Launching your startup is one thing, but if you’ve managed to survive past that initial rocky phase of getting your business off the ground, it won’t take long before your attention turns to how you’ll scale.
Unfortunately, a poor strategy for scaling your startup can quickly undermine all your previous work. In fact, some studies have even cited premature scaling as one of the leading causes of startup failure.
One of the most common causes of this type of failure? Lack of money.
Growing your startup often requires additional investment in both personnel and financial resources, but if you don’t manage your growing team & cash flow properly, you can quickly get your business into trouble.
But all of this doesn’t mean scaling is impossible. And to highlight this reality, I recently sat down for a great conversation with both Tom Kulzer, CEO and founder of AWeber, an email marketing automation tool that’s been around since 1998, and Anton Mishchenko, co-founder and CEO of the Y Combinator-backed developer hiring platform, YouTeam.
Both were able to provide great insights – based on first-hand experience – into what startups need to do to scale successfully in today’s increasingly expensive business world.
1. The power of word-of-mouth
Unlike many other startups, AWeber didn’t rely on outside funding to scale. Kulzer wanted to maintain full control of his company so he could do what he felt was right for his customers and employees without being “beholden” to investors.
So how did he get his company to grow its customer base?
Rather than investing in a big marketing campaign, AWeber initially utilized the power of word-of-mouth marketing and leveraging introductions from existing customers.
“We continue to have a big affiliate reseller network, because when you help a small business out, they tend to be very well-connected to others in their industry or in their geographical location,” Kulzer explains.
“They tell other people about the tools they’re using and what they’re seeing success with. And that led to a lot of that ‘network effect’ of growth for us. Direct word-of-mouth referrals was always one of our biggest sources of new customers and continues to be to this day. If you do well by your customers and support them really well, they’re going to do well by you.”
2. Streamline your processes
Customer growth is one thing – but it isn’t the be-all-end-all of successful scaling. You need to have the right infrastructure in place to ensure you can continue to provide a positive experience for each of your customers.
“Building a startup is like attempting to ride a broken bicycle, you have to both ride and fix it at the same time. It sounds silly, but it’s true, when you start building a company, everything is broken; everything is an act of survival. Once things start moving forward however, the trick is to have high-quality, streamlined processes for everything your business does or plans to do,” explains Mishchenko.
“You should still be open to new ideas, but at the same time, you must have a baseline where there are clear steps for everything from resolving customer complaints to managing delivery of your product or service. This is how you continue to maintain quality, even as you start to expand.”
Each business process should ultimately contribute to your startup’s end goals.
For best results, each process should be easy to understand, outlining each step that must be taken to successfully complete a task. Taking care of this before you start to scale, will make it easier to onboard new employees and keep future actions in line with your overarching goals.
3. Outsource and automate
“You can’t do it all on your own either, there just aren’t enough hours in the day,” Mishchenko adds.
“But this doesn’t mean you should hire full-time employees for every position imaginable. If you go from working as a solopreneur to hiring two employees, that doesn’t mean it’s time to hire another full-time employee for payroll processing.”
Instead, Mishchenko advises that scaling startups look for more affordable options (like tools and contractors) that help save time and money with vital business tasks that don’t require everyday attention.
“When you have a limited budget, your money needs to go to core tasks that ensure business growth. Don’t hire in-house until you truly have an in-house need.”
Fortunately, there are plenty of options available for small businesses.
SaaS tools can assist with everything from email marketing to payroll management. Dedicated remote specialists can be a great option for one-off projects. Hiring contractors is a great alternative to help manage one-off projects with a clear deadline, like implementing an affiliate program or running a brand sprint. By utilizing less expensive resources to handle important tasks, you can dedicate more of your own effort to the projects where you’ll directly contribute to your startup’s growth.
4. Build the right team
Hiring new employees is an inevitable part of scaling your startup – and it also has one of the largest margins of error. When I asked Kulzer what his biggest regrets were in his early efforts to grow AWeber, he quickly cited “Making bad hiring decisions and not owning up to it fast enough.”
“It’s not necessarily that the person is a problem; you just plain made a bad hire. You hired the wrong skills for the wrong kind of role, but you didn’t know it. You have to be able to deal with it and move forward,” he explained.
Later, he added, “I’ve never regretted having asked anyone to leave the team.”
Kulzer’s experiences further validate the idea of “hire slow, fire fast” so often espoused by business professionals. As a startup, you can’t afford to hire someone who lacks motivation or has the wrong skill set.
Take your time to find a self-motivated, innovative individual who will grow with your business. If you make a mistake, fire fast so that you don’t waste your precious resources.
Scaling for success
Scaling your startup represents a significant opportunity – but it’s also a time of great risk.
Fortunately, it’s still possible to scale your business without breaking the bank. By using these insights to guide your actions, you’ll take the right steps to reach new customers and keep your finances on track.