How to Scale Up a Software Startup
We wrote several blog posts here at Full Scale on how to launch your startup dream. So what happens after you finally get your feet wet with your startup? If you’ve worked hard in the initial startup phase, now’s the time to look out for better things—startup growth. The idea of scaling up a startup can be intimidating, with 20% of new startups failing during the first year of business. If you want to be part of the 80%, read on as we provide you with helpful tips for a successful startup scaleup.
Let’s assume that you’re past the initial struggles of starting a business. At this point, your software startup is ready to break new grounds by scaling up. Scalability is the ability of a company to adjust to higher output without jeopardizing revenues.
Depending on the strategies used, scaling up can be a hit or miss. Some startups are built without the right people, processes, and direction. If you’re scaling up too soon, you might bump into organizational issues that would be difficult to change. If you scale too late, you’ll miss opportunities that go along with better resources. So, how do you successfully move from a startup to a scale-up? Here are some steps you can follow.
Steps to Growing a Startup to a ScaleUp
1. Take an honest look if you’ve nailed down all the fundamentals
One of the most apparent signs your software startup is ready to scale is when it has achieved its initial target goals. In the beginning, startup owners or CEOs don’t have adequate information to help them forecast costs and revenues.
This is when they use data analytics to align their goals. If your startup has exceeded its goals, then it’s time to reexamine if your startup is prime for a scaleup. Additionally, you need significant financial investment to support the growth of your business.
To decide whether you should scale up, reevaluate your revenue performance. If you plow back a portion of your earnings to scaling, will this affect your profitability? For worst-case scenarios, if something goes wrong, do you have a backup plan to counter them?
At this stage, your ability to regulate costs and predict revenues is critical. List down all your recurring and one-time expenses. Calculate your estimated cost and determine if you have the money for such an investment. Scaling up may also entail additional funding from other investors. If you decide to go this route, make sure that you can prove to prospective investors that there are little to no risks of your startup failing.
2. Automate labor-intensive processes
If most of your processes are labor-intensive, this will hinder your startup from scaling. Nowadays, almost everything is digital. There are plenty of technology-driven solutions to help you automate most of your business processes and in turn, increase efficiency. This allows you more time to focus on scaling up your startup.
Here are some tools you can use to make your software startup more scalable. Since these are optional, you need to check with your team if these tools are necessary.
- Cloud Computing – As your customer base grows, so does the information stored in your company system. With cloud computing, you can fulfill this growing demand with minimum resources. For software businesses that are powered by the Internet, you need additional spaces to house all your projects. Storing your information on the cloud allows you to reduce expenses for electricity, hardware, office space, and manpower. These are some examples of cloud products you can use for business: Microsoft Office 365 (productivity), Google Drive (cloud backup solution), and BlazeMeter (load testing platform).
- Customer Relationship Management (CRM) – When scaling up, you also need to improve customer experience. CRM software enhances your relationship with customers by storing and organizing their information. This software helps you convert leads better, analyze purchasing patterns, answer customer questions, optimize marketing strategy, and find sales opportunities. Salesforce, Hubspot, and Zoho are some of the great CRM software you can use.
3. Work with the Best People
To stay scalable as a company, you need to hire the best people. But, hire only when necessary. For small startups with limited resources, you can outsource roles such as web developers, SEO specialists, content and technical writers, graphic designers, and others.
If you plan on hiring in-house, make sure that the team members have the skills and experience to help grow your startup. They must have more than one skill; hiring people with multiple skillsets gives the team flexibility to do more tasks than what is merely expected.
4. Improve Operations with Better Strategies
To transition into a scalable startup, you need to develop robust strategies. One of the things you can work on is listing down all your areas of strengths, weaknesses, and potentials in your startup. Set short and long-term goals (quarterly or yearly) after you have gathered this data. Include your analysis of market trends and investor prospects.
Stay proactive by reaching out to business owners who have surpassed this stage. Be open to mentorship and ask questions. It’s also recommended to attend startup conferences or seminars that help startup owners to scale up their startups.
5. Focus on Marketing
How can you attract more people to your business? Answer: marketing. You can have the best infrastructure, people, and processes, but if potential customers have never heard of your company, then it can be challenging to scale up.
Content Marketing and Social Media Marketing are some of the effective marketing strategies that are tried and tested to scale-up businesses. Why so? Content marketing has great potential to go viral and has long-term value. As most software startups don’t have a huge budget for advertising, they turn to social media as their next option. Social media is a great platform to build awareness, branding, and even generate leads for your company.
6. Get Additional Funding
It’s no secret that software startups are known for being cash-strapped. Typically, they are backed by a seed round or Series A funding. Most startups are at a phase where they’re working on creating a strong product-market fit and solid revenue stream. This is why they are dependent on funding from other investors.
When startups get their second round of funding, they are most likely to transition into a scaleup. If you can prove to investors that you have a solid team, processes, market outlook, and can go beyond an MVP (Minimum Viable Product), then the prospect of moving into a scaleup phase is inevitable.
Are you Ready to Scale Up?
Transitioning into a scaleup has its rewards, but it doesn’t come without challenges. Scalability is an important attribute that allows you to perform and grow along with the increasing demand for your software business.
You need to have the right tools, people, processes, strategies, and additional funding to make the scale-up as smooth as possible. By following the steps we’ve shared in this article, you are well on your way to building a scalable business.
If you need mentorship on how to scale up your startup, we recommend you talk to the experts. Matt Watson and Matt DeCoursey are startup heroes you need to get from Point A to Point B. They are the partners behind Full Scale, a former KC startup that blossomed into the huge offshore software development company that it is today. You can also listen to them share their two cents on the startup culture, and how to navigate around the intricate world of entrepreneurship on their weekly podcast, “Startup Hustle”. Available on most podcast players.