It takes a lot of motivation, dedication and hard graft to get a startup off the ground. And like any business owner, you’ll have high aspirations for your company down the line. But as your startup begins to grow, you may realise that you need to start thinking differently in order to scale up.
But how do you make the crucial transformations required for long-term success? Making the shift to a scaleup requires not only a change of mindset but some practical changes to your business processes as well. This article will outline some of the steps that will help you rapidly transform your startup into a scaleup. Follow these tips and you'll be on your way towards achieving greater heights and building a sustainable company.
What’s The Difference Between A Startup & A Scaleup?
According to Steve Blank, author of “Customer Development, “A startup is a temporary organisation designed to search for a repeatable and scalable business model. The corollary for an enterprise is: a company is a permanent organisation designed to execute a repeatable and scalable business model.”
Here’s a further breakdown of the key differences between a startup and a scaleup below.
A startup is the earliest stage of a business. Similar to a baby — it’s still learning to walk, talk and feed itself. It should be making progress, but it’s probably also making a few mistakes along the way as it finds its feet.
Experimenting with different ways to generate revenue is a normal feature of any startup. Investment might still be limited, so it can afford to take some risks. The startup may not have fully defined its Minimum Viable Product (MVP) yet, and it’s still developing its internal processes, refining its target market and creating its branding strategy.
A scaleup is more advanced than a startup. Your startup baby has grown, and now reached the toddler stage. Your business is expanding and it’s either in its second round of investment or it’s just about to secure more funding. You already have some success behind you and not only is your business growing, but it’s starting to scale up its processes too.
Growth vs Scaling
So what’s the difference between growth and scaling? Growth may look like an increase in returns and customers, but if your business is not expanding to accommodate these new revenue streams, then it’s not scaling up. You must be able to match your company's growth by expanding your operations. The OECD defines a scaleup as a company that has an annualised return of at least 20% over the last three years and a minimum of 10 employees since the beginning of that period.
How Do You Know You’re Ready To Scale Up?
How do you know if your small business is at the optimal stage to scale up? Should you start now, or should you be waiting until next year’s budget before considering any company scaling strategies? This question can be difficult to answer but it’s important you know when it’s the right time.
When you start to experience some company growth, the excitement can be tremendous and it’s easy to get carried away. Sometimes, this leads to a premature decision to scale up. In the worst cases, this can trigger the early collapse of the business. This mistake is one of the leading causes of startup failure. According to Startup Genome, 70% of startups in their dataset experienced failure due to premature scaling.
For other businesses, they end up scaling late, missing out on opportunities to increase their revenue. To avoid making these costly business mistakes, it’s crucial for your company’s survival that you scale up at the right time.
Here are a few signs that your startup is ready to scaleup:
- Your business has reached most of the goals that were established during its founding.
- You are generating enough profit to invest in scaling.
- You have invested in a strong IT system and you have an effective tech stack in place.
- You are in a position to hire more employees, or your current employees will be able to handle the additional workload of scaling.
5 Ways To Quickly Transform Your Startup Into A Scaleup
You’ve established that you’re ready to take the next steps. Where do you even begin? Here are some of the best ways you can turbo-charge your transformation from startup to scaleup.
1. Start Distinguishing Roles
When starting a business, you’re often limited by your own knowledge and expertise. In the early stages with limited funding, you probably have to wear a lot of hats and learn as you go. You may hire people to act as “jacks of all trades” to compensate for your inability to afford multiple specialists.
But if you want to move on to the next stage and scale up, you’ll need to hire some experts and delineate roles. Do you have one person covering both marketing and sales? It’s time to separate these roles. Everyone should have clearly defined responsibilities and fit into the company hierarchy in a way that makes sense. When company roles are plainly delineated, employees can focus on what they need to do without getting overloaded with tasks outside their area of responsibility and expertise.
2. Introduce Clear Processes
Business owners know that the bigger their company, the more systems and processes they need. So what happens to a startup when it starts growing? It needs to move from informal ad hoc processes towards formal documented business processes. One of the biggest obstacles for scaling up is changing this mindset early on.
Business processes are the operational elements that define the company's activities. They describe how things get done in an organisation, and what needs to happen to deliver a service or product. When you started your business, you probably didn’t have any formal business processes set up. As you grow your team and begin to ramp up your operations, you need to start getting these in place.
