10 Tips to Scaling a Small/Midsized Business

Hardly anyone focuses on the challenges you have as a leader of a small business that is established and growing. It really doesn’t matter if you are a leader with around 20 employees and growing or 100 employees and growing. After working with tens of thousands of leaders over the last 25 years, research, and my own experience growing a business to around $100M, I have these 10 tips for scaling your small to midsized business.

1. Focus on Cash-Flow: Growth requires a lot of cash, much much more than many leaders expect. Cash is needed for both investments and when unplanned things happen. It is vital that you have great insight into the coming months' cash-flow and include delays and/or the unexpected. You should have three to four key metrics that are critical to the company’s growth and profitability that you track regularly.
2. Forecast that Sales Always Takes Longer: Many companies have beautiful growth projections and scenarios. Often, the projections do not become reality as sales take more time than expected and require more work than originally thought. Sales is the locomotive of the company and has a big impact on how fast you can grow.
3. Avoid Death Valley: Most small growing companies either stop growing, go out of business, or have their management team replaced. This is due to entrepreneurs/founders/small company leaders lacking the business acumen or the people leadership that is required to operate a larger company. Leaders need to know their strengths and weaknesses, develop themselves and others, and employ people who fill gaps where the leaders have blind spots.
4. Get Out of the Weeds: One of the most common challenges is how to go from founder/entrepreneur to a leader of people and leader of leaders. In the early days of the company, the founder/entrepreneur is involved in all or most decisions. The founder/entrepreneur also knows how to do things best and the fastest way. The challenge is to let go and let people do it in their own way. The result might be 90% compared to if the leader did it yourself but many times that is plenty good. However, if you don’t let go then you will run out of bandwidth and become a bottleneck which results in the company halting its growth.
5. Plan a Year Ahead: Many leaders of small growing companies don’t want to lose the entrepreneurial spirit and become bureaucratic. The problem is that as the company grows, you need to implement processes and systems to manage the bigger size. However, new systems and processes require that people change the way they operate and people generally don’t like change. So, the longer you wait and the bigger the company becomes, the more difficult it will be to implement changes. Think through what is critical in a year or two from now such as processes, systems, and organization, and start implementing them now so you don’t have the frustrations & difficulties later.
6. Build an Organization: Often in the founding of a company, friends, acquaintances, and relatives help out in the company either as advisors or employees. If you want to continue to grow, you need to build an organization with people who are professional in their roles. Dedicate a lot of time to get the right people on board, who not only can do the job, but more importantly also fit in. The saying is ‘if you pay peanuts, you will get monkeys’ so don’t be cheap and invest in people who dare challenge you and whom you can trust. You need to avoid your “old” informal network as it undermines the work your people do.
7. Lead with Toughness & Love: Culture is the most important factor when it comes to speed and ability to execute a strategy. This becomes even more true the bigger you get. In the early days of a company, the company is almost like a family, where the leaders can easily be a friend to everyone. The best leaders in small and large companies are the ones who can set clear goals, give support and coaching while having honest discussions, and make tough decisions that are not always popular. A key is to watch out for people who generate results but undermine the culture and values.
8. Stay On Top of the Game: In today’s business environment the changes are fast and many. It is critical for you to stay up-to-date with the trends especially your industry and its development. If you fall behind, employees and customers will notice quickly and lose faith in you as you come across as not being relevant and on top of your game.
9. Join a Network: Leaders in small growing companies seldom have anyone to bounce ideas off or discuss challenges with. The board of directors or management team is often not the kind of support the leader needs. Join a network or a smaller group of leaders in a similar role to yours and in a company of roughly the same size. This network will provide ideas for ways to solve your challenges and will help you avoid mistakes others may have already made.
10. Focus on the Right Customers: In most companies, it is common that 20% of the customers contribute 80% of the profits. Find out which customers are profitable and which ones are not. For the ones that are not profitable enough, you need to either increase their prices or fire them as customers, unless they are of strategic significance. Also, don’t allow customers to treat people in your organization any differently than you would your own people. If they do, they should not be your customers.

Jonas Akerman Jonas has been a life-long entrepreneur and business leader. He enjoys writing about finance and operations.