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Avoid These 3 Mistakes When Scaling Your Business

Is your startup gaining traction? Congratulations! Now for the real challenge—scaling it.

Avoid These 3 Mistakes When Scaling Your Business
[Photo: Flickr user Chris Wolcott]

You’ve been successful in launching a new product or a new company. There are customers and clients calling to buy your new product or do business with you. So the next logical step is to scale up your business. Since you have or do something people obviously want, why not?

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But before you start scaling your business, it’s smart to pause for a moment and take stock. You haven’t reached the summit as soon as you’ve proved your product or service has a good shot in the marketplace. In fact, the journey has just begun.

When you move ahead, you’ll want to avoid the pitfalls established companies confront when hastily getting into new markets plus the errors that drive so many startups to oblivion. On the other hand, waiting too long to scale up your business can dictate the life or death of your company, too.

Here are the three things you need to avoid when you want to grow your business.

1. Failing to Distinguish Different Types of Consumers

The markets for most new products typically have three different types of users—the first users, the early adopters, and the real or scaling users.

The first users are those who try the product for free, suggest improvements, and write about it on their blogs. They play a vital role in the scaling process because their rave reviews can encourage your real users.

Take Quake, for instance, a game launched by John Carmack in 1996. The developers let seasoned players try the game for free in return for proposing modifications and debugs. Only then did the polished version of the game go out to the real users, who are the paying public.

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The company listened to first users’ suggestions and complaints, and let them post changes to the game online. Soon afterward, the new, user-redesigned Quake saw a sudden increase in sales.

The early adopters are those tech fanatics who always want to be ahead of the pack in trying a new product. In his book, Crossing The Chasm, Geoffrey Moore says these types of consumers typically have a pain-point, and they’re willing to pay the retail price in order to find a way to solve it. Companies looking to scale their business must first identify and target early adopters before looking to the wider public.

2. Continually Hiring—Or Worse: Continually Hiring the Wrong People

One of the most common mistakes startups make when they first start seeing success is to hire more people to ramp up the business. This over-enthusiasm can create bloat in the organization, and even cause the company to accelerate too quickly.

If a startup bounds ahead too fast, early adopters will soon tire of the product and move on to something new, leaving the company with no real customer base, too many people on staff, and too little business to go around.

New companies that begin trying to scale can also wind up hiring the wrong people, since there’s usually little in the way of a proven hiring process in place. The fact is you can’t rely on gut feeling alone if you’re looking to make a successful hire.

A great example of this is Ameet Ranadive, founder of Dasient, an Internet security company acquired by Twitter. He wrote in a Medium post that when his startup was gaining momentum, experienced investors advised him to hire more salespeople because they had an execution problem.

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But instead of generating more sales, Dasient started burning through its cash. After a careful study, Ranadive later found out that what the company had was a market problem, not an execution problem.

3. Refusing to Change Within

A lot of startup owners strive single-mindedly to grow outward and upward, forgetting to trim what’s inside. As your company grows, you’ll find there are things you don’t need anymore, or people you have to let go, or departments you have to dissolve.

What worked when you were managing 50 people won’t when you grow to 200. You need a new strategy, a new process, and a new organizational chart. Recognizing what doesn’t work any longer—and getting rid of it—is difficult yet vital for any startup trying to scale.

The Solution

Never lose the habit of turning a sharp, critical eye on your business. One way to do that is to carefully craft a detailed sales plan, and work hard to implement it while keeping track of the results as it gets underway.

Then keep re-evaluating your plan, going back to make adjustments all the time. It’s a continuous process, but it will help keep your course steady as you sail onward.

James Richman is a business author, and much of what he writes about is based on his own experiences—both good and bad—as the CEO of the globally recognized and trusted online technology company 1stWebDesigner.

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