to implement their perfect strategy, so they decide to wait until they do, leading to scaling setbacks.
- Fear of change
Business owners can be afraid of changing leadership or losing the core identity that made them successful. This fear of change can end with businesses scaling in size, but not mentality, affecting the effectiveness of the company.
The solution to this is simple. Don’t be afraid to make changes when necessary. It could mean changing leadership, trimming the fat from your business, or outsourcing. Don’t underestimate the benefits of Shopify or other ecommerce platforms in helping you reduce resource costs.
Use your sales and revenues as an indication of whether you’re moving in the right direction or you need to make changes to continue progressing upward.
4. Lack of Technology Investment
Solid infrastructure is vital for businesses to succeed, and in the modern world, this means using the right technology.
By not investing in the right infrastructure to support your employees, you’re setting your business up for failure. It's particularly evident in poorly managed remote workforces. Workers are stuck carrying out trivial tasks instead of working efficiently to boost revenue.
For example, a small business customer service department might deal with 200 customers. In a scaled-up business, they could be looking at over 20,000. To deal with the increased workload without hiring hundreds more staff requires technology.
Technology is moving at a lightning pace. AI tools and automation provide inexpensive options for small businesses, reducing the burden on their employees. It overhauls your business processes to be leaner and cheaper.
There’s a wide variety of tools available to assist your employees in doing many things, for example, tools to help manage your inventory and prioritize your tasks. Whether you want effective marketing or to connect a remote workforce, technology is the solution to inject life into your business scaling strategies.
5. Losing Sight of Customer Experiences
It’s easy to get caught up in building your business. You’ve taken your idea from a seed to a small tree, and now you’re about to turn it into a massive, strong oak.
However, while you’re tinkering with product features, technology improvements, and the machinations of your business, you can’t forget about your customers and their experience.
Customers are the reason your business exists. If your priorities shift to scaling your business, their experience suffers, leading to unhappy and dissatisfied customers. Reputation management is crucial for small businesses. While your strategies may be successful, you could end up with a smaller customer base and a declining reputation.
Losing focus on what’s important is not a new challenge, which makes the solution more simple. Pause your scaling strategies and take care of your customers.
Nobody wants to stand still when they see their business flourishing, but it’s essential not to ignore customer problems and experiences. Work to resolve customer issues before they grow out of control.
You don’t need to race to the finish line. Sometimes, planning carefully and taking a measured approach can be the way to success. Keep customers as your main goal. Continuously assess how the changes you implement will affect their experience.
Don’t Let Challenges Downscale You
Challenges are perennial in every walk of life, and business is no different. No matter what level you’re at, you’ll face challenges in getting to the next one.
Even behemoths, like Google or Amazon, find themselves facing new and difficult challenges. They deal with it by adapting, investing in technology, and improving the customer experience.
To have revenue increases, growth, longevity, and customer satisfaction, it’s vital you identify the challenges you face and work to build business scaling strategies that don’t fall into the same traps as other small companies.
Remember to hire quality, not just quantity, and scale when your business is ready, not just when you are. With a strong focus on providing the best for your customers, you’ll gain customer trust and start with a solid foundation as you move upward and outward.
