You’ve turned your idea into a business.
Now, you need to be focused on scaling your business. How can you achieve the growth you dream of while keeping the risks at a minimum?
Scaling-up is usually a goal for most founders and investors as it means greater revenue and the chance at higher margins, plus you get excellent exposure by being a part of a company that goes big. Scaling-up can be defined as a situation where your business has the potential to multiply revenue with minimal incremental cost.
However, scaling-up can be a make-or-break moment for your business – starting the process prematurely can create a lot of organisational problems or even cause business failure. In 2011, the Startup Genome found that 74% of start-ups failed because they tried to scale up too quickly. When scaling up, you need to keep an eye on these five things – the customer, product, team, business model and your financials. Your scale-up efforts will be more efficient if you ensure all these core elements are aligned and in sync. The study found that most failures linked with premature scaling were linked to one or more of these elements falling out of tune with the others.
We’ll be touching on eight focus points to help you prepare for the scale-up process – making sure your scale-up efforts are as seamless and efficient as possible.
Before you start scaling up, you need to get all the fundamentals of your business down.
Some aspects you need to cover about your business include:
- Making sure your core product line reaches “market fit” – the point at which there is a broad acceptance for your application or product. You can do this by ensuring that you have a solution that effectively solves the problem from the perspective of your users. 80% of SaaS start-ups never achieve product-market fit and most start-ups take 2-3 times longer to validate their market than most founders expect. Take time to identify all the different ways your product or service can meet user needs. This might require some effort, but it is vital to your company’s success.
- Have realistic estimations and targets that fit within your scaling time frame. Be realistic about the kind of traction your product or service will have in the future. While your goal might be to be the next Facebook or Uber, scaling up incrementally can take time. That’s why it is important to make realistic estimates, models and forecasts to help guide your technological architecture decisions. The key is to set measurable goals that will add value to your start-up business.
- Incorporate a cloud hosting solution. One of our engineers mentioned some of the ways that cloud hosting can support your growth efforts. Cloud hosting software offers flexibility of scale and is cheap to configure. Through cloud hosting, you can enable your business to incorporate serverless, a cloud-native development model that allows developers to build and run applications without having to manage servers. The cloud provider handles all the routine work of provisioning, maintaining, and scaling the server infrastructure.
- Boost your marketing efforts. Keep in mind, however, not all forms of marketing may lead to scaling up. Content marketing is considered the most scalable growth strategy compared to other methods, like direct- or word-of-mouth marketing. According to Inc.com, content marketing has evergreen value and viral potential, making it the most optimal marketing strategy for start-ups.
- Make sure you have the resources to scale - you need to ensure that you have a strong cash flow. This can be done by seeking an additional round of funding if necessary, ensuring you do not rely on profitability when scaling, and ensuring you have a steady revenue stream. Once you have raised the necessary cash, keep all the financial focus on raising the business. A report by Tech Nation stated that access to finance posed a challenge to more than 40% of the companies that took part in the study. The survey further found that the two most important boosters to a start-up’s scaling-up efforts are management and Financing.
- You need the right team on your side. Partners and investors can help make business operations more efficient as well as increase your bottom line. Look within the business for potential leaders and train them. Secondly, top management needs to be accessible, on the front lines, and open to feedback. Lastly and importantly, learn to put your ego aside and hire up. A 2017 Tech Nation survey found that over 50% of the founders found having employees without digital skills as a major setback to a start-up’s growth and it also reported that a majority of start-ups struggle if they lack a brilliant team.
- Understand the ways to manage rapid growth. A well-skilled and qualified management team is one of the main qualities that investors look for while conducting their due diligence to establish a company’s ability to scale-up successfully. The ability of your management team to oversee growth in sales, recruit the appropriate workforce and build a robust social media platform is an essential element of a successful management team.
- Plan your expansion route strategically. Your start-up can successfully formulate a scaling-up strategy by addressing the skills needed, management information systems, governance, and market entry route among other essentials. If you are planning to expand globally should first consider creating a board with an international representation before internationalising the business. Similarly, you need to strategically choose your target markets.
Remember, the art of scaling up your business lies as much within these core elements (Customer, Product, Team, Business Model, and Financials) as it is a mindset. It is important to remember to be patient, to learn as much as you can, have fun and enjoy the process.