Search the term “scaling a startup” in Google and you get thousands of search results offering: “the ultimate guide”, “everything you need to know”, “the [insert a number since millennials love numbered checklists] steps to scaling your startup”, and other fun titles that talk about scaling startups.
It’s great that there is so much literature on the subject, and I have zero qualms against any of it although that’s probably because I haven’t read the thousands of articles, I’m sure a fair amount are bunk.
This article isn’t meant to be a start-up scaling checklist. Rather, it’s to remind readers of the top three most forgotten steps to scale a business.
It’s not the fault of the start-up CEOs, after their eyes glaze over from reading the same advice in a slightly different ways for the twentieth time (but hey, you do have to read it right? Just in case there is that one, little knowledge nugget lurking there #FOMO) it’s hard to avoid a myopic view of scaling startups.
So, Mr. Glazed Eyes Start-up CEO, here are the Three Forgotten Steps for Scaling a Startup:
- You’re not the CEO anymore, you’re the acting head of HR
- Basic Google Analytics? Consider better business intelligence
- Not so fast, don’t run to profitability
Step 1: Role Reboot – HR
In talking about automating processes, standardizing various business elements, increasing average order size, optimizing repurchase rates, etc., one thing that people forget to tell the Scaling Start-up CEO is that at this stage his job is more Head of HR than CEO.
Yes, it’s a startup so you have to wear many hats. Yes, the company’s strategy is still largely dependent on you. Yes, you’ll still need to be in the weeds a bit (although less and less as this scaling stage takes effect). However, where your time and energy is spent is in hiring (and firing) people.
The majority of your time is spent on hunting top talent, then convincing them to join your team. One of the end goals in scaling is that your operation could survive without you.
You’re not a bottleneck once you have qualified people in the right positions to make sure quality doesn’t slip and capacity increases. Yay! So, to get there you must find the right people, and that’s hard.
It’s not only hard, it’s time-consuming. Your days are spent interviewing all of these candidates, and then, you don’t even hire one of them. It will frustrate you and make you appreciate headhunting firms.
One last note, for the smarty reading this and mumbling about how it’s not scalable for you to be so engrossed in hiring…duh! You’re scaling your startup; you’re not scaled up yet! Think of this stage as the unscalable tactic phase.
Step 2: Let’s Get Analytical
You already have some type of analytics reporting program setup. This step isn’t about optimizing your Google Analytics; it’s about re-tooling your analytics stack. This will vary based on the kind of business you have. Is it e-commerce, is it lead-gen, is it eyeballs for ad dollars, is it mobile or web, both?
Remember you’re trying to grow in efficiency and, by definition, efficiency is getting more of something out of the same source.
So, you should be using analytical tools that will help you increase conversion rates, time spent on page, basically increasing whatever behavior(s) that lead to revenue.
Conversation rate optimization is a buzzword for a reason. You should know where all these great users and customers are coming from and be able to double down on these sources.
To get to where you are, you may have already been getting the low hanging fruit. Your new analytics tools should make it to where there is no low hanging fruit left and you’re starting to yield some promise from the mid-level hanging fruit.
Step 3: Profits? Eh, maybe.
Just because you’re growing up doesn’t mean you should already be profitable. For certain companies in certain industries, this may be true. Personally, I was a part of a fast-growing startup that was profitable in its second month and never looked back.
I’ve learned that that was an anomaly.
Most likely you’re doubling downscaling efforts will make you lose money (possible on paper AND cash flow), and that’s OKAY!
You’re at a stage where you’re crossing the chasm from early enthusiasts (some may call innovators, early adopters, evangelists, etc.) to a mass market audience. Doing that often entails more expenses (higher marketing costs, more staff -> more overhead, larger offices, etc.).
Revenues are likely trailing these new expenses, and that’s OKAY!
So, this isn’t so much an actual step as it is more of an FYI that you don’t need to step into the Profits Pool. Take a step towards it, sure, but don’t feel the need to be profitable by the end of your “scaling up”.
You’re still growing, not necessarily maturing. You don’t go from 12 years old to 25 in real life, so your company likewise isn’t going to skip this fast-growth, but unprofitable stage. Enjoy being a teenager (company).