Launching a startup is certainly demanding. But it takes even more skills and effort to scale a startup, get wind in the sails, and move in the direction toward success. When is the right time to scale startups? How do you approach the matter, and what are the common obstacles? Here we investigate these questions and share expert tips.
Jonathan Ive, Apple’s Chief Design Officer, once said: “It's very easy to be different but very difficult to be better”. New and mature businesses need to evolve as rapidly as the market conditions and competition dictate them to do so. However, the constant hunt for a larger market share is the most pressing point for startups, as they have to become better by expanding the outreach, increasing their value, and enhancing their offering.
As startups expand their operations, they have to facilitate such a positive change properly. What are the optimal ways and strategies for a startup scale? What other scenarios come in handy when you enter the growth stage? In this article, we’ll investigate these questions and provide practical advice on how to avoid the mistakes and pitfalls when scaling a startup.
Scale vs Growth: What Differences to Be Aware Of?
Scaling and growth scenarios are the most widespread options for startups entering an expansion stage. Each pathway has its peculiar upsides and downsides, yet it is worth considering the ultimate goals and the overall vision of your startup. What does it mean?
What Is a Growing Startup?
When a startup is growing, it means that it:
invests in new assets (such as renting bigger office space or getting more equipment);
adds new technologies;
increases human resources;
or creates new product features for its offering.
In other words, the company’s revenue grows in line with linear investments. This may, of course, also have to do with the current funding stages of a startup.
So, when a company is ready to invest in its growth to increase profit, this scenario comes into play. For instance, you can additionally hire developers for a startup or take on more designers to handle heavy loads without overtime. The more employees you hire, the more projects you can complete at a time. In the end, you will earn more or at least become go beyond break-even.
The major outcome you will get as a result of your growth activity is predictable and low-risk gradual business expansion. However, mind that this approach requires ongoing investment.
What Is a Scaling Startup?
Startup scaling, on the other hand, is a tactic that doesn’t come with large upfront investments. It helps to achieve fast expansion without having to spend on talent or technology acquisition. Rather, you can scale a startup by improving and optimizing a certain business process or automating a workflow or at least its part.
For instance, you may take your customer service to the next level by adding a solution that would accept customer inquiries round-the-clock or create an FAQ block so that clients can find answers to repetitive questions. Giving more examples, you may reorganize your CRM for the staff’s convenience or shorten the checkout process to reduce cart abandonment and push more customers to finalize their payments.
Scaling a startup sounds like a reasonable decision for entrepreneurs willing to make the most of their productivity. Besides, this option lets you leverage the latest innovations to complete more without having to spend more. But is every startup ready to scale? What indicators need to be considered? Let’s find out.
When Should You Scale Your Startup?
Let’s go over the cases when it makes sense for a startup to consider scaling.
When you are backed by a reliable core team As scaling a startup is not a catwalk to go alone, you need the support and dedication from a group of enthusiasts with the right skills and experience to handle critical activities. If you can trust the team behind your startup, it is a clear sign you can scale without disruptions.
When the cash flow is as strong as the profits It is hard to afford startup scaling when there is negative cash flow, even if the profits grow steadily. If the amount of money going into the current bank account is larger than the amount of money going out, then it is worth scaling a startup in the first place.
When you say no to clients due to high demand If there is a steady flow of orders that your internal resources fail to fill, it is time for a startup scaleup. Otherwise, you may be missing out on a ton of business opportunities that can have a positive impact on your business.
When you meet and surpass projected goals repeatedly Do you think it is time to raise the bar by meeting more challenging goals and going out of your comfort zone? Assess your scaling opportunities if you’ve reached exceeding expectations with the number of orders, paying customers, and actual profits.
Once you’ve figured it is the right time for scaling a startup, the next step is to envision the exact road to success. Does it contain any roadblocks? Which startup scaling challenges do you need to overcome before you cross the finish line? It is worth considering all moving parts of your business and preparing a detailed mitigation plan to act quickly when something goes wrong.
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As you might have guessed, scaling a startup isn’t an easy task, especially if its handled in-house without any external help. Oftentimes startups face struggles as they go through scaling as many habitual things and familiar processes have to be changed. And although this is change for the better, it may get tough. What are the most common bottlenecks?
Choosing a Bad Time to Scale
Even if you’ve noticed that your business is gaining traction among a growing number of users, it doesn’t mean that the infrastructure, business systems, and employees are ready for a scaleup. You need to prepare all systems to support an increased number of orders and ensure you can deliver on every promise you make.
