Published on February 14th, 2017 | by Jose Vasquez0
The Scaling Problem to Watch in Startup Tech Companies
Startup entrepreneurs get excited about the prospect of growing their businesses, but there’s a scaling problem you’ll need to face before you succeed.
Scaling is one of the most difficult parts of startup development to get right. You may have a good idea and a strong model for profitability, but if you don’t have a reasonable plan for how to grow your business, you’ll be stuck at the same level for an indefinite amount of time. Now, some businesses get along just fine without a plan to scale; these businesses remain comfortably profitable at a given level of sales. However, most tech businesses require some level of scaling to reach peak profitability (and make their owners wealthy).
So what’s the big problem with scaling in startup tech companies?
Scalability refers to the capacity for a business to operate at higher volumes. For example, a business that requires in-depth one-on-one communication for each sale is not scalable because every new incoming customer would need a significant extra addition of effort. However, a business that accommodates 100 people and 10,000 people for roughly the same amount of money is highly scalable.
Unfortunately, scalability alone isn’t enough to solve the problem.
Scaling Too Quickly
First, it’s possible that your business scales too quickly. If you grow too fast, you won’t have enough resources to reasonably keep up with your increased volume of sales. You may not be able to achieve a reasonable degree of customer service, leading you to lose customers as quickly as you gain them, or you may invest in the wrong areas of your business and lose money entirely.
Scaling Too Slowly
On the other hand, it’s possible to scale too slowly. In this scenario, you’ll strive for growth, but you won’t be able to pick up new customers at a reasonable rate. Accordingly, you’ll be stuck at a lower level of profitability, and it will become harder and harder for you to break out of that plateau.
How to Measure Your Pace
So how can you tell if you’re growing too quickly or too slowly? I wish I could say there was an easy way to gauge this, but as a rule of thumb, keep steady pressure on your business to change and evolve. Don’t become too comfortable with your current level, and push for more without overextending yourself. Then, only invest in new resources as you discover you need them. Over time, you’ll be able to grow at the ideal pace.