Originally posted in Bolton blog on February 10, 2020
For startups, getting funded is just the beginning. Once you have the resources, you need to scale rapidly to make good on the promise of your company and get ready for enterprise customers.
More than 90% of startups fail due to self-destruction rather than competition, so when scaling a startup, it’s important to be aware of what can go wrong. Here are 3 common factors that can impact your success.
1. Running out of money before you can establish a customer base
Getting funded is when the pressure really hits you — if you’re not able to deliver your product or service to enough customers to cover your operating costs, you’ll go out of business before you can make your mark. Even the biggest cash reserves, if spent poorly, can leave you short of the finish line.
Using capital to add bells and whistles to a product or service before determining product/market fit for the original version is taking unnecessary risk. Additions and improvements can be made later, once you establish a healthy customer base and have cash reliably coming in.
Similarly, pouring money into direct marketing campaigns is not always a smart move. Yes, you want exposure, but it needs to be proportionate to where you are in the startup process. Marketing won’t be effective if you don’t have a handle on your audience, so make sure you have a specific, data-based strategy before you invest in expensive advertising or launch parties.
Even if you’re able to get multiple rounds of funding, you’re still on a fixed income until cash starts flowing in. That’s why it’s best to aim for reasonable milestones that can be achieved with the cash you already have, so you’re prepared for unexpected losses and won’t have to scramble when faced with inevitable cash burn in the early stages. Surpassing goals, no matter how straightforward they seem, will always look better than falling short, so be realistic about how much you can do within a particular time and budget constraints.
"If we didn't have the remote team at Bolton available to us, we would still have been able to build our product, but it would have taken us three to four years longer to get off the ground."- Dan Ruch, Co-Founder & CEO
2. Not scaling fast enough
Spending wisely can be a challenge, but it shouldn’t be your only concern. As long as you’re operating on a fixed income, you also need to spend decisively and rapidly to make sure that your team is working efficiently as soon as possible. But how do you scale a startup fast enough?
What works for a small business won’t necessarily work for a larger one. This may seem obvious, but many startups fail to scale appropriately because they don’t accurately anticipate how their needs will change.
Scaling and optimizing your operations involves both implementing new processes and eliminating old, ineffective ones. Maybe your initial team was entirely in-house, but is that still practical? To support your organization’s rapid growth, it might be more reasonable to hire remote teams and/or outsource technical or specialized roles so you can quickly identify and onboard new talent.
In addition, introducing automated processes will speed up day-to-day tasks and reduce the number of new people you need to hire. When implemented strategically, the right software can carry you through your organization’s rapid growth — and remain functional years down the line.
3. Compromising on quality
Making systemic changes can be difficult, particularly when you want to stay true to your roots. If you’re used to a hands-on, in-house approach, it might feel inauthentic to outsource your teams and transfer manual operations to software systems. These changes are often necessary for scaling, but that doesn’t mean you have to compromise on quality or alter your organization’s values.
When it’s time to hire new talent, focus on quality rather than quantity. Even if you need to put a new team together quickly, you want to pick the right people for the job. In the long run, you’ll benefit from hiring an experienced team of people who fit well within your company culture.
If you do decide on a remote and/or outsourced staffing solution, you may have concerns about building unity and keeping team members passionate about what they do. But no matter where your employees work, you can foster engagement and maintain productivity by rallying your teams around common goals and encouraging communication. If all team members understand the organization’s objectives, they’ll feel more connected to their work — and be more effective at working together.
You should also be deliberate about what positions you choose to outsource. To preserve authenticity, core creative positions should generally remain onsite, while departments such as IT and frontline customer success can easily be outsourced without weakening your brand’s authenticity.
Over to you
There are many different paths a startup can take to transform investment into growth. However, scaling requires extensive planning — and planning for the unexpected. If you scale at the right time, in the right areas, with the right tactics, you’ll increase your chances for success.
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