Many business owners have ambitions to scale up their business. But how do you know when it’s the right time to do so? Get your timing wrong and you risk wasting the money, time and effort you invest.

Cash flow problems, where costs increase in advance of higher sales revenue can even threaten the survival of businesses that expand too quickly.

Research by the ScaleUp Institute found that businesses don’t have to be young to transform into faster-growing enterprises, with 51 per cent trading for ten years or more. It also found that businesses increased chances of scaling up successfully by operating close to other companies in the sector.

According to a report by Innovate UK, having a strong management team is a critical factor for scaling up successfully, rated as “very important” by more than 80 per cent of both business leaders and investors. The next most important factor was market demand for a business’s product or service.

This guide explains the key factors that indicate if a business is ready to scale, what to watch out for and quick wins that will help you get the timing right. The next step will be to use our action plan to direct your change and improvement.

Ambition and confidence of business owners and its leadership are a prerequisite while operating in a growing or new market will provide favourable conditions.

A favourable outlook

Scaling up inevitably means taking a view about the future and how the market is changing. If you see the demand for your product or services growing then this strengthens the case that this is the right time to invest in more staff, new equipment or larger premises.

Tell-tale signs

Tell-tale signals that the time to scale up is ripe include your existing processes struggling to cope with a higher volume of business and increasing the volume of products or services you sell to each client.

Businesses that have been successful up to a point may come to the realisation that they now have sufficient resources to invest in the next stage of the company’s development.

Your company’s finances

Before taking the plunge and scaling up, it is important that you have a sound understanding of your company’s finances. This includes looking at financial forecasts, end of year financial accounts and booked work.

This information can then be used to produce a detailed business plan that you can use to examine whether you’re ready to scale and present to potential funders.

Scaling up and when to do so is a strategic decision but many small businesses don’t spend enough time on strategy. Business owners and managers can get stuck in “working in the company” rather than “working on the company”.

Caught up in their day-to-day activities, business leaders can be too busy to notice that they have hit certain milestones and that they need to make changes to support the sustainable growth of their business.

Similarly, scaling up quickly because of a pick-up in demand, but without proper planning, can lead to a lack of coherence between different parts of your business. This can result in solutions and strategies being slapped together and not being sustainable.

Building a team that can help you scale

Failure to bring in people with managerial and administrative experience of working in a scale up situation can derail the process.

According to research cited in serial entrepreneur’s Sherry Coutu’s, Scale-Up Report, 61 per cent of UK scale-up leaders said the lack of such talent hindered their company’s growth.

Lack of access to finance can delay scaling up

Not having access to appropriate finance and growth capital is a factor in determining when a business is able to scale up. Bear in mind that choosing the right funding – and securing investment – takes time, so don't make the mistake of leaving the financial side to the last minute.

Make sure you are meeting a real customer need

While the desire to scale up is understandable, getting the timing right is not straightforward. Companies may be attracted by growth in the market that turns out to be short-lived and does not justify the investment. Products that are selling successfully might still need work to be standardised in a way that makes them scaleable.

Avoid being all things to all customers

Before a business can scale up successfully it needs to make a fundamental shift in its approach. Rather than bending over backwards for customers out of a sense of desperation to win and keep their business, avoid being all things to all customers.

Standardising your product or service and producing a “repeatable” product and simplifying your processes allows you to lower costs. This may mean identifying those products or services that you wish to focus on, and jettisoning those that are non-core.

If you do need to customise your products or services ensure that you have benchmark costs in place to reflect the additional times and resources required.

Take steps to boost efficiency

Scaling up will increase the managerial workload, so before you go ahead with consider whether you have the right tools and processes in place to manage things like payroll, forecasting and stock.

Having the right tools and processes in place will boost efficiency and enable managers to focus on the aspects of the business that contribute to hitting its strategic targets.

Scaling up doesn’t necessarily mean hiring lots of new people or investing large amounts of money, it could be launching a new partnership or targeting a new demographic.

Bring your staff with you

Ensure staff and structures are flexible enough to facilitate growth and allow team members to take ownership of change. Prepare staff for the changes and potential upheaval to long-established ways of working and plan how key team members’ roles will evolve to meet the changing needs of the business.

Involve your suppliers

Businesses don’t operate in a vacuum, so involving your key suppliers and communicating in advance what you expect from them, such as scaling up their own business to meet your demands, can be vital.

Don’t wait for the perfect time

There will never be a perfect time to scale up your business. There will always be challenges and a degree of risk. It’s important to do the right preparation but at some point, you’re going to have to make the leap.

Now you’ve learnt about the underlying factors that affect scaling up your business, use our action plan to direct your improvement efforts.