„Scaling refers to the period in a startup’s life when management and board feel like they can systematically accelerate growth with confidence that the resources they put in will yield great and measurable results.“
Fred Desin, Seed and Early Stage VC
Normally, scaling occurs after a successful product-market fit and a sufficient, recurring user base, as well as the existence of a repeatable, promising sales model. Start-ups prove this through positive key performance indicators. But numbers alone are not enough for a successful company and planned growth: “When your startup enters the growth stage, you want to make sure you’re not just thinking about the numbers – customers, users, headcount. You need to have the right mindset for your current phase of development, and you need to make sure the people you’re working with are on the same page,” says Bob Sutton in the Stanford Entrepreneurship Corner talk.
The article about Bob Sutton’s talk on fristround.com provides an interesting perspective on this topic. For most people, growth and scaling is above all more: more employees, more customers, more processes, more money. But with the gain of some things comes the loss of others. “Scaling is a problem of less. There are lots of things that used to work that don’t work anymore, so you have to get rid of them”. Because there are actually always a few things that you do right from the start that slow you down instead of contributing to growth. It is important to always keep your eyes on the goal – but at the same time to reduce, delegate and automate when necessary.
The article about Bob Sutton’s talk on fristround.com provides an interesting perspective on this topic. For most people, growth and scaling above all more: more employees, more customers, more processes, more money. But with the gain of some things comes the loss of others. “Scaling is actually a problem of less. There are lots of things that used to work that don’t work anymore, so you have to get rid of them”. Because there are always a few things that you do right from the start that actually slow you down instead of contributing to growth. It is important to always keep your eyes on the goal – but at the same time to reduce, delegate and automate when necessary.
Growth as a long-term planned process
Growth is a constant and long-term process – even if you are in the middle of scaling, this does not mean that you should focus rigidly on the predefined goals and ignore all other opportunities and possibilities that may arise along the way. According to Jeff Boss, there are four main things to consider when making the leap from a small to a big scale:
„Put the brakes on telling“
In a startup, it is normal for the founder to represent an idea and articulate his or her vision – and thus automatically set the course that is taken. However, as the team grows, this role also changes. Now is the time for founders to take on the role of “organizational leader” and encourage employees to develop and contribute their ideas and visions more as coaches.
„Trust“
As a company grows, you have to accept that you may no longer be able to do everything on your own. The more growth there is, the more tasks arise and these need to be distributed. The important thing here is to trust your colleagues and employees to take care of things themselves and take responsibility.
„Flatten the silos“
The more people who come on board, the greater the risk that individual segments will form within the company that operates among themselves but not with each other. Examples of such segments would be areas such as marketing, sales, finance and other business units. The aim is to establish consistent communication and encourage the different areas to interact with each other. This also makes it easier to share your own goals, visions and strategies and to inform the entire team about updates.
„Create consistent feedback loops“
In larger companies, employee appraisals or feedback sessions usually take place once a year, sometimes even every two years. If there are problems to discuss that can wait that long, that’s perfectly fine. However, if small successes occur for a year or interim targets or milestones are successfully achieved, don’t wait until the next Christmas party to celebrate them.
The biggest stumbling blocks in the scaling of startups
If a company decides to take steps towards scaling, a lot more resources are consumed in a very short space of time: primarily money and personnel. For this reason, the startup scaling process is a critical period in which startups continue to fail. There are several reasons for this:
Designing their processes with repeatable outputs and adapting them to market developments remains a major challenge for startups.
The need for funding is increasing rapidly and not all start-ups are prepared for this.
Realigning or reinventing the company becomes increasingly difficult as the size and management levels grow. Alignment and preparation for scaling must take place at an early stage.
Donna Levin, co-founder of Care.com, also shares these views. She successfully summarizes them in one sentence: “Scaling prematurely burns cash, and it’s hard to course correct when you have hundreds of employees”. Her tip to counteract this: “Take it slow and do it right”.
Sources & further links:
The 4 Steps to Scaling Your Startup to the Next Level
What is involved in a startup „scaling“?
The Do’s and Don’ts of Rapid Scaling for Startups
Scaling up Excellence [Entire Talk] Bob Sutton, Stanford University
The 3 Deadliest Challenges of Scaling a Startup