There is a tremendous emphasis on scaling up in modern business, as if the whole definition of success in commerce is to scale up to infinity. In truth, it is a fool’s errand in most cases, because scaling is only a by-product of success, not the target.
In the same way that every individual’s idea of success is different, every business’s goals should be, by their very definition, different. Not every entrepreneur is the next Steve Jobs, and nor is every start-up the next Apple. While every entrepreneur will have their own idea of what it means to ‘make it’ - whether it is buying a Lamborghini or changing the commercial landscape forever - businesses need to make a profit, pure and simple.
Sometimes, this involves scaling up, and sometimes it means the opposite. It is therefore crucial that you understand the difference, and whether scaling up is the right path for your company:
Assess whether you could actually meet additional demand
Although using ‘scale up’ as a catch-all business strategy sounds smart, it is actually incredibly vague. When working out whether your company should scale up or not, it is best to assess the details first.
One such detail is whether your customer base is actually large enough to accommodate your expansion, or whether your supply will outstretch demand instead. Few markets are bottomless, so eventually you will run out of potential customers. It is wise to accurately estimate how many customers you are hoping to land over a certain time period, and scale to match.
This will involve doing detailed market research, competitor analysis and an assessment of the efficiency of your supply line.
Of course, you could face the opposite issue. If you undertake a huge marketing campaign, attracting lots of customers in the process, you may find yourself overwhelmed with orders and end up unable to meet demand. In this case, it is best to keep improving the efficiency of your production line, through investing in a conveyor system, such as those from fluentconveyors.com, for example.
There are many additional ways you can make more money
Another reason it is wise to assess all your options before scaling up is that there are plenty of other ways you can generate additional profit other than growing your team and infrastructure.
For example, you could increase your profits by offering new products at little additional cost. If you make a certain product and there is demand for similar variants then it won’t cost you much to meet that demand. In fact, given that you would have invested in the existing molds, machinery and work processes, it would make a lot of financial sense to make as many similar products as possible, in order to maximize the investment.
Scaling up means more risk without the guarantee of more reward
Another consideration to make is that scaling up involves a great deal of risk and leverage, without any guarantee of a greater reward.
While investing in additional capital like real estate, production machinery and staff members sounds smart on paper, you may not actually need them. By investing in these avenues, you risk tying up money you could have better spent elsewhere - such as making sure your existing business model is working well enough, and saving enough for a rainy day.