What Are the Common Roadblocks to Scaling a Small Business?
Scaling a small business can be exciting and challenging…but also overwhelming.
In my previous blog: How to Scale a Small Business I discuss how to create a growth plan using your customer needs, product innovation and continuous improvement as the main focus. The other part I mention is getting your risk management right.
Growth and increased profits are the ultimate goals but as well as mapping where you want to go, you also need to look at where else you might end up along the way. It’s important to identify potential roadblocks that may hinder progress so you can steer clear of them, or have the ammunition you need to blast through.
In every stage of your business, you will face risks, there’s no avoiding them, but rather than putting you off, you can plan ways to tackle the potential rough patches and also spread them out, so you aren’t trying to handle too many issues at the same time.
In this blog, I’ll discuss some of the common challenges and risks small business owners face when scaling and how to put effective plans in place to overcome them.
Ways To Identify Roadblocks when Scaling
In order to measure how you are doing and identify the early warning signs of roadblocks and limitations you need to constantly measure and chart your progress. You can do this a number of ways depending on your preferences, however, you want to make sure you include at least one of the following as part of your research:
The easiest and most accurate way to know what your customers want is to listen to them. It doesn’t get more simple than that. Some small business owners cringe at feedback, so I would encourage you to embrace it as the fastest learning curve out there.
Not only do you get first-hand info on how your business is impacting people, but you also get some valuable insights into areas that are working well, need improvement or are poised for expansion.
As well as customer-generated feedback you can reach out with surveys and even focus groups where you can help gather information on customer preferences as well as their pain points and expectations.
As well as getting the upper hand on how well you offer real-world experiences you also show your customers that you care about them, what they want and how you can serve them better.
Keeping books is a time-consuming exercise but one you need to make room for (or budget for) if you want your business to be taken seriously. As well as helping you meet your targets, analysing financial data can help flag potential roadblocks around cash flow and profitability.
It sounds boring but by monitoring key performance indicators (KPIs) such as revenue growth, gross profit margin and operating expenses gives you visibility into the financial health of your business and allows you to watch areas for improvement.
So, for me in my first business, I was buying fabric in U.S. dollars and selling clothing articles to an Aussie market as ready-made clothing (assembled overseas) for a profit. Sounds simple enough. I didn’t really care about the numbers, apart from how much money I was raking in, and because my cycling clothing fit better and wore better than anything else on the market, I was killing it, even against well-seasoned professional brands.
If I had bothered to do any accounting I would have seen a big red flag around being dependent on my Australian customers. I could have played with some hypothetical numbers and seen that if the value of the dollar dropped, I would be losing money….very quickly, and with no way to justify hiking my prices to be double what they were the day before.
I was caught completely unaware and went from a six-figure income to a huge debt pretty much overnight. What I know now is that I needed to have rainy day money aside to help cover me in a crisis, and also invested in stretching my market to Europe and the U.S., not because they are bigger markets, but because they would have been more stable against my outlay.
What your numbers will tell will be unique to you but it’s worth stopping and mulling it over, What If….
Be as accurate as you can be around what scaling costs will be as well as how you pay your supplier (upfront or by credit) so your forecasts can deliver genuine red flags and areas you need to improve on.
Conducting your own market research isn’t as daunting as it sounds and it can really help identify competition as well as market saturation and gaps. Analysing industry trends, consumer behaviour and competitor strategies can provide valuable insights into new opportunities or threats that you can leverage as you move forward.
While none can predict what’s going to happen next, looking at industry trends over time can reveal some interesting patterns that might loop back again or give you a different perspective that can launch a brand new product.
Once you have outlined the risks, the next step is to do everything in your power to avoid them.
5 Common Mistakes to Avoid When Scaling Your Business
There are a number of roadblocks that can turn up as your business scales. Knowing what they are early on gives you time to plan ahead, avoid mistakes and also know what direction to take if you hit trouble. When used in conjunction with business systems and a great team, your risk management plan will help your business become bulletproof as you rocket ahead.
Many entrepreneurs, even experienced ones, can make mistakes that can hinder their growth and success. Here are five of the most common mistakes to avoid when scaling your business.
#1 Limited Resources
When you started your business you could get by on limited resources, probably facing burnout to cover the workload yourself, but when it comes to scaling, you can’t keep it up. You need to find ways to gain enough time, staff and equipment to cover everything you need – with some in the tank for sudden explosions of growth.
It’s essential to prioritise tasks based on their growth impact as well as delegate responsibilities to people who can handle them better than you can.
Outsourcing and hiring new employees are two crucial aspects of scaling a small business. Both come with advantages and disadvantages so it’s important to determine which tasks to pass on to outside parties and which to hire your own people for.
Rather than doing it all yourself you need to outsource non-core functions like accounting and marketing so you have more time for core business activities – what that is depends on your skills, business and industry but examples might be product development or customer acquisition.