3. Refine Your Product-Market Fit
Product-market fit is the relationship between your product and your audience. If you’ve established a good product-market fit, your customers should be able to say "I've been looking for this!" when they first experience your product. It's not just about getting someone to use your product, it's also about making sure that those who do use it, are satisfied with it and will stick with your company.
When you began your business, you may not have fully established your product-market fit. Experimentation is part of this process, and it may take you some time to get things right. But when it comes to scaling up, there's more capital involved and this means that experimentation carries additional risks.
Before scaling up, here are a few ways to ensure you’ve refined your product-market fit:
- Determine your ideal customer persona. Who are you targeting with your product or services?
- Identify their needs. Does your market have a specific need that is underserved? What gaps exist in the market?
- Determine how your product will meet their needs better than the alternatives. This is your unique value proposition.
- Foster a close relationship with your customers. Obtain frequent feedback through customer interviews, surveys and market testing.
4. Get The Right People On Board
If you’re trying to scale your business, you’re going to need all hands on deck. One of the most common problems among early-stage scaleups is rushing into hiring, without taking the time to plan a clear recruitment strategy. Firstly, you need to determine which roles are a priority for your company to scale successfully. The best place to start is to communicate with your team. They should be able to identify the areas that they feel could benefit from additional staff. Is your salesperson struggling to stay on top of their workload? Could they benefit from having someone else on their team?
Your hiring strategy should align with your long term goals. What direction do you want to lead your business in over the next few years? The people you hire should have the skills and experience that reflect the backbone of any scaleup which is always going to be its tech resources. To scale quickly, you’ll need the ability to automate a lot of business processes that you may have been doing manually before. Marketing boosting software can automate many time-consuming and repetitive tasks that may be bogging down your team. Email lead nurturing, social media posting and the company’s long term goals.
You should also be realistic about compensation packages. You’ll be hard-pressed to find a qualified CTO for €60K. But above and beyond financial incentives, it is important to ensure that your values are aligned as well. Are you committed to environmental, sustainable and social development? In many cases today, top talent cares greatly about these aspects. More and more, people want to be part of a journey that makes a real impact!
Consider outsourcing your recruitment process to experts within the industry to bring the right people on board.
5. Get The Right Tech Stack
The backbone of any scaleup is always going to be its tech resources. To scale quickly, you’ll need the ability to automate a lot of business processes that you may have been doing manually before. Marketing boosting software can automate many time-consuming and repetitive tasks that may be bogging down your team. Email lead nurturing, social media posting and more, can all be scheduled in advance. Payroll should be automated, to allow you to easily manage a larger team.
SaaS providers can provide access to the minimum required software that will allow your business to scale, without putting a huge dent in your budget. Most of these companies offer free trials, so you can test solutions out before making any financial commitments.
Potential Problems & Pitfalls
Let’s discuss some of the most common mistakes made when attempting to scale a startup.
Agility has never been more important in the business world. In today’s rapidly changing markets, you must be able to stay flexible to remain afloat. This becomes more challenging as you scale your business. You invest more time and resources in certain processes and these become increasingly difficult to adjust.
If you can’t factor agility into your scaleup, then you might find your business suddenly facing an unexpected market change that it can’t survive. Always be ready to pivot your business strategy, no matter how far you’ve scaled your company.
Unwillingness To Delegate
You’ve been nurturing your startup from the beginning. Understandably, you may not feel comfortable passing over important tasks to other people. However, one person can’t run a scaleup. If you want your business to be successful, you’ll have to let go at some point.
As such, learning how to effectively delegate is key to scaling. Business owners who are unable to do this, risk the long term future of their startup.
A Poor Onboarding Process
Scaling up means more hiring, which means more onboarding. Don’t underestimate the importance of having an effective onboarding process that fully prepares your recruits to smoothly integrate into your existing team.
Staff turnover rates cost startup businesses enormously, so failure to retain new employees can have a significant knock-on effect. Approach recruits the same way you do your customers — you want them to stay with your company to maximise ROI.
A smooth onboarding system will improve your retention rates and make it easier for your new employees to do their job well.
No Clear Strategy
In the early days of your startup, while you were caught up in the entrepreneurial spirit, you were likely referring to your business plan. Now that your business is growing and changing, you need to get back to the drawing board.
Creating a business plan is not a one-off event. You must revisit your plan and always know where your business is headed to ensure your strategy aligns with your goals. Scaling without a plan is a recipe for business failure.
Need help to recruit for your startup? Here at Funded.club, we can help you find the people you need to transform your startup into a scaleup.