Launching a new company is hard, but scaling a startup is even harder. It requires bigger risks, a more complex organizational structure, and the challenge of “turning a startup culture into corporate values”.
If you’re thinking about moving your business to a new level, there are different options for how to do this.
- Expand the infrastructure and build an in-house team
- Scale your company with an external dev team.
Not every startup has the expertise, infrastructure, and budget to turn the idea into a real product on its own. Scaling a company means finding ways to optimize processes. It requires planning, some funding, and the right systems, staff, processes, technology, and partners.
So, let’s discover what scaling is and who needs it, and finally, how to scale a tech startup?
Growth vs. Scaling
Let’s start with defining the terms scaling and growth and the difference between them.
Growth stands for the process when the company’s revenue increases in the exact same way (with additional investment in technologies or human resources). In this case, the formula may work like this: more orders lead to the need to hire more workers, which brings more revenue in general.
Scaling refers to the process of increasing a company’s revenue exponentially (without additional investments) To get a maximum income with minimum expenses.
Prepare Your Startup to Scale
According to Forbes: your company is ready to scale “when you have a proven product, proven business model and about to expand to new geographies and markets”.
The first thing you need to do before starting this process is to ask yourself whether your company is ready for this. There are a lot of startups that failed because they started this journey too early with the same approaches and didn’t realize that all the business processes have to evolve as well. Basically, what got you here won’t get you there. So, be ready to pivot.
Are you preparing your startup to scale up? Here are a few thoughts:
- When you start to scale up, your business turns from a building-a-product approach to a distribution one. Once you get to the point where you sell your product, the next challenge is how do you get people to buy more or how do you get that distribution? Whether it’s through some channels, direct sales, or through marketing. It’s difficult to build a very scalable distribution channel quickly, so think about it in advance.
- It’s expensive to scale. If you run out of cash, it’s a real problem, that’s why plan new monetization methods in case of emergency.
- Establish rules and processes. Make sure everyone is on the same page by following the rules while you scale up business. Firstly, it will give you time to concentrate on core issues. Secondly, such a company remains strong even if the CEO pays attention to other projects. And finally, making sure that you have rules, gives people the structure to be more successful.
- It’s all about the people. Do you have a strong team that will run the company without you being involved in every decision? If not, hire the best out there.
- Think about the offshore strategy. There are challenges like time and culture differences but good management, and outsource development team will definitely strengthen your organization.
- Find functional experts with relevant (preferably, successful) experience and a professional management skillset. Pattern recognition helps not only in big data but while scaling up software startup too.
According to Michael Alter, a clinical professor of entrepreneurship at Chicago Booth:
“Business is really a movie, sometimes the plot’s a little different. But once you’ve seen the movie, there’s real value. And the issues you have around scaling are very similar across businesses. So finding somebody who’s seen the movie is really helpful, and when you get somebody who’s seen the movie, it’s like, it’s magical.”
- Define and reinforce the values that will maintain the business.
- Last, but not least, remember that you can’t run in lockstep anymore, so you need to start establishing new systems and processes to build a scalable startup.
Check the best team management software to improve your work productivity.
When Should You Scale Your Startup?
From the very beginning, every startup evaluates the same questions: how to get to the next level, how to reach the audience, does the business has the capacity to grow? 90% of new startups fail, 50% of businesses make it to their fifth year,40% of startups actually turn a profit.
How can you know when your startup is ready to scale? Here is our list of the signals that you are ready to expand:
- Your product is validated and ready to expand to the new marketplaces.
- You’ve already fulfilled the initial business goals
- You have a strong core team that can handle rapid changes
- You have too many clients to handle them by yourself
- You’ve created a positive cash flow for your firm
- You are ready to expand your in-house team, external dev team
An example of such transformation is Jellyvision, a software company based in Chicago, Illinois. Initially, it was the company that made games on CD-ROMs. Eventually, those things became outdated, just like the company’s original business model. And so, there was a critical need to change. Jellyvision went from a hits-driven B2C gaming company to a B2B enterprise SaaS company. They got into health insurance, and this transition is recalled as their scaling.