Outsourcing gives you access to a wider pool of talent from all over the world so you can match the skills you need to the task at hand.
One way to outsource tasks is by using platforms like Upwork where a wealth of skilled freelancers are available for specific tasks.
No matter how good you are you simply don’t have the skills or experience to support every area of your business. Break down each of the roles needed and give yourself the jobs only you can do well. Everything else needs to be passed along, either to a professional with the skills and capability to do the task perfectly, or someone with a great work ethic who can slog through the stuff that’s more mundane.
Taking the time to carefully evaluate each candidate and make sure they are a good fit for your company culture. Hiring part-time workers or contractors can also be a cost-effective way of bringing in additional help
If you aren’t quite ready for full-time staff then look at freelancers, contractors and part-time hiring to at least provide temporary support and maintain flexibility.
#2 Scaling too quickly without proper planning and preparation
One of the biggest mistakes entrepreneurs make when scaling their businesses is trying to grow too quickly without proper planning and preparation. Scaling a business requires a lot of resources, including time, money, and manpower. If you try to scale too quickly without structure for these in place, you’ll wind up overextending yourself or burning out your team.
To avoid this plan your growth strategy carefully, including:
- Identifying your target market
- Setting realistic goals for growth
- Developing an action plan to reach each goal
- Cash flow projections
- Staffing needs
#3 Failing to delegate responsibilities
Another common mistake entrepreneurs make when scaling their businesses is failing to delegate responsibilities effectively. When you’re first starting out as a small business owner, it’s natural to want to be involved in every aspect of your business. As your business grows you can’t do that anymore, you have to delegate tasks and responsibilities so that you can focus on strategic decision-making and meet your growing demand.
So what’s holding you back? It could be a lack of funds, a fear of losing control or making a change, or not being organised enough to be able to delegate efficiently. In some cases, it can also be down to micromanaging.
Some managers do delegate but then don’t relinquish control, so they wind up micromanaging. This is a serious (and pointless) waste of time and energy, as well as being toxic to employee morale. To do it right, hire talented individuals who are capable of taking on responsibility independently and trust them to do their job well (because of course they can!).
#4 Overlooking cash flow and financial monitoring
It’s easy to get caught up in the excitement of growth and forget about monitoring your finances. Neglecting to monitor cash flow and other financial metrics can be a costly mistake that can lead to cash flow problems or even bankruptcy – I know that sounds dramatic but I came close to losing the lot, so I can’t even begin to stress how real the risk is.
Establish clear financial goals for your business and track your progress towards those goals regularly. You should also develop a system for monitoring cash flow and other key financial metrics so that you can identify potential issues before they become serious problems.
Think about where you can get funding from if you need it and plan these steps carefully. Ultimately your business should be able to pay for its own progression. Talk to a business coach if you are unsure how to cover expenses as you scale.
#5 Failing to adapt to the changing market
Your customers are going to have shifting needs and priorities that are dangerous to ignore. You need to stay flexible, especially in your thinking and be tuned in to the changing market. Ignoring customer feedback or failing to adapt to changing market trends means you will be left behind the rest of your industry and become irrelevant (which is as bad as it sounds).
You need to stay in touch with your customer’s needs and preferences so that you can continue to provide value and build loyalty.
Develop a system for gathering customer feedback regularly and use it to adjust your products and marketing strategies. You should also stay up-to-date on industry trends and changes in the competitive landscape so that you can adjust your strategy for the big picture too. You don’t necessarily need to follow the crowd, but there might be an opportunity you can take advantage of by going in a new direction – being aware of what’s happening is the crucial first step.
Prioritising Sustainability in Your Scaling Efforts
There are endless possibilities when it comes to what the future might hold, but one thing you can pretty much bet works for every industry is a focus on prioritising sustainability as part of scaling.
Sustainability won’t just make your customers and councils view you more favourable, it will also rebuild your resources and save you time and money in the long run.
There are a number of ways you can include sustainability in your scaling efforts:
Prioritise sustainable growth over rapid expansion
Prioritising sustainable growth is essential not only for the environment but also for the longevity of your business. By taking a more measured approach to scaling, you can ensure that your business remains profitable and successful for years to come.
Go for Eco-friendly practices
Implementing eco-friendly practices can include using renewable energy sources, recycling, composting and using environmentally friendly products and packaging materials.
In places where there is a large carbon footprint that can’t be easily addressed you can create some offset initiatives, like planting trees in local rehabit zones.
Monitoring progress towards sustainability goals can help you make informed decisions about how to continue scaling your business in a way that prioritises sustainability and also celebrates your wins (and gives you bragging rights).
Consider the impact of scaling on the environment, society and economy
To prioritise sustainability in your scaling efforts you’ll need to develop a long-term plan that takes ecology into account including
- Resource consumption
- Waste management
- Giving Back
- Social responsibility
- Supporting eco-friendly suppliers
The common roadblocks to scaling a small business – key takeaways.
