How to scale your business without taking on debt

business expansion

Scaling your business without taking on debt is not impossible, but it is easier said than done. You need money to scale and your current savings might not cover the costs. You might think the only way to gain the revenue you need is to get a loan, but you can scale your business without taking on debt. 

In this article, you will understand what it means to scale a business and how to do so without taking on debt.

What does it mean to scale a business?

Increasing a company’s capacity to make money or grow without hindrance is known as scaling. It usually entails creating sustainable methods, procedures, and tactics to assist your team in more effectively managing rising demand, without making significant expenditures on staff, machinery, or technology. 

Periods of scaling are common for all businesses, but they’re especially crucial for startups and small enterprises. A scalable company plan must facilitate expansion while keeping expenses under control. This may include adjusting business practices to optimize efficiency, broadening sources of income to enhance revenue, or using technology to meet rising demand. 

When is the right time to scale your company? 

Scaling as quickly as possible may make sense, but doing it too soon might harm your company. After you have established systems and business procedures to enable expansion and have a stable cash flow, you will usually start to consider scaling. 

The general rule? After your sales have increased steadily for six months, you should consider scaling.  

However, you may want to consider growing sooner rather than later if your small firm or startup encounters any of these difficulties:

  1. When workers are unable to do their jobs: When staff members often fail to complete tasks because they are overworked or lack the necessary time or resources, it may be time to start searching for more economical solutions to reduce workloads. 
  2. When the number demand is rapidly growing: Every business needs customers to grow and make a profit, but when the customers you have are too much for you to handle, it may lead to your business failing. It could be time to invest in solutions to assist you if the manpower you currently have cannot meet the growing demand. 
  3. When achieving long-term business objectives is impossible: Scaling may help you move from strong months to outstanding yearly results if you’re consistently exceeding short-term goals but are unable to envision how to achieve your long-term company objectives with your present personnel, technology, or equipment. 

How to scale your business without taking on debt

You generally need money to scale your business even though you might not need much. The money you have at hand might not be enough, so you need to seek funds from outside sources. One way to do this is by taking out a loan. However, it is still possible to scale without taking on debt. Let’s explore some ways you can fund your scaling business without taking on debt:

1. Find an angel investor

Even if you don’t currently have the funds to finance your firm, you may know someone who does. Finding someone with a ready cash flow might help you do more tasks faster. 

If you are running a small business, you might want to reach out to family and friends to check if they are interested in investing in your company. You may be able to seek assistance from an angel investor if you are unsuccessful in finding investors from your social network. Angel investors usually provide young companies with funding in return for convertible debt or company stock To avoid debt, get an angel investor interested in investing for equity. A large number of angel investors are part of networks that exchange investment resources.

If you choose this path, formalize the procedure. To prevent future disputes and possibly harmful disagreements, create a formal written agreement with each investor. You should involve a lawyer also, and every agreement made should include details about the amount of money invested and the expected rate of return. 

2. Find a business partner

Getting a business partner is an additional option, with the added advantage of having someone else share the burden of running a business with you. You should only use this strategy if you’re prepared to give up some degree of control over your company.

It’s essential to contact an attorney to write a partnership agreement that contains an “exit plan for the relationship,” along with financial specifics, expectations, and a detailed split of who will handle which elements of your organization.

3. Grants from the government

Although there may be a lot of competition for them, you may also check for grants from local organizations and the government.

Reach out to people who might have information about available grants or browse forums where grants like that are posted. When you find a grant that you qualify for, make a strong proposal and apply. 

4. Wherever possible, cut down on personal spending

Making financial sacrifices for the sake of your company is a common part of entrepreneurship.

There are a lot of expenses to consider when you are starting a new business. You will save yourself a headache and have more money to invest in the new business if you keep your bills low.

5. Look for a side business

Although taking up a side job won’t make you wealthy, doing so may help you raise money for your company.

Put money earned from side projects into an account that is hard to get to. In this manner, you may increase your fortune and resist the temptation to spend it carelessly. 

6. Put money back into your company

Despite the temptation to utilize your earnings to settle personal obligations, prioritize the expansion of your company.

Refrain from spending your earnings immediately. Before repaying any debt, reinvest your earnings back into your company. This is essential and will sustain your company. It will save you later on as well. Hold off until you are consistently turning a profit. After that, you might increase your debt repayment and expenditures.

Best practices when scaling your business

There is no one-size-fits-all method for effectively scaling your company, and your strategy should be in line with your business model. If you want to scale your business quickly and successfully consider the following best practices: 

  1. Invest in automation and technology: Your staff may spend less time on manual busywork and feel less stressed about compliance by using specialized software made for HR and financial automation.  For instance, your HR staff may eliminate the need to manually input data, check timesheets, and set up direct transfers by using a payroll automation platform.
  2. Develop your managerial abilities: To successfully navigate the sometimes challenging process of scaling, teams need strong leadership. As your company grows, make sure your executives have the education and resources they need to assist staff, make strategic choices, and work across departments.
  3. Improve your budgeting: Invest in the resources you need to think through various possibilities and create backup plans, going beyond simple planning and budgeting. Since growth isn’t always linear, you should make sure you have enough reserves in case your engine slows for a while. 
  4. Make contact with clients: A loyal customer base is your greatest asset. In addition to increasing customer loyalty, investing in solutions that keep your present clients satisfied and involved allows you to get raw input that you can use to pinpoint unmet requirements.
  5. Make a risk assessment: A shrewd risk assessment may assist you in identifying potential obstacles and making appropriate plans, even while you cannot account for every potential setback. As your approach develops, including a frequent risk assessment in your scaling plan helps you stay aware of emerging problems. 
  6. Determine the main prospects for growth: Offering clients a unique answer to an issue is the quickest way to develop your organization. To put it simply, by satisfying an unfulfilled need. Look closely at what your rivals are offering and consider what your present consumers would want to see included to find these market gaps that your company can fill.

Common mistakes when scaling a business 

Rapid expansion poses new obstacles for your company, even if you have a well-thought-out plan and a clear set of objectives. During the process of scaling your business, you are most likely under a lot of pressure and more liable to make mistakes. Although it is unavoidable to make a few mistakes, you should avoid the following common mistakes that could prevent you from scaling successfully:

  1. Putting short-term objectives ahead of long-term ones: Although quick wins may increase income right away, they may lead to companies ignoring the strategy and infrastructure required to ensure long-term growth. You run the danger of straining your finances and losing your client base if you devote too much time and effort to short-term growth objectives rather than investing in essential operations. 
  2. Scaling too quickly: A lot of small companies and startups that seem to be sudden triumphs are the result of months or even years of gradual effort. Only invest in scaling when there is a real need to do so, resist the urge to grow based only on estimates. Similarly, avoid trying to expand your firm by making drastic changes to your operations all at once. Instead, make deliberate changes gradually so that you have time to make well-informed choices and have time to evaluate their effects before moving forward.  
  3. Getting distracted: Scaling may become a recipe for resource waste, misplaced priorities, and stopped progress if you lose sight of your main goals. Growing a firm requires teamwork, and each member should be well-versed in performance metrics and the procedures that lead to them.

Conclusion

The cost of scaling may cause some businesses to remain stagnant, but that should not be your story. Do not let money keep you from achieving greatness. Even if you don’t have the money yet, you can still scale your business if you have the right strategy in place. 

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About the author

Habibat Musa

Habibat Musa is a content writer with MakeMoney.ng. She writes predominantly on topics related to education, career and business. She is an English language major with keen interest in career growth and development.

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