YOU MADE IT! You wrote the business plan, put in the long hours, weathered storms, and watched your competitors drop out one by one. You have made it past the dreaded 18-24 month period that most small businesses fail. Revenues are growing and the company is projecting to be in the black(profitable) for quarters to come. So now comes the important question. Is it time to scale? Well, it may very well be. So you go out and start looking at buildings for a second location so that.............I'm going to stop you right there! Far too often, entrepreneurs fall into the trap of thinking that they have to have brick and mortar to achieve scalability( a fancy way of saying grow the business). Contrary to popular belief there are many ways to scale your business. There are not only easier ways but some are so cost effective that they won't cost you a dime. Yes, you heard me right! Brick and mortar is not always the way to go. I mean you can if you have to but it's not the only way. The savvy entrepreneur is always looking for ways to cut cost. If you fit that description and at the point of thinking about scaling, get ready because you are about to receive a ton of value from this piece.
With Our Powers Combined...
(Only a kid who grew up in the 90’s would get that reference.) One of the best ways to scale is to joint venture with another firm. The important thing to remember is to find a partner that compliments what you do well already. For example, at OWLS, we are education and business strategists. We keep up with industry trends and help your business to achieve profitability and scalability. However, there may be a time where we may come across a client who has a legal need. OWLS could partner with a law firm to provide that service to the client. That law firm would be able to do the same if they had a client with a small business in need of strategists. This partnership increases credibility for both companies and adds tremendous value to both client bases. Another thing to take away from this example is that notice how both partners are different yet compliment each other. We do not do the same thing, so there is no confusion about who does what ( even though it is possible for competitors to enter a partnership that can become quite lucrative). Also, the partnership is not so out of this world that it makes sense. For example, it does not seem to make sense for OWLS to partner with a retail store that sells shoes. Could it work? Sure! However, those types of partnerships tend to be very limiting.
New Products and Services
A new product or service is a great engine for growth. Product diversification can lead to new clients while adding more value to your current customer base. For example, let's say you have a barber shop or a hair salon, and you are trying to find a way to scale to get new clients or provide more value to your current customers. Why not hire a masseuse? They would set up inside the shop, and once they finished with their hair, the body would receive attention. A new hair style and a message would make the customer not only look good but feel good as well. If you are the hair salon, maybe you have added a person that provides manicures and pedicures. Product diversification gives you an advantage on your competitors and maybe even start to compete with companies that are bigger than you. At OWLS, we regularly preach professional development to entrepreneurs because it will spark new ideas like adding new products and services. So when it comes to growing, consider this route.
The Global Store
Many business owners are starting out feel they have to have what we call a "brick and mortar" or just a physical store. I think maybe they have to see their name on a building or just have a building to believe that their business is real. I always advise avoiding having a buliding if you can. It's for that reason rather in a startup phase or to scale to consider e-commerce. E-commerce is a digital marketplace that allows you to become a global store in a matter of minutes that is so much cheaper than having a physical storefront. E-commerce is growing very fast from a $300 billion industry now to a projected $1 trillion industry in 10 years. You have many options to start your store. Etsy and Shopify come to mind. You could also have the store on your website you want. My point is that I would rather have a global store, that is a fraction of that cost, that is open 24 hours, which doesn't force me to be behind the counter the entire time.
Other People’s Space
If you live in Memphis, then you know the Bluff City treasure that is Mekeda's Cookies. I always thought that one of the smartest things they did was that even though they have a physical store, they put their cookies in the grocery store. From Kroger's to SuperLo people all over the city enjoy those delicious cookies without having to drive to the Orange Mound community, unless they want to. Think about using other people's space, marketing, and time to sell your product. Just like the E-commerce, it allows you to generate more revenue with out making the sell yourself. The beauty of having your product in a place like Walmart or Whole Foods is that people must go to those places for household items which only increases the chances of them running into your product. This form of generating revenue is called "horizontal money" because you can literally make money while you sleep.
Subscription Pricing Model
In case you didn't know, when your customers are making decisions on whether acquiring your services or products, most of the time, they look at the first number and make the decision from there. If you ever wondered why things are priced at $1.99 or $399, then that is why. So for those customers who think you may charge too much, try a subscription pricing model. This is a really hot trend in business right now( no it's not the fashion industry, but business has hot trends as well). Just about anything from fashion, food, cosmetics and yes even haircare. Many hair salons and barbershops have been very successful with it. What's the value to the consumer? They get a commodity or service that they don't have to pay an enormous amount up front but get the same level of service as if they did. What's the value to the business? A constant stream of revenue that will net you more long term than if you had your one-time fee. Thinking about a subscription model is something all business owners should strongly consdier even if it's only part of your business.
What’s The Bottom Line?
When it comes to starting and growing a business, scalability is the name of the game. Banks and investors are going to look for that in your business plan. So these ideas are a great way to start thinking about that. These examples are not the "gospel" in scaling but hopefully it will spark other ideas to do just that. Before you think major corporations don't think about scaling and just live off the success of one thing, then you would be wrong. Tesla could have just stuck with the $130,000 model X but when they realized there was a market for the middle-class family, they clearly did the smart thing and created the Model 3 at $35,000( which is why those preorder numbers are breaking records). So remember in business if you are not scaling, then you are dying. #AnOwlInYourCorner