The transition from startup to scaleup should occur when the upper management and founders can let go of the complete ownership of the decision-making. Ever heard about Beepi? We talk about this promising startup that was constantly reported to micromanage minor and major decisions. One of the reasons why this startup failed was the reluctance to delegate crucial tasks to other team members who lost motivation to maintain the required level of customer service.
Focus on Immediacy Instead of Strategy
It is crucial to remain on the lookout for the bigger picture and have a clear understanding of where your company is going in the next 15, 20, or 25 years. Determining only short-term action steps can lead your startup in the wrong direction and become a reason for a failure scenario.
Lack of Proper Infrastructure
When assessing startup scaling opportunities, many businesses fail to determine if their working environment, inner processes, internal software systems, and collaboration practices are ready for a simultaneous scaleup. It is vital to future-proof all infrastructure elements and redesign their architecture to become scalable. Otherwise, you will run out of physical and digital space and lose common means of daily collaboration.
Maintaining the Same Level of Quality
The scale-up process doesn’t imply you can increase the number of orders without retaining the same level of quality. Instead, it requires even more focus on delivering consistent customer service, improving your performance, and adding relevant adjustments.
To overcome these and other roadblocks, you need to be aware of how to scale up a startup and prepare your environment for drastic changes. As you move forward with the next milestone of startup development and growth, follow the below tactics to ensure ultimate success.
How to Scale a Startup: Essential Steps and Tips
So how should a startup approach scaling? In essence, you may either handle scaling by yourself or opt for external help. In case you don’t want to handle product scaling on your own and need assistance, you may get an expert consultation or consider joining a startup incubator or accelerator as alternative paths. But if you’re up for self-sufficient scaling, below we share the must-knows based on our expertise.
Step 1: Develop the Right Strategy
Start by identifying your major strengths, weaknesses, prospective achievements, current market situation, and investment opportunities. One way to go is to look into your product performance metrics and analyze where you currently stand in terms of KPIs.
Then, set clear long-term startup objectives, such as benchmarks regarding your profits in 1, 3, and 5 years. Consequently, you will arrive at having a strategic view of where your startup is heading and creating futureproof plans for a scaleup phase.
Step 2: Identify Essential and Non-essential Resources
As startups grow, they need to focus on core activities that give a competitive edge and more viable chances to succeed. It is necessary to identify core and additional products, marketing channels, and target customer types. Besides, it is crucial to work on feature prioritization, list a pool of essential and critical activities, and review the items that can be automized and optimized.
One way to handle non-essential tasks is to resort to outsourcing. When it is not reasonable to hire in-house specialists, startups can expand their expertise with outside resources. For example, Upsilon enables you to hire a dedicated software development team to remove load from your core team. With us, you can concentrate on mission-critical tasks, business development, and new partnerships while we handle other product development without your supervision.
Step 3: Pour Investments into New Technologies and Automation
Remove manual processes that lost relevance when the team’s size started to extend. This step includes:
automating customer management and HR processes;
streamlining payroll and invoicing;
and fine-tuning automatic sales, customer service, and marketing pipelines.
Instead of relying on disparate tools and systems, you can resort to unified ones, ERP or CRM systems, and universal communication solutions like Slack. The bottom line is that you have to aim at getting the best startup tools for your team.
Step 4: Address the Problems of Scaled IT Infrastructure
You will inevitably have to tackle scalability issues with all the elements of your tech ecosystem. To bypass undesired outcomes, it is vital to set up version control and backup scenarios and prepare detailed documentation for every activity. Besides, it is necessary to monitor each element of the infrastructure to avoid bugs, glitches, and security issues.
Step 5: Refrain from Unreasoned Expenses
Don’t waste money on redundant things like luxurious items for office space, hiring non-critical employees, or expanding your offering with new features. If you hire too many specialists, you may shift the focus away from your growth plans and scale additional areas ahead of the planned time. On the other hand, you can start building product bundles, or add new features without researching the demand, which can lead a startup to failure or recession.
Step 6: Easily Add New Thought Leaders and Managers
The founding team shouldn’t fear adding new people on board especially when it comes to upper management and strategic advisory. Build the right hierarchy of interdependent roles and ensure they can work without your strict supervision. As your team grows by giant leaps, you need responsible managers to guide and motivate every employee. Failure to do so may result in lost productivity and the inability to provide the desired level of customer service.
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The road from startup to scaleup can go without roadblocks when you prepare early, plan out all expected adjustments, and leave room for other team members to make decisions when you are absent.
And if you need more tips on how to scale a startup and make that process as seamless and efficient as possible, don’t hesitate to contact us. As an experienced software development company that went from startup to scaleup and matured through the years, we know the ins and outs of this challenging journey and can help you drive success with proven tactics.