What could possibly be bad about scaling up your startup? If you’re thinking about growth because the demand is there, you’re clearly doing something right. But a rush to ramp up too soon can lead to serious growing pains, especially in the human resources and accounting departments.
Here are few instructions and advices for founders about to embark on a big push foor their start up.
The biggest problem with scaling is you take on commitments. Commitments for offices, technology, employees and any number of assets that can slow you down and bleed your bank account. A great option is remote employment. Remote employees are more efficient than local ones and you don’t have commitments like offices, payroll or the bureaucratic headaches that local employees produce. This relationship produces incredibly efficient employees at a fraction of the cost.
Spend Money On The Best People
Whether you’re selling a product or service, maintaining quality during periods of quick scaling is hard. When your business is moving along at a steady, manageable pace, you might not see the value of hiring someone for $90,000 when you can fill that position with someone for $40,000. But there’s a big reason, and you’ll see it when business ramps up. A-level people cost more, but they’ll be able to keep a steady hand on the wheel with you in situations where other companies would crumble under the speed of their own growth. The best people will feel expensive at first, but a team of great people can control a train that would otherwise fly off the tracks.
Understand What It Takes To Serve 10X The Customers
The biggest mistake startups can make when trying to scale a business is to not understand what it takes to support 10 customers versus 100 customers. As an entrepreneur, project all the resources you will need as you grow. Forecast how each of your key resources (i.e. staff, strategic leadership, infrastructure) will need to be expanded.
Premature Scaling Kills
There is no doubt about it – startups offer some amazing opportunities to exercise Computer Science and Systems Engineering knowledge. Engineers regularly marvel at the amount of data companies like Google, Amazon and Netflix have to process, analyze and serve. Here’s the problem: This opportunity doesn’t exist for early-stage startups, because, by definition, they have no users or customers. Worrying about “scale” in the early days of your startup is simply a bad investment. You may not have even discovered whether a product or market is worth pursuing, but you will have already invested in scaling that pursuit. Startup founders have to develop a craft in rapid application prototyping. Scaling comes later.
Listen To Your Customers
One of the best barometers for scaling should be customer satisfaction. If your customers are satisfied, you can scale as fast as you want. Typically, when something starts going wrong or you’re understaffed, your customers will tell you!
Ride One Horse At A Time
Focus on dominating the sandbox you’re already in before branching out. Make sure you have strong systems and resilient revenue streams. Run market tests and grow your business slowly so that every piece is sturdy, stable and cohesive. If you try to ride more than one horse at the same time, you’re going to fall off.
Stay Focused On Cash Flow
The most dangerous problem with scaling too quickly is usually cash flow. One missed payment from a big client could be disastrous. Cash flow is king in scaling up your business. Most entrepreneurs learn the hard way and this is definitely something that needs to be talked about more.
Estimate Growth, Then Divide By 2
As much as we love to dream about explosive growth and unyielding demand for our product or service, our passion and excitement may skew the truth about future projections. If you can estimate revenue for the next 12 months, take that number then divide by 2 – and plan your resources and expenses around that number instead. Be modest in your expectations and seek outside help for an unbiased estimate. It is never a bad thing to sell out beyond capacity, it creates demand.
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