Most new businesses start with what the founders believe is a great idea, and if they’ve managed to line up some outside funding, it’s a good bet someone else agrees with them. But what comes next? Growth is the goal for the majority of early-stage ventures, and they need to create scalable organizations to be able to handle it.
“Growth is awesome. This is true in any business setting, but particularly so in an early-stage environment,” says Todd Gibby, CEO of BoardEffect, a provider of board management software. “Conversations about scale tend to focus on systems, processes, people, and business models, each of which is important. But in my experience, one thing rises above them all as far as criticality in scaling is concerned: mindset.”
Like individuals, organizations can have a collective mindset that influences how they function, Gibby explains. Organizational mindsets can be customer-centric or oriented around accountability, collaboration, innovation, experimentation, or results. “Mindsets correspond to culture, values, and environmental factors, and they should help a business differentiate itself from competitors. The bottom line is that establishing a shared mindset within a growing organization is a powerful way to achieve scale,” he contends.
While a big-picture strategy may be important to scalability, attention to detail at the nuts-and-bolts level is required to make it work. Some of those details will be industry- and/or situation-specific, but organizational development consultant Christian Muntean, a principal in Vantage Consulting, says a general approach to scalability that all startups can use should include:
- A clear picture of growth, extending out about five years or so.
- Identification of major strategic business goals mapped along that timeline.
- Identification of major changes/developmental steps such as staff growth that justifies hiring new management; opening new locations; adding new, significantly different product or service lines; hiring of first professional staff of any type (CFO, CIO, HR, etc.); and developments that may trigger the need for major tech upgrades.
Human resources and capital are perhaps the two most critical elements in planning for scalability, says Buddy Arnheim, chair of law firm Perkins Coie’s emerging companies and venture capital practice. On the human capital side, the ability to manage a quick-scaling business is a very unique and proprietary skill, one that is almost always learned firsthand, he says. “Very few entrepreneurs are able to manage fast scale without surrounding themselves with people who have already experienced this growth.” On the capital side, fast-scaling businesses often are not profitable in the early days, but they require significant amounts of capital to support that growth. “Flagrant spending is a killer. A startup needs to maniacally manage its costs,” he says. “This doesn’t mean cheap, but it does require vigilant prioritization.”
Marc Prosser is co-founder and managing partner of Marc Waring Ventures, which develops specialty internet properties for high-value audiences, such as Fit Small Business. Previously, as CMO of a company he helped grow to 700-plus employees over 10 years, he came to believe the hardest part about scaling a business is that “it’s never just scaling one thing. Most businesses will have to scale three things at once: sales and marketing, so they can add more customers; their core business, so they can deliver to customers; and their ability to handle the issues that come up from having more employees.” A mistake many businesses make is scaling one without the ability to scale the others.
A strategy that will help address that challenge is judicious use of outsourced talent, suggests Yukon Palmer, CEO of FieldLogix, a GPS tracking system for fleet management. “For HR, I recommend using a third party who can manage it properly,” he says. “We also leverage professionals as contractors and subject matter experts. This ensures that we have a knowledge base that we can tap into for certain uses, while keeping our fixed operating costs low.”