There are a few distinctions between starting a business to scaling and growing a business. Trust us, we know this first hand. What we experienced was that starting a business has a whole bunch of hurdles to cross, and as you become a ‘pro’ at crossing those hurdles, then scaling a business presents you with a new set of hurdles that you have to learn to cross. Issue is, as with most things in business, there is no manual or plan set in stone to give a step by step guideline on how to successfully scale a business. But, as one does, we looked to one of our business gurus – Tim Ferriss, for some advice.
According to Tim Ferriss, there are 3 fundamental steps in scaling a business. To those of you who have been living under a rock for the past decade, Tim Ferriss is an investor, entrepreneur, author and lifestyle guru. He is undeniably one of the most prominent figures in business literature and is the man behind the infamous ‘The 4-hour work week’ book.
So, without further ado, here are his 3 steps to growing a business:
1. Endgame in sight
Understanding, straight from the get-go, your endgame is crucial to any business. Most business owners usually only like to look a few steps ahead so as to not lose focus, but having an endpoint helps a lot with strategy.
Ferriss stressed the importance of understanding if you are building a company that will make an exit some day, or a company that you will keep and essentially grow as a lifestyle path. In his exact words: “It’s only when you’re clear on your destination that you can plan a scale strategy to get there. For example, building a company to sell requires a different approach to growing a business that supports a lifestyle.”
2. Understand businesses grow EXTREMELY fast
Once you have your endgame planned out and you know whether you are going to be selling the business at some stage, or in fact, keeping it and making it an integral part of your life – then we can move on to the second step. The step that makes us understand and accept that businesses do grow fast and sometimes require growth capital. This capital, at most times, has hidden ‘expenses’ within. What he means by that, is that if a business reaches a point where it requires some capital and goes through a capital raise, then the pressure the business comes under is immense. Both from new shareholders, as well as targets etc. Also, the loss of equity in the business is worth more than the underlying value.
With that being said, he outlined 3 alternative types of stages that companies will go through in order to secure this growth:
Most of us, if not all of us, start here. The bootstrapping phase. This is the phase that when you have an idea and you want to bring it to market quickly, you will do so on your own terms and resources to make sure it has “legs” or potential. For this stage of growth, you can use your own capital, or crowdfunding or the 3 F’s (Friends, Family or Fools) to use their capital to prove an idea without taking a big financial risk.
- Strategic Advice
A business that is scaling, will soon exceed the point where the founders of the business can not grow it alone. When you reach this point, strategic advisors can help you escalate and overcome this growth hurdle and get to the next step. That is because the optimal strategic advice will minimize your learning curve and become a catalyst for growth.
Ferriss explained that the strategic advisor’s needs will vary by business, but the type of advice you can leverage includes growth and scaling tips, financial expertise, product development, market segmentation or logistics experience.
Strategic advice can be informal too. For example, Ferriss emphasised the benefit of finding people who already obtained or managed to work hard and get the results you want and then arrange to meet for coffee. A useful platform for this is LinkedIn. With LinkedIn, you can reach out to a lot of influential people and arrange a coffee or a chat. Use this opportunity to not only discover the strategies used but find out whether they’d do it the same way again. Or, if they’d take a different approach. This is important, if they would do things differently, make notes of that. This, Ferriss explained, is a brilliant way to fast-track your growth.
- Outside Investment
Once advisors have stimulated growth, the next big step is to acquire or find an outside company to get to the next stage. For example, this might involve a private equity company or a venture capital firm to fund with cash and resources or to help secure a merger with another company or simply buy more resources to grow.
3. Overcome cash constraints creatively.
Regardless of which strategy you may choose, you will need funding to stimulate your growth and help you implement the actions necessary to take you to the next step. Whether this funding comes in the form of equity or debt.
Lack of funding can be a big obstacle for growing businesses, but fortunately, there are plenty of creative options you can explore before seeking investment and sacrificing equity.
One of the most creative ways in securing growth capital is by leveraging modern day fintech platforms such as Fundrr to provide seamless and accessible unrestrictive working capital for your business. The new age and era of technology allows business to get access to funding at a quicker rate and that ties in with Tim Ferris’ advice, to get capital to grow.
You can create an account and apply online directly here.