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You saw a certain problem in society, analyzed its relevance, came up with its brilliant solution, studied your competitors ... finally, developed a high-quality startup project. Are things going quite well for a while? It's too early to relax! If you are standing firmly on your feet, standing is not enough. You have to keep moving! Go ahead - think about scaling! Today is about this ;)
Scaling is a logical and important process in business. In fact, scaling is a big responsibility and a significant risk. But if everything is done correctly, everything will work out. The problem arises when scaling is used to stimulate startup growth. Ideally, scaling is a natural result of startup growth.
Scaling errors are one of the reasons startups breakdown. Therefore, before moving on to scaling, you must make sure that your company has all the prerequisites for this.
Signs that your business has the basics to scale:
Constant customer flow
Your company provides customers with a very high-quality product or service. You are always in touch with customers, quickly receive and work out feedback. But it is known that when customers are satisfied, they recommend you to others. Also, you already have certain achievements that you can indicate in numbers.
Product relevance
Your product or service solves the acute problem of a large number of people. This is critical to the startup success in both an existing and a new market. Only those startup projects can truly develop that are capable of providing a solution to the problems of the target audience in the long term. Another sign that the time to scale comes is when demand exceeds supply. That is, there is a regular shortage of your product that customers need. The critical level, which shows the need for scaling, is an increase of 5% or more every week.
Strong team
Do you have a strong competent team? Cool, it's at least 50% business success! Without a reliable team, it is simply unrealistic to succeed. After all, an inexperienced team becomes the cause of failure not only of scaling, but of the startup as a whole. Recall that according to cbinsights.com, the wrong team is the third main reason for startup failures. With a reliable team, as they say, the sky's the limit, so to scale the business is no problem at all.
Financial strength
Another important sign is that you have a stable income, you understand how to manage cash flows and which business model to use. Quite often, business founders overestimate their capabilities and knowledge in the financial sector. This is evidenced by the fact that 82% of startups are closing due to poor cash flow management.
Ready value proposition
Another sign of readiness for scaling is that your startup already has a proven value proposition for its client segment. Moreover, you can easily describe it in one or two sentences to employees, customers, investors, and partners.
New market research
You enter a new market in stages. That is, your startup does not seek to simultaneously scale in many markets, but focuses on two-three locations, and only after that it develops the next two to three markets.
Now, the signs of readiness for scaling are clear. So how does this natural growth process happen? What needs to be done and what to consider? Let's look further.
Key stages for business scaling
.1 Assessment and planning
Carefully study your business, check if you are ready for growth. Develop a strategy for what steps you need to take to increase sales. Imagine that one day your orders have increased several times. Does your company have people and systems to handle the avalanche of new orders?
WARNING! Scaling a business too early/fast, you will lose order, getting only misunderstanding, staff exhaustion, confusion in orders, lag in production. And as a result, you will disappoint or even lose customers. What worked well in a small company may not work for your business when it grows up.
.2 Take care of financing
Scaling a business requires considerable costs. Your company's development plan can show the need for hiring personnel, deploying new technologies, adding equipment and facilities, and creating reporting systems to measure and manage results. Think about how to find money to invest in all of these aspects.
WARNING! When scaling up, startups need to be especially careful about the costs. Many small businesses fail because they are not disciplined when they receive large sums of money. Distribute finances carefully and invest only in necessary improvements.
.3 Provide sales
One of the indicators of business scaling correctness is sales upturn. Take care of the sales structure in order to have a solid basis for their increase. Examine your sales from start to finish. First, make a detailed forecast of sales growth, taking into account the desired number of new customers, orders, and income. The more specific you are, the more accurate your sales plan will be. Also make a similar forecast of expenses based on the increase in the number of team members, technologies, infrastructure and systems for processing new orders. Carefully study your latest data on losses and profits and analyze how all this can affect the business. Be sure: costs will continue to rise. You have to predict where and how exactly this will happen.
.4 Invest in technology
The implementation of new technological solutions is a necessary step towards scaling. With a reasonable investment in technology, your company is able to save a lot by automating processes and making them many times more efficient. If your company does not use a single process management system, with the growth of your business communication and management problems may increase. There are technological solutions that make a business more efficient. The good news is that you can choose the systems that best suit the needs of your startup: CRM, ERP, etc.
