A guide to scaling a startup
When Henrik Gebbing and I founded Finoa in our shared apartment in Madrid back in 2018, little did we realize that within just three years we’d have team members across the globe with plans for exponential growth in the works.
Obviously, the way we ran things when it was just a handful of us would never suffice now. Scaling our business has meant overcoming some tough challenges in order to build a sustainable organization.
The biggest question I’ve heard from other founders is, “How do I know when my startup is ready to scale?” From my point of view, the answer is, “When you have found a winning business model.” This is a vital point here. You have to have a business model that works.
There’s no point in scaling if your minimum viable product is dysfunctional and you don’t have proof that you can monetize your product in one way or another. In other words, don’t scale if you don’t have customers who are willing to pay for your product.
Once you have a working business model in place and a group of paying customers, then you can think about broadening that client base. There are two ways that you can accomplish this.
One is by expanding into new countries or regions, the other is by expanding into new products. Each of these options will have some specific challenges, but here are my tips for how to prepare your company before scaling, so these challenges don’t derail your growth.
Expansions can fail without processes in place
Scaling a startup adds a lot of complexity — from straddling time zones to adding lots of new lines and boxes on an organizational chart. What happens to your operational processes as you add people in different regions, or at different management levels?
If you’re adding a new product, this adds levels of complexity to your supply chain situation, your billing department, and your development teams, just to name a few affected areas.
For example, if you try to scale a business with faulty project management and sales processes in place, you could end up with sales teams promising delivery of product updates that have not yet been finished and tested.
Management will end up spending too much time extinguishing organizational fires and not enough time making sure the core business itself is functioning properly — or on attracting new investors. This is an area where expansions can fail.
Where is your single source of truth?
The main challenge that scaling presents to internal communications is with the flow of information. When you have a team of five, it’s fairly easy to keep everyone informed about every little (and not so little) thing that’s going on.
With more people on board, it’s tough to ensure that relevant information is flowing to those who need it. Here, you may have to institute internal measures, including all-hands meetings, management meetings, communications tools like Slack, and even emails to everyone in the company when needed.
Remember, too, that internal communications need to be a two-way street: not just top-down, but also bottom-up. Having clear reporting processes in place will also help when you’re scaling into new countries or regions. Efforts in one location might be duplicated in another location, but may proceed in a very different direction.
As an example, if you have regional teams independently building product rollout roadmaps, you could end up with vastly different timelines that are in conflict with the launch plans underway by the marketing manager.
It’s vitally important to have a single source of truth in place, a central medium where all relevant and important info is gathered and shared, so that folks at each location know what the others are doing and who’s in charge.
Since many people are working from home and locations can be vague for some companies, this centralized structure should be set up by the headquarters and leadership so that there is a transparent flow of information within the company.
You can’t approach new markets with the same old messages
When you start to scale your company, you realize that it’s difficult to duplicate your image and brand onto a new product or to directly translate it into a new country. You see that a lot with car companies. They have different names for their vehicles, different ad campaigns.
The more your business grows internationally, the more important it is to align your branding and marketing to the target market, to accommodate for the preferences that customers in these countries might have.
If you’re headquartered in Germany, you would likely know what shows people tend to watch and when. But if you were to then expand into Spain, where you don’t know the market as well, you’d need to invest in support from local PR or marketing agencies who could help you localize your messages to be effective there.
The same applies to startups that scale by adding a new product. You might be selling comfort and usability for your first product, but perhaps the second product requires a completely different customer approach.
Scaling experience matters when it comes to hiring new managers
When you scale, you need to practically double or triple the team size, which will present problems to maintaining the company culture and DNA, especially if you are integrating diverse people across different time zones.
To minimize problems, you need to be sure to get people in management who have experience scaling. If you’re adding products, you need product managers who have experience working with that type of scale-up. They’ll best be able to handle any complications that arise as the new product is integrated into the company’s offerings.
If you’re opening an office in a new country, you need to hire a manager who knows the country, the market, and the local talent. Successful companies hire about 30% of their people from who they know and based on referrals. Therefore, it’s best to first look for a manager already working in your headquarters, who fits the company culture, and who has experience in or is from that country and knows the market.
Once you have a local manager in place, that person will be able to hire the right talent for that market. You can also work with international recruiting agencies that have supported scale-ups. They will have connections to talent and people in their markets.
For new teams in a different country or region than the headquarters, it will be important for leadership to spend some time with them on the ground in the beginning.
You have to really show your face so they know they are considered to be part of the whole company and not just external to it. There needs to be a strong connection here, and I highly recommend inviting these teams to the headquarters often and having in-person company-wide retreats where everybody can be together.
Get comfortable with ambiguity
As Finoa has grown, Henrik and I learned early on how quickly it can become too much for two founders to be responsible for everything. As a founder, you need to give away responsibility and become comfortable with ambiguity.
You are not going to know exactly what everyone is doing every minute of every day. It’s important to remember that you are still in charge of guiding the overall strategy and looking after the big picture, so you should not get bogged down in the nitty-gritty.
To do this, you need to increase the size of your management team and off-load operational responsibilities onto people you trust. Processes come into play here, too, since having these in place will enable you to collaborate with those people and maintain a surface-level knowledge of what is happening.
As I mentioned earlier, expansions can fail if the founders lose focus because they are drowning in work trying to do all the day-to-day stuff as the company grows.
You can’t prepare and scale at the same time
You want to make sure you are instituting systems and processes early on, as your company is starting to grow. Don’t wait until you have your minimum viable product and a customer base to start preparing to scale.
The longer you wait to get these processes in place, the harder it is to institute them with a larger team. By that point, everyone has already developed their own hodge-podge of ways to do things and it’s difficult to get them to completely switch to a new system.
Whether you are expanding into new regions or new product lines, having the above measures in place will help you successfully scale the operations of your startup, while maintaining your company DNA and keeping the big picture directly in your sights.