To successfully scale your small business, it is crucial to identify potential roadblocks that could hinder growth. This means having a clear understanding of your target audience and developing the products, services and communications that reach out and speak directly to them.
As much as possible, avoid common mistakes when scaling your business by sitting down and forecasting where you might end up and what roadblocks might get in the way. Some common hiccups come from overextending yourself financially or expanding too quickly without stopping to perfect the base building blocks that will ultimately hold your business up, no matter how big it gets.
One step many business owners put off is finding the right staff (or outsourcing) to free up their workload and get tasks completed professionally. YOu can and should get help as early as possible so your team can transition into their role before things get hectic.
Whale most of the future is still a mystery, prioritising sustainability is pretty much a must in any scaling effort. It not only looks good, but you also get extra benefits too that can help with your long-term success.
If this is your first time in business you’re not going to have all the answers, I sure didn’t back then, but experience, practice and continued growth have given me the tools I need not just to run a thriving business, but to teach others how to as well..
Book a free ‘meet and greet’ so we can help you overcome the roadblocks to scaling your business today.
What are the common roadblocks to scaling a small business – FAQs
Q1: What are the challenges of scaling a business?
A: Scaling a business involves overcoming several challenges, including:
Resource Constraints: Limited financial and human resources can hinder growth. Small businesses often face difficulty in hiring and retaining skilled employees or accessing sufficient capital.
Operational Complexity: As a business grows, its operations become more complex. Managing a larger team, supply chain, and customer base requires efficient systems and processes.
Market Competition: Expanding into new markets may involve fierce competition. Understanding local dynamics and adapting your business model can be a challenge.
Maintaining Quality: Ensuring consistent product or service quality while scaling is vital. Quality control and customer satisfaction must not be compromised.
Cash Flow Management: Rapid growth can strain cash flow. Managing expenses and revenue to avoid cash flow problems is crucial.
Q2: Why is scaling a business hard?
A: Scaling a business is challenging for several reasons:
Lack of Experience: Many small business owners lack experience in managing growth, making it challenging to navigate the complexities of expansion.
Resource Limitations: Limited access to capital, skilled personnel, and technology can hinder scaling efforts.
Risk and Uncertainty: Scaling involves inherent risks and uncertainties. Expanding too quickly or without a clear strategy can lead to financial troubles.
Market Changes: External factors, such as economic downturns or changes in consumer preferences, can impact scaling efforts.
Operational Hurdles: Managing a larger workforce and more extensive operations requires effective leadership and operational systems.
Q3: How do you scale a small business?
A: Scaling a small business successfully involves the following steps:
Strategic Planning: Develop a clear and comprehensive growth strategy, including market analysis, target customer identification, and revenue projections.
Financial Preparation: Secure necessary funding, optimise cash flow, and set aside capital for expansion.
Operational Efficiency: Streamline and automate processes, leverage technology, and ensure that your current operations are efficient before scaling.
Team Building: Recruit and train skilled employees, and establish a strong leadership team capable of managing the growing business.
Market Expansion: Identify new markets, channels, or product/service offerings that align with your core business.
Quality Control: Maintain a strong focus on quality and customer satisfaction throughout the scaling process.
Q4: What are the risks of scalability?
A: Scaling a business carries various risks, including:
Financial Risk: Rapid growth can strain finances, potentially leading to cash flow problems, debt, or even bankruptcy if not managed effectively.
Quality Decline: Expanding too quickly may compromise product or service quality, harming your reputation and customer trust.
Operational Challenges: Managing a larger team and more extensive operations can lead to communication issues, inefficiencies, and increased overhead costs.
Market Risks: Entering new markets may expose your business to unforeseen competition, regulatory hurdles, or market downturns.
Management Complexity: The complexity of a larger business requires effective leadership and management, which can be challenging to maintain.
Q5: What prevents companies from scaling?
A: Several factors can prevent companies from successfully scaling, including:
Lack of Capital: Insufficient access to funding can limit a business’s ability to invest in expansion.
Inadequate Planning: Without a clear and well-thought-out growth strategy, businesses are more likely to face roadblocks during scaling.
Resistance to Change: Some organisations resist change and are unable to adapt to the necessary adjustments in culture, operations, and strategy.
Market Saturation: In mature markets, intense competition and limited growth opportunities can hinder scaling.
Regulatory and Compliance Issues: Navigating complex regulations and compliance requirements can be a significant barrier to expansion.
Leadership Challenges: Ineffective leadership or a lack of experienced managers can impede scaling efforts.
By addressing these questions and providing comprehensive answers, you’ll create an informative FAQ section that will help your readers understand the common roadblocks to scaling a small business and how to navigate them effectively.