For example, using CRM, you automate customer interaction strategies, increase sales, optimize marketing, and improve customer service by storing customer information and relationships with them, improving business processes, and further analyzing the results. ERP system allows you to effectively manage the main business processes of the company, increases the efficiency of management and optimization of the enterprise resources use. This is due to the fact that the ERP system on one platform combines individual systems within the company into one (production, accounting, human resource management, inventory, delivery, procurement, business analytics, human resources, etc).
Also, if you plan to scale your business, it's time to think about updating the features of your product or developing a product that would complement the existing one. For this purpose, it's important to have a reliable team that develops custom software, provides IT consulting services, and a technological support.
WARNING! Do not rush to add new products / services or add functionality until you improve the current product.
.5 Expand your team
Technology is now having a huge impact, but you can’t do without people. Analyze if you have enough staff for scaling your business. Determine the number of customers your staff serves and how many people may be needed when there are more customers. How can you quickly and efficiently replenish a team? Sometimes outsourcing is a good solution to this issue. Third parties may have employees and investments in systems that allow them to perform certain functions much more efficiently. It may take too much time or money for your company to repeat this function internally. So the best solution is to find a reliable partner for outsourcing, which will allow your business to scale better, faster and cheaper.
WARNING! Do not hire too many new employees. Especially when it comes to managers and secondary specialists. Hire those who are really needed at your project.
.6 Improve marketing
It is very important not just to have an excellent team and working IT systems, but to improve marketing, build a company reputation, develop a marketing strategy, and make sure that as many people as possible learn about your startup. Good marketing can give your business even more than you expect. We know this firsthand.
Until a certain point, our company, MassMedia Group, did not attach much importance to marketing. In fact, we were content with one or two sales channels, and they worked pretty well. But approximately in 2018, our company began to grow rapidly and a need arose in the search for new channels. Moreover, we were faced with the issue of positioning and further promotion of our company in the market. Of course, there have already been developments in this direction. Nevertheless, everything we did before was based more on our own experience, knowledge of the market and intuition.
And then we decided to focus on marketing. This helped us to better understand the goals of the company, to realize our weaknesses and advantages, and to understand what should be concentrated on. It is thanks to marketing, that we created our development strategy, thereby identifying long-term prospects and goals, and, based on this, we compiled the immediate tasks that need to be done. And today it helps us to develop.
Scale smoothly and timely
If you are scaling a startup too fast or recklessly, you will create many organizational problems. Scaling it prematurely may crash your business. On the other hand, if you scale too slowly, you will miss opportunities that will bring you more resources and income. Therefore, it is critically important to start moving towards it at the correct time. Your startup should be ready for this. Be sure to pre-arrange all the important processes in the company. After all, there are cases when, without calculating their strength, businesses simply drowned, because they could not bear this burden. What to say, even if the well-known giants of the market could not avoid scaling errors.
Groupon
Groupon, once called the “fastest growing company in history”, allowed users to receive discounted services and products while shopping in groups. It was very successful, but business started started worsening when the company began to scale rapidly without resolving existing problems. It turned out that Groupon had an unsustainable business model. The main mistake of the company was that it did not focus on retaining its customers, which is achieved by introducing innovations and increasing the value of the service, but on attracting new consumers.
Amazon
Probably, we all use the services of the famous Amazon company, or at least have heard about it. And the story of this delivery giant began with a few people on team. In terms of growth, Amazon sought to dominate one market and always avoided rapid scaling. But, unlike Groupon began to scale too quickly, Amazon was not rushing. Once the company management did not predict an increase in the number of orders during the Christmas season. Due to the fact that seasonal workers were not involved, the main staff suffered, they had to work overtime, many could not be with their families on Christmas. After that, Amazon CEO promised never again to try to save money on seasonal workers.
Scaling up a startup without creating the conditions for the start of growth and its support is like trying to bake a cake without some ingredients in its recipe. You get a delicious cake only when the right amount of certain components is added to the dough, mixed and baked correctly.
The same thing is with scaling. And we are talking about not just one or two factors that affect the growth of your startup. Successful business scaling is the culmination of applying all the components of this process that work together to make your business succeed. You already know the recipe, so everything will work out for you! ;)
