How do you know if you’re ready to scale up?
Your startup has been blooming. Now you’re wondering if the ground is fertile enough to do some more growing and perhaps also let your roots run deeper and wider. So how do you know when it’s time to enter new markets, hire more people, release new products or seek additional VC? In other words, how do you know you’re ready to scale up? We answer that question and share advice from a diverse group of startup founders and entrepreneurs.
The proof is in your product
A strong indicator that your business in its bigger or more ambitious reincarnation will succeed is the value your product has already generated. If your proof of concept has been translated into proof of value, and that proof has been tried, tested and tweaked to your own satisfaction, it may be time to scale up. “The first question you need to ask yourself is: Can we scale?” says Nina Kotterik from ScaleUpNation, an Amsterdam-based platform that empowers innovative businesses to scale. “Think about if your venture has the scale-up DNA: Are you serving a great market? Is your business model fit for scale? What is your competitive edge: How difficult is it to copy what we have built? Once those elements are in place, you can build on that and start scaling.” Baris Korkmaz, co-founder of digital marketing company Earnado, agrees. “It’s our technology and [our] business model that allows us to scale.” The unique usability, efficacy, and efficiency of the company’s algorithm-based system and platform attracts new workers organically, and that gives Korkmaz confidence in the product and its potential.
Capacity is calling
Belief in what you can supply the market is crucial. But the yin to that yang is demand. If you’re turning down business opportunities due to limited resources, it may also be time to scale up. Is the market calling for more of your product or service? Or is it hungry for a more diversified portfolio of your products or services? If so, that could require quicker turnaround time of your supply, which means you need more hands on deck and overhead to pay them. For Foodlogica, a solar-powered delivery service that connects food producers, businesses and consumers, knowing it was time to grow came simply “when three clients were asking us to,” says Francesca Miazzo, the company’s co-founder and CEO.
Make sure you’re ready to let go of the startup mindset
According to Kotterik, another question to ask yourself is “‘Do we really want to scale?’ The reason is that if you decide you want to scale your company, you will need to let go of the startup you have created, which will often require attracting external capital, new team members and big adventures like internationalization and capital investments. Scaling will require a transformation, which will get you into a real rollercoaster. Scaling up requires courage.” Consequently, she thinks that “the most common pitfall is for companies to keep doing what they have been doing and with that creating ‘a bigger startup’. During the startup phase, you may be working as a tribe, trying to find product market fit. Once you have found market fit, all kinds of options become possible: Where do you want to take your company? What type of organisation do you want to be in? If you do not take this transformation seriously, your scaling journey will probably not be successful. Dare to take the time to work on your company.”
Rule out product prematurity
There are plenty of other pitfalls companies may encounter when deciding to scale. “It's a journey full of obstacles and each journey is unique,” says Florent Coudyser, founder of weGrow International, a consultancy that supports startups across Europe. He points toproduct prematurity as a major risk. It is also the reason weGrow works specifically with already successful startups “that have mastered the product-market fit stage.” Determine, therefore, that your product is “fully ready and matching the needs of your clients,” says Coudyser.
Recalibrate market expectations
Look before you leap not only in terms of which market you will do business in, but as far as whether and to what extent you can manage your market from headquarters or need to set up localised management. Relatedly, you may need to reassess your KPls. Consider to what extent the ROI you previously used will translate to another larger, different or diversified market. “You can’t compare apples with pears. In your home market people know you; outside you start from scratch again and it will take even more time to get there,” says Coudyser.
Lean, green finances
No matter your market, before you scale, make sure your finances and financial control system are looking lean and green. That means having a predictive revenue model, growth in your financial forecast, robust accounting and a system that ensures you stay secure and compliant with evolving laws and regulations, especially if you internationalise your company. “Upfront preparation, insights and research is key,” cautions Coudyser, emphasising that most companies underestimate how much time, budget and validation are required. So “work with buffers.”
Your team is a dream
If you have a strong core to build a foundation on, you may be ready to scale up. That core is usually a team composed not just of smart, empathic colleagues, but perfectly fit-for-purpose professionals who have good chemistry – or have at least learned to react well with each other on the team. Besides helping guide your growing company toward greater value generation, they can keep you from making mistakes they have learned from. What’s more, your thoughtfully hired team can contribute to the cultural diversity – and thus customer service quality – of your business. “We work with 100+ experts from all across Europe that can provide insight into the new markets in terms of culture, needs and pains of your future customers,” says Coudyser. That, in turn, can minimise risks and optimise flexibility and resilience for your startup to experience a steady scale-up.
Be ready to learn
Scaling is a journey that poses an entirely new set of challenges. It’s impossible to anticipate everything you will come up against, so it’s important to be resilient and embrace change. “Have a learning mindset!” says Kotterik. “The one thing we see in both our research and scaling programmes we are running with ventures is the immense value of the leadership team having a learning mindset. Challenges will come your way, but how to deal with those challenges will make all the difference. Have a learning attitude to experiment, self-reflect, internalise and improve in order to scale as a venture and to grow as a leader.”