Properly structuring your business for scalability will prepare your team to succeed through the common challenges of expansion.
Scaling your small business for growth is an exciting challenge to take on. It’s about finding that perfect balance of capacity and capability.
As the size and scope of your company expand, operations will become more complex. When you understand the challenges many business owners face, you’ll be better equipped to navigate the hurdles that commonly hold people back.
Your leadership team needs to be prepared to grow the business without sacrificing quality or increasing costs. A successfully scaled business needs to be able to handle an increase in sales while reducing costs at the same time.
Scaling a business involves careful planning to enable and support long-term growth. Leaders should be prepared to set the framework for cost-effective production, which requires an organized staff, clearly defined systems, funding, technology, and partners.
First, it’s imperative to anticipate your business’ growth. As you prepare for the changes that have to occur, focus on finding the right individuals aligned with the company’s mission so you can strengthen the internal structure and processes.
Structuring a business for growth takes time to strategize and have all your key factors in place. Then your company will be better equipped to handle great levels of success, regardless of the capacity.
Although there is no secret formula to scale your company exponentially, you can follow guidance and tips from small business owners who have succeeded.
You certainly can’t scale a business alone, so the first thing you need to map out is how involved you plan to be. As the company continues to grow, you won’t have the time to handle all the small things that can consume your time.
When you have a realistic expectation of what your role will be, you can create a team that will have the ability to handle what you can’t. It’s crucial to familiarize yourself with the types of business structures that would work well for you.
You may need to consider a partnership agreement to help oversee operations during each growth phase.
There are a lot of costs involved with scaling a business. To handle the growth, you’ll likely need to hire more staff, deploy new technology, add new equipment, acquire new buildings, and so on.
You’ll need to secure financing if you’re trying to scale a business before experiencing substantial growth in sales. You can look for finance opportunities in various ways, such as debt financing with a loan or line of credit, crowdfunding, venture capitalists, or equity financing with angel investors.
Create a plan for how much you’ll need to invest and how you want to allocate it.
It’s important to have realistic goals to keep your profit and losses on track.
You and your team should have a clear target for all business areas, such as cost management, sales growth, recruiting, and training staff — these factors will affect your bottom line.
Using a combination of short-term and long-term goals will create more milestones and make it easier to monitor progress. When you know where the metrics need to be for each department, they can work together to do their part in growing the company.
Scaling your company doesn't always equate to adding many new hires to your payroll. You might only need to recruit a handful of people if they’re high-performers.
Hiring anyone willing to work during the rapid growth phase can be tempting, but that is when you should set the bar high. Choose employees who are passionate about the company’s mission and possess the qualities needed to climb the ladder.
Consider the work culture you want your business to have and keep that in mind during the hiring process. The employees you hire during the early stages will be the ones to set the standard for the values of your organization.
Business structure refers to the legal structure of a company and how it conducts day-to-day operations. It’s a government classification used to regulate certain aspects of the business.
Every new business has to register as a business entity, which informs the U.S. government who is in charge of business dealings and how the annual revenue will be taxed.
It’s important to carefully choose the form of business structure you register because it affects the paperwork that needs to be filed, how you can raise money, your tax burden, and personal liability.
It’s a good idea to consult with a business counselor or accountant because certain restrictions can vary by location. Choosing the wrong business structure could result in complications, unintended dissolution, or tax consequences.
These are the five most common types of business structures:
Cooperative
A cooperative, or co-op, is owned and operated by the same people using the services. The profits are distributed across members, known as user-owners, who vote on the mission and direction of the organization.
Forming a co-op is somewhat complex but beneficial because it can leverage its size to obtain discounts on products and services. They also have increased funding with federal grants.
A corporation is a legal entity with its legal rights separate from the owners. The corporation pays net income or losses taxes, then distributes profits to shareholders.
There are several types of corporations, including:
A limited liability company protects the owner(s) from personal liability. In most cases, your personal assets, such as your house, vehicle, or savings accounts, won’t be at risk if your LLC faces a lawsuit or bankruptcy.
Members of an LLC are considered self-employed for tax purposes, so they must pay self-employment taxes toward Social Security and Medicare.
Partnerships are the simplest legal structure for two or more business owners. Two types of partnerships are commonly used: limited partnerships (LP) and limited liability partnerships (LLP).
Limited partnerships have one general partner with unlimited liability, and the other partners have limited liability. The general structure of limited liability partnerships is similar, except every owner has limited liability.
A sole proprietorship is the easiest business structure to form. You’re automatically considered a sole proprietor if you conduct business activities but don’t register as any other type of business.
Sole proprietorships are not considered separate business entities, so you can be personally liable for the debts and obligations of the business. These are best for low-risk businesses or someone testing their business idea before they create a more formal business.
Deciding how to structure a new business is one of the top priorities of a business plan. You’ll have to verify the legal structure before registering the business name.
Hoist can offer expert training if you have questions about which type of business structure makes the most sense for your business.
Source:
How To Scale a Business for Sustainable Growth in 7 Steps | Indeed
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