Preparing to Scale Your Startup
Given the name, it’s no surprise that much of the advice and attention being given to startups is geared toward actually starting up.
Tips, tricks, and guides abound for the founder trying to break ground on a new idea and build out a functional business. But at some stage, it becomes time to stop being a new business, and time to scale your startup into something larger.
Scaling up can be a make-or-break moment for your company. If you scale your startup too quickly or recklessly, and you’ll create a host of organizational problems that will be hard to undo. Premature scaling may even cause your business to fail. And if you scale too slowly, however, and you’ll miss out on key opportunities that come with greater resources and revenue. As you plan for the next phase of your company’s development, remember these five tips for a successful scale-up.
As you plan for the next phase of your company’s development, remember these five tips for a successful scale-up.
1. Ask Yourself If Your Business Is Really Scalable
Even though you might have a killer product that serves a real need, but that doesn’t mean it’s necessarily a cornerstone for a scaled-up business. Be honest as you examine your offerings—if scaling will come at the cost of inordinate amounts of resources, maybe it’s better to stay a lean, successful, small business.
“Not everyone needs or wants investors, or a highly scalable business. 90% of small businesses today are family businesses, which can be very successful, satisfying, and small by design. It’s a strategic decision,” writes Forbes columnist Martin Zwilling in “10 Tips For Building The Most Scalable Startup.”
2. Identify Your “Core”
You need to know your core products, customers, and marketing channels before you try to take your business to the next level. Not convinced? There’s hard data to back up that assertion: a 2011 study by The Startup Genome looked at over 3,200 startups and found that 74% of them failed because they tried to scale up too quickly.
In “7 Ways to Prepare Your Startup to Scale Up,” startup expert and author Neil Patel offers a quick checklist you should run through to make sure you have a solid grasp of your core before you try to scale:
- Do you have a minimum viable product and achieved product-market fit?
- Who are your primary customers are?
- What marketing channels will offer the best ROI?
- Are you able to aquire enough funding to make it through a time in your business’ life that will most likely be unprofitable?
If you answered no to any of those, it’s time to slow down and get it figured out. You don’t want to join the 74%.
3. Automate or Outsource Everything You Can
If any aspect of your startup is labor-intensive, Zwilling says, you won’t be able to scale effectively. You need to start figuring out a means to streamline every process you can. This includes automating payroll and billing, creating training videos to quickly bring new hires up to speed, finding ways to automate marketing your business, and so on.
Where you can’t automate, outsource. The majority of your resources should be going into making your core offering work at scale. Thus, only the most essential roles should stay in-house. Where possible, everything from design and copywriting to legal issues and office cleaning should be delegated to external contractors. Once you’ve gotten comfortable at scale, you can think about bringing these ancillary roles back into the fold.
4. Make Your Business Workable Without You
Your process needs to be simplified and streamlined to the point that even if you disappeared off the face of the earth, someone could easily come in and know what to do. Your process must be easily understood and repeatable. Don’t let anything about your business be so fragile that less talented or unmotivated employees can bring it down.
“It is an easy mistake to assume that hired salespeople or marketing people will be able to replicate the same rate of success as an incredibly motivated, tenacious, and compelling founding team did in the early days. Of course, that’s rarely true,” venture capitalist Fred Destin writes in “Scaling-Up Without Screwing Up: 7 Tips On How To Scale.”
5. Don’t Go Overboard in These Key Areas
Destin lists three areas where you must show great restraint as you scale your startup: hiring, spending, and building. Here’s why:
- Hiring: Remember, you need to stay lean during the scaling process. Don’t hire too many people (especially middle managers or specialists). These take away from your core competencies and leave you prone to trying to scale other areas too quickly.
- Spending: Again, there’s a tendency for startups to get loose with their money once they’ve raised a lot during the fundraising stage. Keep all of your spending focused on growing the business.
- Building: Once you’ve achieved product-market fit and started scaling up based on that main offering, don’t go crazy trying to add features or related products. Make sure you can do one thing better than anyone before you start building new stuff.
What You Need to Remember
Scalability is a mindset that’s all about having the systems and people in place to make your growth as seamless as possible. Here are some things to start thinking about now as you prepare to scale your startup.
- Figure out how to automate or outsource everything you possibly can, especially if it’s not directly related to your core competencies.
- Stay disciplined with your money. Don’t spend on new people or features until you’re absolutely ready to do so.
- Make sure your business is actually scalable. There’s nothing wrong with staying small and lean if the product or service demands it.
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