Today I’m going to talk about something I learn from someone very close to me, my business mentor. As you’ve probably seen on the site before we are starting to talk alot about scaling businesses. This is because most people struggle when it comes to actually scaling businesses. They can set-up a good product, market it well, but as soon as it comes to scaling the process and earning the highest profit with the most efficiency, suddenly all common sense and business points go out the window. Today I’m going to talk about a couple of things that helped me to scale the unscale-able. How he scaled his supercar agency without having the capital to even purchase a car!
This data was pulled from the Ferrari car hire company in London and Supercarhire.co.uk These are rental agencies of all models and also collect data on supercar trends and prices. It was also his first business and how he learnt the keys behind scaling business correctly. Reading supply and demand, managing cash flow and finally using credit wisely. These are the 3 points I’m going to talk about today, they are all references of his business as I know a lot about it from the talks over the last 3 years, but the points can be pulled and re-framed to any business in the world!
3 Tips to Successfully Scaling Your Company
1.) Understand Current & Future Supply and Demand
Supply and demand are the basic economic principles and they also apply to all businesses in the world. If the supply increases you can either increase the demand through increasing the number of products in the marketplace or you can increase the price. The easiest way to see this in action is to look at gas prices. When petrol increases in price and oil per barrel prices increase, then you will look at the price on the pump increase in the same way. When the demand drops, the price will drop. Understanding this in your business type can give you a huge advantage, mainly when it comes to cash flow and having what you need in stock on specific dates and not wasting time in storage or having cash tied up in stock when the market isn’t ready for your product.
2.) Manage Your Cash Flow
Cash flow is the number 1 killed of start-up businesses. 80% of start-ups fail inside 2 years. This is due to either a.) Running out of money. Or b.) The market changing in such a way that their product or service is no longer viable. Although both can happen the first is the most common issue start-up and small businesses face. This makes managing your cash so important. Understanding demand is the first step to this. Utilising credit correctly is another step which we talk about below, but the easiest one is simply not to scale too early. For example saving 0.50c on a unit price might seem great, but if you have to spend $5,000 additional for this order then you might be better off having a smaller number of items and just take the slight hit on the profit margin. I have personally made this mistake multiple times.
3.) Utilise Credit Correctly
Credit is such an ugly word in 2016. But in my opinion credit utilised correctly is the quickest way to make a successful business. There is no doubt that you need capital to make a successful business and sometimes people simply don’t have the means to save up a large amount of money in a short period of time. Instead of spending 2 years trying to save this money the better option is to look for long term credit. The best type is obviously a business loan, but sometimes this isn’t possible, so instead I would recommend utilising 0% credit cards for as long as possible. Some people think this is a very risky strategy, personally I think business in itself is a risk and if you don’t think you can pay off a credit card in 12 months then you shouldn’t go into business in the first place.
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