Issue 8 of The road to entrepreneurship
How and when you grow your business is crucial.
By the time you get past the initial twists and turns involved in the first six months of business ownership, you’ll have a firm grasp of the steering wheel. You’ll feel more in control and confident in your ability to avoid mistakes and become more proactive. From six months to the end of your second year is when you should start to scale your company. You’ll want to begin increasing things like:
This is the point at which you’ll be working on the important formula of optimal amount of business + right quality/quantity of resources + timing = maximum profitability.
Growth for growth’s sake is not good.
You want to accelerate your business, but too much growth too quickly or at the wrong time can end up causing you problems. Andrew Caplinger is a perfect example. He learned firsthand from his start-up fish market that improperly managed expansion could do more harm than good.
“We have so much business, we’re losing business,” he says. "People don’t want to wait. For example, during Lent, there’s up to an hour-and-a-half wait at the counter!” Because the food preparation was all manual and done fresh on site, Andrew and his staff couldn’t keep up with demand. Andrew’s situation illustrates how unbalanced growth can hinder your venture – by taking on new business without having enough resources to meet it.
It’s all about balance.
As an entrepreneur, there are three business components you always want to keep in mind: (1) Traffic, (2) Conversion and (3) Economics. These points represent a cycle you want to continuously increase over time. Ideally, more traffic results in better conversion rates, which leads to increased economics.
It’s important for you to be able to take a step back and look at this three-way balancing act objectively. This is what will allow you to recognize and implement the minor tweaks that can make a major difference in your bottom line.