Collective experience from some of the world’s biggest tech startups has shown that scaling is crucial to effective growth. Today’s most dominant companies all mastered the art and generated huge profits to boot.
Entrepreneurs today need to remember that scaling isn’t something that just happens as you get more customers. It depends on strategy and can easily go wrong.
In traditional business models, companies gain clients and then hire more people to service those clients. As the business grows, revenue grows, but so do costs at roughly the same rate. Thus large companies wind up being no more profitable than smaller companies.
Growing scalably is all about reducing costs per unit as your business grows. You want to grow your business into a position of greater profitability, not stagnation. So what can you do to make sure that you achieve this? Take a look at these tips for how to scale up your business effectively.
Build Fail Safes To Insure Against Going Out Of Business
When you’re just starting out in business, everything rests on your first few clients. If one of those clients decides to bail, you’re finished. Thus, at the start, running a business is all about managing client expectations and investing enormously in each of them.
But as a business grows, the risk of losing any particular client drops substantially. Let’s say your company is worth $60 million a year. Losing twenty clients might be an issue. But losing one can be accommodated.
One of the main reasons to grow a company, therefore, is to reduce the risk of going out of business. Sure, the company might not be any more profitable per sale. But it is more robust to random fluctuations in those sales.
Scale IT In Line With Needs
With the rise of the cloud and software-as-a-service, the way startups are doing IT is changing. No longer do they have to invest heavily in their own equipment. Instead, they can simply dip in and out of the services they need, when they need them. Cloud hosting has meant significant changes in this regard. As startups begin to use more data, they don’t have to make more room for servers. Instead, they simply hire out more server space in line with their exact needs. This means that companies don’t have to sink capital into new systems that they may never actually use.
This new era of granular computing allows businesses to scale more consistently. It reduces risk. And it brings the cost way down compared to just a generation ago.
Don’t Rely On Individual People
A lot of startups come to rely on a core of very talented people. That’s great while those people are stationed at your company. The problem comes when they decide to move on, or they get sick. Theoretically, a person leaving your company should have no discernable impact on your operations. Employees should be free to come and go, but the business should always remain.
But of course, that isn’t always the case. In fact, many startups that scale rapidly run into this problem the moment they become successful. Other companies see the success and start poaching talent, leaving the original company hollowed out.
The solution is to build systems that help reduce the need for any one individual. It sounds awful to say it, but ideally, people should just be a cog in the machine. Thus, entrepreneurs should focus their efforts on building cultures and systems. They shouldn’t focus on individual people if they want a business to scale well.
Simplify Your Business Model
If your business is growing rapidly, it’s because you’re doing something right. The temptation during a growth phase is always to diversify into new products and markets. But few companies that scale well ever go down that route. Instead, they consolidate their focus on the products that the market loves and saturate the market.
Simplifying your business model also makes it a lot easier to scale across multiple locations. Consistent experience is critical if you want to grow your business into an international brand. Take Burger King, for instance. Burger King customers expect their experience to be the same, no matter which Burger King outlet they go to. If production processes were tricky, getting that level of consistency would be difficult. But the processes are simple, and the products relatively narrow, making scaling easier. Companies that have a consistent product gain more trust from their customers.
Remember, it’s the system that has value, not the talent of the individual people in that system.
This article was provided by ellie jo