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Entrepreneurs naturally want to find ways in which they can grow their businesses, but it is always important to ensure that any growth achieved is sustainable over the long term. This is why thinking in terms of scaling your business — as opposed to only thinking about growth — is essential for entrepreneurs looking to expand quickly.
Essentially, scaling refers to a business’s ability to take on increased demands (in terms of both customers and markets) through having appropriate workflows and structures in place so as not to disproportionately increase overheads.
Scaling a business thus means expanding in such a way that costs do not significantly increase at the same time so that the enterprise remains flexible, agile, and suitably equipped to deal with unexpected changes in the market.
Below are five key tips for entrepreneurs looking to scale their business quickly through expanding into new global markets, as well as for hiring new staff in these markets in the most cost-effective way.
1. Develop a thorough business plan
Even when looking to scale at speed, taking the time to devise a business plan is essential. You need to have a clear and honest picture of where your business is today before you can look to expand tomorrow, as well as have in place strategies for entering new markets and taking on new people in such a way that your resources are not stretched beyond their capacity.
You have to be realistic when formulating a business plan in these circumstances, but this does not necessarily mean being cautious. How would doubling or tripling demand impact you, for instance — what would be the most cost-effective and time-efficient way to engage the new staff you need to cope with such an influx of sales?
Your business plan should also take into consideration whether your technology is capable of being scaled up, or would additional expenditure be required in the scenario above. How sustainable would this be?
The most important feature of a business plan for an enterprise looking to scale up is that it is not set in stone, but rather is able to be adapted to the business’s current circumstances at any given time, and so is a relevant, working tool at every stage of the decision-making process.
2. Hire new staff as cost-effectively as possible
One of the biggest barriers to businesses looking to expand on a global scale is the costs associated with hiring new staff.
This can be especially difficult when you are looking to take on workers in a country other than your own, or when you are entering a new market and are not certain as to whether you will be a success. In this scenario, taking people on and then having to let them go can mean additional costs, and may also contravene local labour laws.
For these reasons, it makes sense when you are expanding globally to consider using the services of an employer of record. Working with an employer of record (EOR) means that instead of you hiring staff in a new country directly, they hire them on your behalf. In legal terms, the employee works for the EOR and accordingly they take responsibility for ensuring payroll and taxes are paid, while you direct their work as you would with any regular employee.
For companies seeking expansion in Asia, working with an Employer of Record Taiwan can streamline the hiring process by managing compliance with local labor laws, reducing risks, and simplifying the complexities of entering a new market.
The advantages to this are that you are able to hire global talent quickly, but without the hassle and cost of establishing a legal entity in a new country. In the initial stages of operation in a new market, this can reduce overheads significantly.
A partnership with an EOR also means that, in the worst-case scenario where an expansion does not go as planned, you are able to terminate a worker without incurring the fees or penalties that might otherwise accrue, as the EOR will be responsible for providing the employee with a new contract or different working arrangements.
3. Manage your cash flow efficiently
Although the idea behind scaling a business is to expand without excessively increasing costs and overheads, it will nevertheless still be the case that scaling up requires investment. Therefore, understanding where you are situated in terms of cash flow is essential, as this will determine the resources you have available to cover the inevitable costs associated with scaling up.
Cash flow is all about your business’ capability to cover both the current and upcoming expenses that you require in order to operate on a day-to-day basis.
Therefore, scaling your business will require you to perform regular cash flow analyses (monthly, at the very least) as this gives you a more accurate picture of the sort of cash you will have to hand to meet your expected expenses.
For instance, through analysis, you might discover that it would be helpful for cash flow if you revised the terms under which customers settle your invoices (e.g., from 60 days to 30 days), as this would mean that have more resources available more often.
Overall, it is important to note that during any expansion, cash flow is just as critical, if not more so, than profit, as not being able to access funds can mean that you miss essential opportunities that stymie your plans.
4. Undertake extensive market analysis
Undertaking a market analysis essentially means assessing who your customers and competitors are likely to be in any new market that you are planning on entering.
However, an effective market analysis doesn’t mean only examining external factors, e.g., the potential size of the market you are considering, the prices the market will bear, as well as who constitutes the consumer base, etc. It also requires you to closely examine aspects of your own enterprise to ensure that you are completely equipped to scale up in the way you are intending.
For instance, as part of a market analysis, you also need to look at what makes your business different from that of your competitors, the ways in which you have succeeded and failed to date, and how this will be relevant, whether your current marketing approach will be appropriate in a new market, etc.
You should then use this information to see how it aligns with the target market, as well as identify any barriers to entry that are likely to inhibit your planned expansion.
5. Ensure you have the proper business structure in place
One of the biggest issues entrepreneurs commonly face when scaling and expanding into new markets and locations is ensuring that they have the right legal business structure in place.
This is essential as it will determine your tax liability, access to finance, and, crucially, your responsibilities with regard to any staff that you take on. Failing to classify staff correctly, provide the appropriate working conditions, or not paying workers in accordance with local labor laws, is one of the most frequent ways in which expanding businesses fall foul of authorities in locations where they are not up to date with compliance.
Ensuring that you have the appropriate business structure in place for your industry and operations will mitigate the risks as outlined above, as can working with an employer of record, as they will have the requisite local knowledge to make sure you remain compliant with relevant employment laws at all times.
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