From Startup to Scaleup - How not to crash and burn

Mckenna Beyer 17th July 2019

Working on a startup, sooner or later everyone will find themselves at a crossroads: continue improving your core product or start the process of scaling up. The reality is that scaling up your business requires a different set of skills to the one you employed when getting it off the ground initially. You need to manage both growth and risk, but the process shouldn’t offer more risks than potential rewards. In practice, that means thinking ahead so that your business has sufficient resources in place to service the needs of its clients and customers, while also ensuring that those resources are managed in the right way for your company. These guiding questions will serve to get you the necessary perspective and help you get started.

The very first step is to know if you’re actually ready or not. In a study done on startups by researchers from UC Berkeley and Stanford, it was found that 74% of startups that fail can blame that failure on premature scaling. Knowing this, one might ask: how do I know if my startup is ready to scaleup? Sharon Weinber of Scale Venture Partners, suggests that you should ask yourself these questions before you decide to scale up.

First things first: do people like what you are offering? Is there product market fit? If you constantly are finding yourself customizing your product to fit the needs of individuals, then chances are, you aren’t ready. To scaleup your product must be able to fit the needs of each customer you are trying to reach. You should also be paying attention to the need for customer support. If a lot of users are needing help using your project, you should take some more time developing it to fit their broader needs.

Do you know the advertising strategy that works best for you? Advertising and marketing isn’t cheap, but it’s vital for brand recognition and customer acquisition. Before you invest into a huge advertising campaign, test the waters and see what works for your company. Knowing your advertising strategy goes hand in hand with knowing your market and knowing your core users. If you know who you’re selling to and what their buying patterns are, you can tailor your marketing towards their behaviors.

Are the people that are currently working for you going to bring innovative ideas to the table? Can they help to service the existing customers and also attract new customers? The people that you already have employed should be creative and competent enough to quickly troubleshoot and tackle problems as they arise. Ideally your employees should cover a wide range of skills and they should each have a multifaceted skill set that can help you through this transition.

The final, most obvious question to ask yourself is: do we have enough money? If scaling up will leave you pinching pennies, wait, and seek out an additional round of funding because it isn’t worth it to risk it and lose everything you’ve worked so hard for. Take a deep dive in and analyze your current revenue and see if you have the ability to predict your profits while controlling your costs.

If you could answer all of the above questions with a strong “Yes!” then you’re most likely ready to begin scaling. Moving ahead requires some careful calculation and according to Liliia H. from Cleveroad there are some steps you should follow to make sure you succeed.

(1) Set your goals, develop a strategy and commit to growth. These goals should be realistic because, let’s face it, no matter how badly you want to establish world domination in 80 days it just isn’t going to happen. Once you have your realistic goals set (maybe world domination in a year?) you can start developing a strategy. Start writing down your strengths and weaknesses and then use this list to pinpoint what can be done to emphasize the strengths and improve on the weaknesses.

(2) Automation and technology are key to staying ahead. Automating your systems will take some time on the front end, but will eventually make up for itself in profit. This investment allows you to streamline operations, access data faster and market better which are important for you to growth.

(3) Stay safe on social media. Social media advertising on platforms such as Instagram and Twitter has really taken off, to the point where Instagram posting is the only advertising that some companies do. While these platforms make it easy to get your name out there, you have to be careful about what you post. You’re currently still too small to be able to take a PR hit and be able to come out alive. Another social media tip is to actually use your presence to improve your brand image and reputation as well as your relationship with your customers.

(4) Take a step away. One of the best ways to measure success is for you to take a few days off, force your employees to be independent, and then come back and see that your office isn’t engulfed in flames. You shouldn’t be the glue that holds everything together. If your employees flounder without you, you’re in trouble.

Growing pains will be normal during this process and you’ll likely encounter many bumps in the road. If you take some of these ideas away and apply them to your startup, the transition to scaleup should be a lot easier. Avoid premature scaling, keep your goals in mind and stay determined and the rest should be smooth sailing.

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