The challenges you need to overcome in order to scale your business effectively
Without a clear understanding of how to scale, businesses and startups can — and do — crash and burn.
Scaling a business is hard, particularly in today’s climate. Strategy, vision and a focus on sustainable growth are essential. Without a clear understanding of how to scale a business, startups can — and do — crash and burn. When a business grows quickly, it can make itself vulnerable to a range of problems from lack of support, limited foundations for sustainable growth, and losing sight of the company’s goals, mission, and values.
So how can you scale your business effectively?
Overcoming scaling challenges
Businesses hit three key growth milestones as they scale.
The first is ensuring there is a product market fit and demand for their products or services. To overcome this, do your research and ensure there’s demand and clearly-defined market value for your product. Ask yourself, are you solving a real problem for your addressable market?
The second is ensuring you have a business model that works. This means that your inputs to acquire new customers, support and retain them are generating more in outputs for your business. In the Software-as-a-Service (SaaS) world, this is called the “unit economics” of the business — what it costs to acquire one new customer (“CAC”) compared to the estimated lifetime value of that customer (“LTV”). To benchmark, think of it this way: if your business is investing $1 in sales and marketing expenses to acquire a client, can $3-4 in return be generated in return over the client’s lifetime?
Calculating these metrics helps answer the question of whether your business is financially viable, as well as looking at what is working well versus what could be improved. Once the business model and go-to-market motion have shown it can work at a smaller scale, the third step is to scale up your go-to-market. It’s time to invest for growth. The key to success is continuing to keep a very close eye on your investments, return and SaaS unit economics to ensure that the business model that worked at a smaller scale is continuing to work at a larger scale and faster pace.
Prioritising company alignment
As a business grows quickly, it can come with a feeling of a loss of control, leading many companies to institute policies that ultimately slow the business down while suppressing innovation. To avoid this, companies should build a framework for decision making and reporting. This ultimately helps the company align and move as one. The best companies and leadership teams share the future-state vision frequently, partner cross-departmentally, prioritise transparency, and watch and refine key metrics consistently.
Alignment is key to scaling, and there are many different components that contribute to it as an organisation grows.
To have true alignment, businesses need to connect people and teams to the company’s overall goals and then align these goals with the needs of the customers. To do this, you need to connect your financial plans and business plans while watching key leading indicators closely as a team.
Reporting is key. Businesses that clearly define their KPIs, follow a regular and transparent cadence for forecasting and reporting, and deeply understand why the business may be over or under performing against targets are the ones who scale more effectively than those who don’t. Open and transparent communication about metrics and performance levels supports alignment and gives your business the best chance of sustainable growth.
Expanding the team
To scale successfully, organisations must operate with the mindset that certain ratios need to be in place across the business. For example, you can’t over-invest in one team without thinking about the downstream impact on another. If you hire a number of new salespeople to unlock additional revenue streams, you should expect a downstream need for customer success professionals who can provide ongoing client support. In addition, if the go-to-market and customer-facing teams are growing, so must the finance, people, marketing and operations teams to ensure there’s support for development and sustainable growth across the entire organisation. To achieve this, businesses should prioritise investing in their talent, recruiting and business planning functions to ensure success, particularly in light of Australia’s current talent shortages.
Putting your customers first should always be your starting point. Ensuring your unit economics are positive is a must. From there, continue to experiment and adjust where needed to ensure you’re providing your customers and employees with the best possible experience, all while keeping up with the growth and efficiency of the business.
