If you are considering trying a new venture or building on an existing one, you may have questions about how quickly you should grow to be sustainable but remain competitive. Learn how to scale your startup and you'll be putting yourself in position for success.
Table of Contents
The Phases of a Startup
In order to understand when and how to scale, first understand the different phases of a startup. Depending on who you ask, the phases of a startup have different names but represent essentially the same things.
- Brainstorming – the phase where many ideas are generated and evaluated for feasibility.
- Development – the development phase can be divided into stages with no revenues, revenues but no profit, and profit.
- Growth – after turning a first profit, a startup can be in the growth phase for months or years, depending on the growth rate and type of technology.
- Setback – after a period of experiencing growth, a startup is bound to suffer one or more setbacks. These can be periods of declining revenue or loss of key technical members.
- Rejuvenation – setbacks can give way to additional growth in the rejuvenation phase.
- Transition/Pivot – the startup can undergo a transition in direction, products, and services offered, a change of ownership or buyout, or any number of changes.
It has been said that the truest test of scaling is “replacing all components of a car while driving it at 100 mph.” If the car is still intact, you’ve got a scalable model. If you do have the drive to scale your startup, you need to be prepared to make some structural and/or management changes. You may need leadership in specific areas to handle specific parts of the business operations, whereas before it was just one person in the driver’s seat.
As you steer away from early-stage investors, you enter a period of time where the focus of the effort is away from raising capital and toward instituting robust processes and organizational evolution. You will know you are starting to achieve scale when you start attracting later stage investors organically.
There are dangers of scaling your startup too quickly. That car we talked about could fall apart at 100 mph. But there are also dangers of going too slow and being too conservative. After all, you wouldn't get involved in a startup if there weren't some rapid movement, risk and exciting change happening!
When faced with the question of growth, you'll undoubtedly be asking, where should I invest my time? Where should I focus on spending? How do I know if I am growing at the right rate? Here are some good ways to sustain growth:
- Focus on Operational Improvements – look for opportunities to make minor adjustments to operations that will help keep growth strong.
- Hire Strategically – you will never feel like you have all the resources you need when you are going through the growth phase. Resist the urge to hire up too fast. Instead, hire quality people for key positions.
- Evaluate Risk/Reward – Take the most risk on those things that will reap the most reward, while keeping a steady input on your bread and butter operations.
Startup Scaling Challenges
The best planning in the world can't prevent your startup from experiencing growing pains. Just like in any relationship, expect to be tested by the following types of problems:
- A Day Late – schedule delays are common, and usually, they're more than a day late. Ask what you can learn from problems with delivering products on time — it probably points to larger personnel or technical issues.
- A Dollar Short – Cashflow will kill you at some point. Maybe you scaled up too fast? Maybe you haven't taken the time to secure additional investors? Take stock and roll up your sleeves to fix the problem.
- Market for the Product – all that market research couldn't have been wrong! Why aren't you monetizing yet? Could be the market. Could be that you haven't pivoted. Or you misjudged growth potential and it's time to make some quick course corrections.
Scaling challenges come up at the worst possible times and no startup is immune to them. It's how you deal with scaling issues throughout the course of time that defines your success as an entrepreneur.