Want to build big without burning out? You need to know how to scale a service business sustainably.
In the early days of starting up a service business, it can take all your time and energy to keep your workflow running and books balanced. But as you become established, you start looking towards the next step: expanding your service operations.
Growing and scaling phases are key to the longevity of service businesses, but they present substantial challenges. Research indicates that 70% of startups fail because of premature or dysfunctional scaling.
Careful planning is necessary to ensure you expand your business in the right way, at the right time.
In this guide, we will help you identify when to start scaling and how to go about it.
Scaling a service business means growing revenue and client capacity, without necessarily increasing headcount or resources. And doing it sustainably means taking deliberate steps to make sure service levels, customer satisfaction, and employee wellbeing and engagement aren’t damaged along the way.
What does it look like in practice? You’ll learn more in this article, but it could include:
Sustainable scaling in a service business is about using strategy and innovation to unlock higher efficiency and revenue from existing resources – but without burning through your team or cash reserves (that isn’t sustainable in the slightest!).
Growing and scaling a business sound similar, but they are not the same thing. While both involve expanding the business, there are differences in the way they're done and the impact on your profits. The question ultimately is whether your business is getting bigger or better?
Growth refers to the addition of resources as a result of increased revenue. For example, as you successfully complete contracts, you may expand your operations, hire more employees, or even move into a larger office. You may increase your marketing budget to gain new clients, and perhaps your new set-up enables you to take on more contracts and bring in more revenue.
In this example, we can see that as the business grows through this cycle, its costs increase as well as its revenue. While the actual profits should increase due to the increased throughput of work, the profit margin is likely to be in the same region as it was previously.
On the other hand, scaling uses strategies to grow the business more efficiently without adding many costs or resources. The focus is on improving solutions and producing a consistent service.
For example, improving your resource efficiency instead of hiring new staff can result in an increase in throughput without any additional costs.
As a result, scaling ensures revenue increases rapidly with fewer additional resources resulting in consistent growth and increased margin with time.
Want to dig into this topic a bit deeper? We've got more info on growing vs. scaling right here ➡️
Scaling is challenging for every business model, and it's important to do the groundwork before you start. Here is a guide to making your scaling efforts sustainable and successful.
Scaling enables you to serve more clients and could lead to greater profits, but if the timing is off, it can result in stress and disappointment. So, is it the right time to start scaling your business? Here are some indications that your business is ready:
If this sounds like you, congratulations! It sounds like a good time to consider growing or scaling your business.
There are lots of ways to grow or scale a business, and lots of reasons behind it. But whatever your reasons, you need to be clear on them, as this will drive your strategy. Are you aiming for:
There’s a lot to think about. Your vision will inform your decisions around hiring, training, marketing, pricing, systems, resources, and more.
Whether you’re growing or scaling, it usually requires upfront investment – in new tools and processes, training and upskilling, recruitment and onboarding – and that takes time and money.
You need to ensure you have enough cash flow to fund your ambitions. Forecast the costs, remembering to factor in any reduced capacity while staff are learning new systems or helping onboard colleagues.
If you feel ready to scale, it starts with efficiency and doing more with existing resources. Scaling won’t work if you try to scale broken or inefficient processes – it will only amplify their shortcomings.
Start with an audit of your current operations to spot bottlenecks, time drains, and practices that people have never questioned and ‘just always done that way’. This will give you a better understanding of bottlenecks and barriers to efficiency, as well as ideas to challenge the status quo.
After your audit, your goal is to reduce manual tasks and duplication, delegate lower-priority tasks to more appropriate team members or AI and automation software. And to reduce variability that could undermine efficiency.
With your new, hyper-efficient processes in place, you’ll need KPIs to measure their impact. You’re looking to scale – achieve more without necessarily increasing resources – so you should be monitoring for changes to:
This will be easier with the right data collection, analysis, and visualization tools in place.
When scaling, you’re not necessarily looking to grow headcount. But you still need to think strategically about your workforce.
Optimizing your current resources to deliver higher productivity and billable hours – without running them at 100% utilization and burning them out – is one way to boost revenue without increasing headcount.
If you can’t achieve your ambitions without hiring more staff, make sure you do it strategically.
While growth means hiring more people to cover the increased demands, as a business owner looking to scale, you need to control your overheads.
As a business owner, once you decide to expand your company's operations, the steps you take will determine whether your business grows or scales. Here are seven expert-informed tips to keep you on the path to sustainable scaling.
To have a successful service-based business, you should offer the best customer experience possible to retain clients, develop a positive reputation, and gain those valuable "word of mouth" recommendations.
Retaining clients is more cost-effective than acquiring new ones, so focus on delivering on customers' wants.
One tip that can help you gain traction and grow your business is to focus on the customer experience. Your customers are looking for something that will solve their problem and make them feel good about the company they're doing business with, and that goes beyond just having a great product or service. It means offering them a clear path to getting what they want and ensuring they know exactly how much time and money it will take to get there,” says Andrew Tsionas, Co-founder of Adborg.
You can do this by listening to your customers and inviting feedback on your services or products. Research and create buyer personas to enable you to target high-value clients.
