How Do You Know When It’s The Right Time To Scale?
The goal of every founder is that moment when you have product-market fit, and you are ready to scale the business, But understanding when that moment has arrived is difficult.
May startups jump the gun and begin to scale too quickly and end up just burning cash. Net; getting the timing right is critical. If you have discovered a pathway to repeatable revenues, and you are beginning to get organic revenues (proving product-market fit), and you are convinced you are ready to scale. In general, you are correct, about product-market fit, But these early sales are most likely from early adopters.
You still have one or two obstacles to get over. If you are introducing a new product in a new market, according to Steve Blank, you don’t have a market. You have to create the market. So, as you run out of early adopters, about 16 percent of the market, you will have to educate buyers who are unfamiliar with you, your product, and its benefits. That will take some time and money to accomplish.
Therefore, after that early revenue peak, your new revenues are likely to begin slowing down rather than speeding up until you have the mainstream market educated. So timing is critical because marketing costs from scaling up are rising, and revenues are not. A lot of companies have been caught in this trap.
If you are introducing a new product into an existing market, your goal is to take sales away from your competitors. The market is there. Therefore, you should be able to keep revenues growing with your better product. However, you still have to cross the chasm from early adopters to mainstream customers, and they are more skeptical than the early adopters, and it takes time to convince them to switch over to your product. Therefore, your Scaling should be more in sync with your revenue growth. Unless, of course, money is no object.
For startups, timing is an essential element that you need to be conscious of all the time.
On the other hand, Scaling isn’t the same as increasing sales. Scaling also means enhancing and improving your capacity and capability, Scaling requires a well thought out plan (written down) that includes all of your sales and marketing, operational systems, the technology that will help with both revenue generation and operations, financial requirements necessary to scale and potential risks.
At the same time, Scaling also requires that you continue to focus on your customers. It would be best if you thought like Amazon who puts billions into infrastructure and operations to take care of its customers,
Is your goal to have your startup scale? If yes, do you have the profit margins and market size to scale? If no, you can still have a great business, but it will be hard to attract investors,