Written by Shawn Waugh
Passion. Necessity. Side-hustle. There are myriad reasons why people choose to start their own businesses. But small-business owners close their SMBs for just as many reasons: lack of profit, growing too quickly and overextending, or remaining stagnant and getting outperformed by the competition.
There’s no guarantee a business will be successful – in fact, 90% of startups fail. But with the proper planning, you can lay the groundwork for proper, sustainable expansion from the get-go.
1. Create a business structure that limits your company’s liability
Your business structure is crucial to protect your personal assets from anything that happens during your course of work and, later, to protect your partners’ investments from anything you do in your personal life.
If you’ve already been busy and working as a sole proprietor, it’s never too late to convert to an LLC or S-corp (by way of C-corp). After talking to your accountant (or other financial professional) to determine the right business structure for your situation, you’ll also want to file for your Employer Identification Number – even if the only person you’re initially paying is yourself.
2. Implement a project-oriented approach to work
Traditionally, small businesses (and especially service-based agencies) tend to grow slowly. The founder/owner often operates as the jack-of-all trades and wears every hat they can to keep overhead down. Only when they reach the point of exhaustion, but want to take on yet another client, do they think about adding another full- or part-time member to the team. This, however, leads to a cat-and-mouse approach to hiring. When a new team member is added, then new clients are rapidly sought out to cover the added operating cost the company now endures. Then, when they’re overwhelmed again, a third team member comes onboard, and on they go.
The alternative to start-and-stop hiring is to take a project-based approach, where bespoke, flexible teams can be assembled for each project that a client needs. This can free up the principle to focus on the work she finds the most rewarding – and profitable – while offloading specific tasks to other people or businesses that may be able to do those things more cheaply or more efficiently. To do this effectively, you need to maintain a bench of contractors, vendors, and other small businesses you can tap when accepting new projects.
3. Prioritize process standardization and automation
Process standardization may sound like specialized upper-level supply chain management lingo. But when you break it down, it’s really about having disciplined routines. Consider a billing question from a customer or client. What happens once the email is received: does it go to a general inbox where it sits and waits to be attended to in-line with all the other emails that are looked at during the day, or does it get routed to a specialized inbox? Is that inbox checked daily, or whenever other members of the team have the bandwidth to take on extra work that day? Does it get forwarded to someone else to answer, or is the person who opens it expected to find the answer – and not work on anything else – until they get it? Whatever that routine is, that’s a business’s process — and if it happens the same way every time, it’s standardized. Standardized processes are important because they allow you to identify inefficiencies and weaknesses in a system. But if there’s no standardized process in place – let’s say that sometimes a founder clears their inbox every day, while other times allowing unread emails to go stagnant for weeks – then there’s no clear way to improve.
Process standardization goes hand-in-hand with automation. In fact, we cheated a little in the example above – if a billing inquiry goes straight to an inbox dedicated to billing questions, that’s already an automated process. It happens the same way every time all on its own. Every process that can be automated, from routing emails to sending monthly invoices, means time saved. It also allows you to treat your business like a modular operation, and if there’s an issue with one block — it’s taking too long for your product from your warehouse to ship or for emails to get answered – you can swap it out for a new one.
4. Set realistic growth goals
Your growth rate is heavily influenced by the kind of business you own. Service industries are dependent on the cost of labor for people who can provide a specific service and manufacturing is dependent on the availability of materials and strength of the supply chain. This means there’s generally a hard cap on the number of customers or clients you can take on before your costs go up or you need to source new suppliers and talent pools, slowing down growth. If you’ve started a Saas business or license IP, then every new customer comes with fewer new costs (like server bandwidth), meaning you can accommodate new growth easily.
That means you should begin making preparations to overcome those hurdles before you run face-first into them. Do you have back-up vendors and suppliers in case your main one runs out of stock, and are those prices still feasible for running the business profitably? If growing requires investing in capital goods like equipment or tools, do you have investors or finance institutions you can turn to when the time is right?
5. Choose your SMB stack
As your company grows, you’ll find yourself needing to expand beyond a simple (or extensive) spreadsheet. You’ll fundamentally need three components to your finance/payments platform stack: finance software to keep your books in order, a payroll company to pay your employees (and yourself, depending on your company’s business structure), and a separate AP platform for your contractors. The trio you choose varies based on the size and type of your SMB, but we’ve put together our recommendations for every combination.
6. Gather data everywhere you can
How many people open up your emails, and of those, how many click through? How long does the average person on your site take before going to checkout, and is that amount lower for repeat customers? Do visitors to your blog find it organically or through advertisements? If your business is online (and if it’s not, it should be), then opportunities to learn about your customers abound. The only way to scale is to get new clients, and services like Hubspot and ActiveCampaign can provide you with powerful metrics to help you understand where you’re reaching new customers and where you aren’t.
7. Commit to engage after closing
“You gotta sell ‘em even when they’re already sold.” – Reprisal
People have cold feet. Your work doesn’t end as soon as you close: your customers might panic as soon as they’ve signed the contract, started their subscription, or finished the checkout process. That means you need systems in place to help customers find value as quickly as possible. For example, a Saas business could offer demos of the features its users find most valuable, or an online retailer could offer coupons or tracking information after a purchase. Word of mouth is ultimately the strongest form of advertising, and your happiest customers will become your best cheerleaders.
Deciding to Scale vs Natural Scaling
Founders often feel like scaling is a voluntary decision – which makes sense when you look at it from a role-based perspective. You’re either ready to take on another team member to share the workload, or you continue to try to do it all yourself. But when you take the project-based approach, then scaling occurs more granularly and naturally, since you’re already delegating pieces of your work to specialists who slot in to that project.
As more work comes in, you’ll divide them into projects. Those projects are attended to and completed by a flexible team of contractors and vendors who fill those roles. And then when the number of projects outpaces the amount of time a founder wants to spend as a project supervisor, they can bring in a project coordinator or manager to handle that workload.
In this way, the company scales organically, brick by brick.
Scaling and Liquid
Managing your flexible team is a challenge in itself: projects need to hit their benchmarks while remaining profitable. On top of that, the paperwork that comes with onboarding new people to your bench, matching invoices against work orders, and sending payments can create headaches on their own. That’s why we made Liquid – a single unified contractor management system so that founders and entrepreneurs can focus on doing the work they love. Liquid gives you the spend management tools you need to keep your project in the black, check project creep, and pay your team across the globe.
Liquid’s here to make scaling a breeze.