You may be targeting more of the same clients as you always have. Or you may be branching out into new services or markets. Either way, it’s a great idea to refresh your ideal client persona – your description of who you want to attract – and check your marketing strategy is fit for purpose.
As you scale, it could be that you can service bigger clients, and need to reposition your branding and your pricing to reflect this. For example, a marketing agency that scales effectively may be able to move from serving SMEs to enterprise clients – with bigger budgets but higher expectations.
The biggest shift in scaling my agency came when I realized that bigger fish hung out in different ponds. I had relied on freelancer websites, referrals, and local chamber of commerce meetings for leads – until I realized that no decision-makers for the kinds of companies I wanted to work with were present in those spaces. Instead, we met the decision makers where they hung out online. So my piece of advice: stop fighting over scraps of work, and focus on building relationships with decision makers online," says Jordan Scheltgen, Owner, Cave Social, a social media agency in Los Angeles.
One of the best ways to scale a service business is to convert your services into a menu of defined products that clients can buy. These productized services have defined parameters and pricing, allowing customers to choose the best fit for their needs and budget.
At the same time, the process saves you time, as you don't need to customize your services for each new client and know the costs and profits involved. As your team also knows what's involved in executing each product, business can move along at double speed.
Productized services come in various forms depending on what different service-based businesses would like to offer their clients. For example, many offer business-to-business (B2B) services to help other companies, but the model also applies to business-to-customer (B2C) services to provide personalized solutions to various clients.
Offering many different products or services for various customers can be an obstacle to your company's scalability. It's the business equivalent of being a "Jack of all trades, master of none". It can compromise the quality of your outputs and your customer experience. And there’s no standout USP to draw customers to you.
One way to overcome this is to ‘niche down’ and become experts in a specific sector or industry: such as graphic design for healthcare organizations, or marketing for education institutions. Consider focusing on offering a few services that you do exceptionally well and are in high demand.
This approach can help deepen staff expertise and productivity, as well as reduce marketing costs, as you’ll get a reputation as the ‘go-to’ people in your sector.
I have scaled my firm from a solo practice with a few hundred dollars in start-up cash to an annually six figure law firm in the past three years,’ says Laila Ghauri, Founder of Antares Law Firm. ‘As a trademark lawyer, I would emphasize branding, as that is one of the most powerful ways a company can become recognizable.’
Lucy Hurst, Managing Director at Sherbet Donkey Media agrees, saying:
One piece of advice that I would give to the founder of a professional services business who wants to scale their company sustainably is not to overlook their marketing strategy.’
This can include everything from branding and identity, to product and pricing (see below).
One of the best tips for scaling a service-based business is to revisit your pricing strategy and make sure it aligns with your target market.
You may simply be servicing the same customers in a different way, in which case benchmarking against comparators is enough. Or if you’re introducing innovative new working methods and tools, you may be able to charge more of a premium.
However, if you’re moving up into a new market segment as you scale – for example, now able to service enterprises rather than SMEs – your fees need to reflect that.
To set a reasonable price, evaluate your growth each year, review your competitors' pricing and the industry average, then determine an appropriate pricing level.
Scaling service-based and product businesses need to produce more output with the same or fewer inputs. Fortunately, technology can help evolve your company processes to achieve a scalable system.
The tools and apps that you need will depend on your company's size and maturity. For example, you may be able to manage a small team of consultants, designers, accountants, or other employees on spreadsheets and Google calendar. But as the team grows, you'll need more advanced software like Runn to manage your resources.
When searching for a system to help you scale your enterprise, ensure it is versatile and gives you value for your money. Runn allows you to carry out many resource management functions, including resource scheduling, capacity management, project planning, and forecasting, with more speed, so that you have more time available to work on your business.
Scaling is all about efficiency. And one of the first places to check for your company's efficiency is in the revenue systems.
Revenue leakage refers to revenue that doesn't make it into your business – perhaps because of inaccurate time-tracking and billing, incorrectly applied discounts, or unpaid invoices. These leaks can wear down your profits and slow your ability to scale.
But these issues rarely exist in isolation. Your profits may be eroded before you even get to billing. For example:
If unaddressed, these small leaks can become major drains on your profitability — especially as you scale. That’s why building visibility, control, and accountability into your operations is so essential to sustainable growth.
Finally… ‘Surround yourself with a hardworking team who share your ethos,’ recommends Lucy Hurst.
Laila Ghauri agrees:
The one piece of advice I would give to the founder of a professional services business who wants to scale their company is to find necessary mentors to learn from, support staff to delegate work to, and technology to help easy workflow.’
Surrounding yourself with the right people counts when it comes to technology too. The tools you choose aren’t just about the platform but the partnership with the software vendor, and how you work together to achieve your business goals. (Psst. See below!)
Scaling a service business isn’t about working harder, it’s about working smarter – building an organization that can handle more work without necessarily needing more people.
That’s where Runn comes in.
Runn is more than just resource management software – it’s your command center for scaling your service business.
From resource planning and capacity management, to project forecasting and revenue reporting, Runn gives you the insights and flexibility you need to grow your business without growing your headaches!
