If you haven’t done it before, how to scale can seem elusive. Here’s how to scale profitably.

First: Create Demand

Scaling a business is predominantly a response to demand. In the economic sense, you can think of demand as an external pressure to grow. 

If there is sufficient demand, a business should scale to meet it.

How do you create the external pressure that wants your business to scale?

• You need to have a product or service that people want to buy.
• You need to make them aware of it and convince them of the benefits.
• You need to make it easy for them to buy from you.

Exactly what each of those looks like is going to depend on what stage your business is in. A startup will probably have to approach new customers individually until they find product/market fit. A company that is more established will have an existing product, marketing & sales channels and procedures to optimise.

It’s easier to create demand in an emerging market, or within shifting market trends in your industry. It’s much harder to do it in a shrinking or static market.

Then: Build the Organisation

Your company should scale in response to demand, not in the hope of it. Customers should want to deal with your business before you build the organisation.

Building the organisation is the response. What does building the organisation include?

• Growing a sales team (or entire sales organisation)
• Creating back-office departments like Finance and HR
• Integrating software like CRMs and ERPs to streamline your business
• And many, many more things

Don’t build it all at once, just build what you need to. How do you know what part of the organisation to build? As you respond to customer demand, certain things in your organisation will break. They’ll start holding your company back. Those are the things you should fix – the parts of the organisation that start holding you back, preventing you from scaling.

Be very cautious about building parts of your organisation that don’t solve an obvious need. See how far you can go without. Building an organisation adds cost. Cost that is hard to remove once ingrained and may have zero benefit – or even create drag and hold you back. 

As the saying goes, if it ain’t broke, don’t fix it.

And Repeat

So: create demand and then build the organisation in response to it.

In reality, you don’t do just one, then the other. You create pressure, then you scale the organisation. And you keep creating pressure, and then keep scaling the company. Repeat forever.

It’s tempting to scale the organisation in preparation for demand. But that demand may never come if you haven’t created the external pressure yet. Get it backwards and go bust. 

For an example, look at Guvera. Never heard of them? Not surprising. They’re an Australian streaming music company nobody remembers. They scaled their organisation off investor money, but had almost no revenue to justify it. This became apparent in their failed ASX listing, which showed $1.2m revenue with $80m of expenses. Clearly a company that should have been searching for product/market fit, rather than building their organisation. There are many other examples. Use them as cautionary tales – and scale your business the right way.