If you filled out the checklist mentioned above and are still wondering how to scale a startup, let’s proceed to the next part.
Need a piece of advice on a software startup business plan? Inoxoft is ready to share some tips!
How to Scale a Startup
Once you decide to scale the software startup, here are the steps worth taking.
Make a plan
It may sound obvious, but start with the basics and come up with a startup scaling strategy that shows continuous innovation. Also, we encourage you to read our article about the software development business models!
Attract Additional Investments
To expand your business you need to attract new investments. Build a thoughtful business plan of the exact sum you need for development. The most convenient way to do so is to reach out to investors and your ability to justify a strategy will definitely help.
To strengthen the team, you may consider hiring globally with lower rates but the same work quality. It’s a great tool that gives the opportunity to concentrate on core processes whether you delegate some company functions or hire a vendor to conduct the full cycle of product development.
Imagine if you need to develop your product or you have an idea to launch a new one. Of course, you can rely on an in-house team or even expand it. But to do so you need to recruit and train a staff of developers. Set up a workplace, think about the HR team to keep work-life balance within your company. The strengths of external development are the ability to quickly attract specialists of the desired industry and the ability to optimize costs. When working with vendors, you pay only for the working hours of specialists and do not cover other expenses.
Besides, if at first, outsourcing was mostly used to save costs, now startups and little businesses are delegating not just non-essential activities but those that demand high-quality performance. Don’t miss a chance to discover our list of the best countries to outsource software development.
Other benefits of scaling up startup with dev team
- Quick start of a project
- Access to a larger talent pool
- Opportunity to hire the most efficient vendor
- The attraction of resources such as fresh view, experience, and knowledge
- Dedicated, flexible team with a variety of hard skills
Find more about the average developer hourly rate in the USA.
Automate the processes
To be scalable, your company should function just fine without you. Trust us, it will save a lot of time if you set up
- production automation
- payroll and billing
- training processes for new hires
- document processes etc.
Focus on Potential Customers
That is worth remembering that your target audience will be different from the one you are used to. Users have found you and remain loyal despite some of your bugs or other issues. Now it’s time to pay attention to those who expect a little more from your product. Turn the focus from a set of customers that got you here because it is usually not the same set of customers that will get you there.
Create Scalable Marketing Plan
The world’s finest products don’t always win. Somebody else who may have had a great product but terrible scalability is losing while your plan makes the product recognizable and successful. So, don’t forget about the marketing strategy of how to attract new customers, because what worked to get them earlier differs from modern approaches.
Invest in Technology
Software is fundamental. If you invest in technology, it would make the process of scaling more convenient and less expensive. Automation, for instance, minimizes manual work, runs your business at a lower cost and in a more efficient way. An established CRM system helps with managing customer data and offers them a better user experience.
Learn more on how to build a successful tech startup in our blog!
So, how to scale up business or startup? Why does someone succeed and others fail? There is an opinion that winners are those who intersect technology invention with the business invention (that include new business models, approaches, etc) and then they move really fast to establish it. Those who pay attention only to the technological component and forget about other processes (e.g. marketing) don’t keep up with competitors.
The last question is whether your business system and the team will be able to accommodate growth? If so, here is one of the most convenient approaches, hiring a dedicated software development team. It works if:
- There is a lack of experts in your in-house team
- You are looking for a fresh view and new solutions
- You want to strengthen the existing team or create a new team of experts
- There is a need to speed up the development
- You plan to scale up the project
Outsourcing vendors have the technical staff and experience that enable them to be more efficient than your company. To incorporate these functions internally takes a lot of effort, resources (such as time or money). So, the solution is to find a reliable partner that will scale your business if you want it.
If you have any questions, feel free to contact us. Let’s implement your business idea together!