Opening a startup is one thing. Seeing it through its infancy and into an established, repeatable pattern of success is another.
While much has been written about how to get your startup off the ground and encourage innovation, there is less discussion around how to get past that first major plateau. You may start strong, but are you capable of sustaining that momentum five years down the road?
In other words, is your startup destined to mature into its role, or will it be stuck in Neverland, refusing to really grow up?
The key lies in scaling your operations appropriately as your startup grows. Yet, this is often easier said than done, especially in companies that thrive too early. When your first few years are a home run, it can be difficult to keep pace internally.
Today, we’re sharing a few ways business leaders can scale for growth as they take the reins and prepare to lead their startups into the future. Ready to learn more? Let’s get started.
The Journey From Startup to Mid-Cap
What type of organization would you expect to be growing at the quickest rate and employing the most people? Would you guess startups? What about major Fortune 500 companies?
Turns out, both of those are incorrect. Instead, it’s mid-cap organizations that take the lead.
Defined as companies with between $10 million and $1 billion in revenue, this sector has a combined $3.8 trillion in private-sector Gross Domestic Product (GDP). This makes it the fourth-largest global economy worldwide. Moreover, more than 20,000 mid-cap businesses employ nearly 35% of the U.S. workforce.
What’s more, they’re surprisingly resilient. Even amid the Financial Crisis of 2007 to 2008, mid-cap organizations held their footing. Meanwhile, more than 170,000 small businesses crumbled during the same timeframe.
While most startups aspire to obtain mid-cap status, it’s important for business leaders to make sure they aren’t slipping into these oversized shoes too quickly, rendering themselves unable to go very far.
A $20 million company still operating under the same conditions as it was back at its $2 million peak? That’s not just unwise business sense. It’s a recipe for disaster.
When this happens, consumers might take notice of a startup’s impressive growth. Yet, what they don’t see is all the behind-the-scenes work going on internally, as employees scramble to build a bigger and better infrastructure that can support growing demands.
One major reason for this mismatch? A misunderstanding of how growth and scale work. Let’s review.
Growth Versus Scale
Are you currently adding resources at the same time that you’re growing as a startup? If so, that’s called growth.
This business model enables to your organization to become larger over a period of time. You’re earning revenue and growing your client list, while also investing in new office equipment, a bigger workspace, and a larger workforce.
The only issue? The bigger you grow, the more you’ll have to spend.
Take, for instance, a small advertising agency that only has a handful of clients to keep it busy. Then, an opportunity arises to take on three new, long-term clients. This is the breakthrough you’ve been looking for, but you’ll likely need to invest in more employees to cover the extra work.
Scaling, on the other hand, allows you to plan ahead more clearly. When you do so, you’re able to grow your income without having to dip too far into your savings. In other words, you scale by finding ways to drive your revenue up without negatively impacting your costs.
Looking to establish a more sustainable model of growth for your startup? Here are five tactics to try.
1. Conduct a Thorough Market Analysis
You could spend hours crafting a mission statement, values guide and vision board for your company, but how much of that time could be more wisely invested into market analysis?
While these are critical components of a successful startup business plan, they should be established at its earliest stages, not when you’re looking to make the leap to mid-cap status. Moreover, they seek to define your startup’s identity only. Equally important is your market identity.
To scale successfully, you’ll need to stay one step ahead of the pack, and that means understanding your niche both inside and out. What new trends are customers most interested in? How are they interacting with your peer brands? What innovation is shaping the future of your industry?
Getting an edge in this way can help you roll out deliverables that are more aligned with the current interests of your target audience. Case in point? Consider Kodak.
Once a game-changing pioneer of the film industry, Kodak saw its reputation (and its bottom line) crumble when it failed to embrace the fact that online photo sharing was taking over the print photography industry.
Contrary to popular belief, the brand did attempt to keep up with digitization and even pioneered one of the first digital cameras. What it failed to understand, however, was how its current product offerings fit into this new landscape and how modern customer preferences were shaping it by the minute.
This is where market analysis comes in. To stay ahead of the curve and become an early adopter, understanding your industry, then adapting to that knowledge, is key.
2. Diversify, Don’t Stagnate
If it ain’t broke, don’t fix it. Why reinvent the wheel?
You’ve heard those idioms in the past, but consider how effective they are. Especially if your startup emerges hot on the scene with a creative new product or service, it can be tempting to stay right where you are.
To avoid being labeled as a jack of all trades and a master of none, you take a deep-dive into specialization. It becomes easy to replicate your model for success, and you do so often, riding the wave as far as it will take you.
Yet, what most business leaders fail to remember is that a wave only peaks for so long. Eventually, it has to come back down.
If you focus all of your efforts on one area of your business, you’ll find it difficult to scale successfully. As orders start rolling in, it’s difficult to meet expectations, especially if you’re working on a minute-by-minute schedule with little time to plan ahead.
Focus on your core competencies, but don’t be afraid to tweak, improve and sophisticate your processes wherever possible to help your company grow.
3. Envision Future Scenarios
Often, it’s easiest to get your ideas down on paper or at least on the conference room whiteboard. To help your startup achieve scale, take a look into the future and encourage all of your employees to do to the same.
Create perceived scenarios of future events and brainstorm ways your startup could solve them. Use predictive modeling software to design mock scenarios, and from there, describe how your team would respond to major threats, risks and opportunities for growth.
The results from this exercise can be eye-opening. Use the data you walk away with to help you better manage your portfolio, lower any risks and get your name into a market you may have overlooked.
At the same time, look for ways to shave off replicated costs. This way, when the vision you anticipated comes true, you’ll be more than ready to respond and react.
4. Focus on Customer-Centric Hires
Want to sell more effectively and grow your market reach? Hiring the right people is key.
When you focus your efforts on bringing customer-minded sales professionals, you can help your revenue grow organically without the need to spend tons of capital on costly marketing methods.
Look for employees who are passionate about your startup, your vision and your plans for the future. Make sure they can speak confidently on your products and also know your target audience as a whole. This way, they can make sure your development processes are aligned with market needs.
5. Standardize Key Processes
You could be losing money on your in-house processes and not even realize it.
This will primarily take the form of unnecessary labor costs, expended as your employees spend time wandering around looking for direction on a task, clarification on a requirement or someone to show them what to do next.
To make your operating model as lean as possible, seek to standardize your most common processes. Then, delegate those tasks appropriately. You’ll need to train your personnel to get them up to speed, and you may need to replace your legacy equipment with newer models to keep pace, but those are one-time expenses you’ll quickly make up with improved efficiency.
Help Your Startup Scale for Growth Today
We get it. You’re a busy business owner looking to get over any productivity slumps and income drags.
One way to do so is to focus on growth. This means paying out as much as you’re earning to ensure you stay above water. Or, you could prioritize growing through scale, aiming to keep costs as low as possible while concurrently raising profitability.
Want to learn more about how to make the most of your startup or small business? You’ve come to the right place.
Take a look at my startup page for more advice on how to ace this journey. As you prepare to grow through scale, let’s take that first step together.
