You’re confident your new venture will succeed, but how can you be sure you’re ready to meet increasingly complex demands as the business grows? Darren Fell, co-founder of online accountancy firm Crunch, offers five tips for wow to build a scalable business
Build for scale right from the start
Fell says: “Many a business has been caught out by a sudden lack of elasticity when faced with increasing customer demand. To build a scalable business you must be able to do just that… scale.
If you have grand designs it is absolutely crucial to ensure you lay the right foundations down. Choose your suppliers with care and design your processes so that your business is able to grow by a factor of one hundred – or one thousand – if it needs to.
A single point of failure is usually the undoing of a fast-growing business, so every element needs to be carefully designed.”
Scale everything together
“A study by the Startup Genome found that 74 per cent of high-growth companies that fail do so because they scale one aspect of their business faster than the others.
For example, a huge marketing push can certainly result in a flurry of new business – but without the sales or customer service teams in place to deal with those new customers your firm will all but collapse under the weight of the new business.
The best approach is to scale everything together, slowly at first, and then increase the speed as each team finds their feet. Don’t let anyone run before everyone can walk.”
“The very best way to scale is to get frameworks in place for growth. For purely online businesses this can be as simple as adding extra server horsepower when you reach certain milestones – service-based businesses can be a bit trickier.
Scaling people-driven operations involves recruitment, training, equipment purchase, and even new premises – so planning in advance is a must. Think ahead, plan well and get a structure in place so when you pull the trigger on a new team everybody knows what to expect.
We use a so-called ‘pod’ system – meaning two account managers, two accountants and two admins. When we hit certain client numbers we know we’ll need a new pod soon, so we order six new desks, six new computers and get our job ads out.”
Identify your ‘flywheel’
“Amazon founder Jeff Bezos famously devised the Amazon ‘flywheel’ method to grow his business – low prices led to customers who shopped more, and this increased revenue meant prices could be lowered further.
Once you’ve got your processes nailed and fixed any bottlenecks or single points of failure, and all your departments are scaling together, it’s time to think about the flywheel.
Does your business have this kind of virtuous circle – and if so what levers can you pull to make the wheel go faster? If you’re running a software start-up, Dropbox is a great example. They rewarded people with extra storage if they recommended a friend.”
“Achieving scale doesn’t mean your job is done. A sustainable business is preferable to one that grows fast and bursts; but the real trick is achieving both scalability and longevity.
Have you heard from Groupon recently? The certified ‘fastest-growing business in the world’ is now languishing at less than a quarter of its IPO value having failed to identify the cratering appeal of its daily deals model early enough.
Founder Andrew Mason was ousted as chief executive amid hundreds of lay-offs, and the company is currently casting around for a new business model. Building a business that scales is easier than ever – but a fast ascent often comes before an equally speedy descent. Keep a close eye on your key business metrics and keep innovating to maintain that scale.”