Nobody told you the reality of launching a startup and the myriad of decisions you’d face. And, how you navigate each inflection point determines the ultimate success or failure of your venture. Statistics bear out the uphill battle involved in startup success – 80% fail after less than 2 years. One of the most significant decisions you’ll face is when to expand the business, and we gathered upscaling tips to make the expansion as painless as possible.
Myth versus reality
The silver screen, business books, and a plethora of online advice recommend you dream big and shoot for the stars. Success stories, such as Facebook, Apple, and Kinkos, show an idea and hard work is all you need to grow your business into a multibillion-dollar enterprise, even without a college degree or a business plan. The reality is very much different than this rocket ship reaching the stratosphere of success. Missing are the vast number of business that failed despite founders with enormous experience and education, carefully crafted business plans, and connections to funding sources. Yet, being the eternal optimist, you assumed your business idea was so unique, your plans so superior that your company would be one of the few doing well after a year. Sure, you were realistic and didn’t expect Amazon or Facebook growth, but you were quietly confident that you’d succeed.
Fast-forward twenty-four-months and reality set in. Suddenly, the company plateaued or tanked altogether. Or, worse, your company took off like a freight train, and you couldn’t satisfy all the orders rolling in, which left you with only one option – expansion. The problem is you have no clue how to scale-up a business, and you don’t have time to figure it out because the day-to-day demands of the company leave you little time for sleeping or eating, let alone planning for the future. Still, if you don’t, you run the risk of moving backward and undoing your hard work, so you develop some half-baked plans for expansion. That’s dangerous and likely a waste of time, money, and other limited resources. So, today, we share some upscaling tips to help you on your way.
Upscaling tip 1. Plan for the future first
Once your business starts operations, you’ll find you have a million demands on your time, leaving little energy left for strategy formulation. Even established companies find themselves with too little time for planning as they face enough challenges, just keeping the boat on an even keel daily. But, without sufficient effort on planning for the future, the future will likely be unattractive. Indeed, your future won’t be the one you might have had with adequate planning.
Businesses recognize the reality that planning for the future is the main difference between success and failure. Hence, they develop strategic plans at least 5 years into the future, at least in Western countries. In Asia, it’s common to plan out 50 years to ensure the company sets long-term goals to guide the tactics employed daily.
Obviously, the future is a big unknown. Who, for instance, could predict the Novel Coronavirus would shutter the world, bringing devastation to most businesses and wrecking the future for millions of people, especially small businesses. Hence, your long-term plans are somewhat general, and contingency planning helps guide the firm when it encounters the inevitable bumps in the road.
Since the future is unpredictable, at least with any great detail, you need flexibility. For instance, Charles Geschke, co-founder of Adobe, tells the story of their startup. The business plan called for selling a bundle of hardware, a computer, and a printer, as software for desktop publishing. First, one company approached them wanting to buy the printer and software. Geschke explained that their business plan called for a bundle of hardware and software. Next, Apple approached them. Apple had its own computers and had just introduced its new Applewriter. It only wanted to buy the software. Again, Geschke explained the parameters of their business plan. Finally, thankfully, the mentor installed by their venture fund, told them the reality of a startup. The business plan got you the money needed to fund the operation, but a business must adapt to the demands of the market. And, hence Adobe started making money by selling the software, which was the truly unique contribution of the firm, and it met with high demand.
2. Copy the competition
Plagiarizing isn’t morally or legally acceptable. However, your rivals don’t have a patent on scalability, or any other idea, for that matter, so it’s not as if you’re going to do a Samsung and steal their technology. Instead, you want to research the hurdles they faced and the approaches they crafted to overcome these hurdles. And, by the way, don’t just look at direct competitors for inspiration.
For instance, I once heard an excellent talk given by a concrete manufacturer who faced the problem of late deliveries, which created a high piss-off quotient (the inverse of customer satisfaction) for his customers. To improve on-time delivery, he benchmarked against Dominos, who, at the time, offered delivery in 30 minutes or the pizza was free. He couldn’t deliver in 30 minutes, but he could monitor on-time delivery. But, it isn’t enough to benchmark against an industry leader since all that does is highlight your failures. You need to find the underlying problem and fix it.
To improve on-time delivery, he first assessed factors contributing to failure. The most significant factor was drivers getting lost finding new construction that wasn’t on any maps (physical or virtual). To fix the problem, cross streets and existing markers were collected when the customer placed the order. Viola, on-time delivery improved to the point that a friendly bet with the local Dominos resulted in the concrete company’s employees eating a lot of pizza.
For the next upscaling tip, consider all the additional products, services, and staff, you’ll need to expand. All of which costs a lot of money.
Outsourcing leverages your existing resources by borrowing rather than buying the necessary resource. Outsourcing also responds quickly when your demand fluctuates. Investing in third-party solutions is also the best way to improve quality and lower operational costs without damaging the brand or its reputation.
With expansion, outsourcing is also an incredibly savvy way to learn more about the cultures and customs of the market you plan to enter. International expansion especially involves connecting with a new customer base that’s likely very different from the type of customer you usually serve.
Hence, outsourcing to local businesses, such as a domestic advertising agency, a freight forwarder with experience in the local market, and domestic retailers provide the nuanced access to local customs, logistics channels, and government idiosyncracies necessary for a successful expansion.
4. Scale Gradually
Upscaling involves numerous steps and careful planning. You won’t succeed if you try to compress your time–no business turns on a dime. Just like an aircraft carrier needs a lot of water to change course, so does your business. The trick is to implement scaled-up practices gradually, so that stay ahead of demand rather than struggling to deliver on promises.
A cheap Windows VPS is a brilliant start as it stops downtime from becoming a problem, as well as helping you secure as many conversions as possible. Another tactic is to hire twelve months in advance to allow recruits to settle in and better understand your systems.
5. Maintain good relationships with investors
If you think a normal startup is expensive, wait until you try to scale up! The issue with growth is it’s difficult to predict the exact costs. Unforeseen circumstances mean expenses pile up out of nowhere, leaving you with an enormous debt, if not handled properly. One of the best upscaling tips is that expansion takes twice as long and costs twice as much as planned. Thus, maintain good relationships with investors and develop likely new sources of money, in case you need more.age.
I hope you found these upscaling tips useful. Feel free to add any other upscaling tips you found helpful with your expansion.
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