Scaling is a term investors and entrepreneurs throw around a lot. Every company wants to know the best way to plan for scaling or even whether their business is scalable at all. But before you can tackle those looming questions, you need to answer a more fundamental one: what does a business need to be scalable?
To scale properly, young companies need to think like Ray Kroc, founder of McDonald's. Even when it was just one restaurant in Southern California the restaurant consistently and efficiently provided a quality product. Owner Ray Kroc developed a process to standardize operations, ensuring that every employee served hot dogs -- and later its famous burgers -- of the same quality every single time.
Companies that are destined to scale establish a consistent brand experience in smaller markets before they expand their customer base, and only do so through a tireless pursuit of efficiency. The following three companies have gone to great lengths to create highly efficient, standardized, and scalable business models.
Warby Parker didn't revolutionize eyewear or the way it was manufactured -- it simply refined the way that eyeglasses are sold. By selling directly to the consumer and avoiding markups from third-party vendors, Warby Parker delivers high-quality, well-designed glasses for as little as one-sixth of the price that consumers once came to expect.
Similarly (and perhaps not as famously), Casper is taking the mattress market directly to the masses. Their product is a hybrid mattress constructed from multiple sleep technologies, and is a relatively affordable alternative to the conventional box spring design. Like Warby Parker, this startup cut out the brick-and-mortar middle man to sell directly to the consumer, while smartly introducing same-day delivery service and a 100-day trial period. Casper's business model is built to scale because it can redirect overhead otherwise spent on manufacturing and retail space to more profitable marketing initiatives.
In fact, Casper executed a brilliant social media marketing campaign over the holidays just last year. The company sent coffee and breakfast sandwiches to people who tweeted about needing a nap at work because they were hungover from the previous night's holiday party. Their efforts won them the 2015 Shorty Award for Best Social Media Marketing for a Small Business. With a recent infusion of $55 million in Series B funding, Casper is already starting to scale, having opened a sleeping showroom in LA to complement its New York location.
Teachers Pay Teachers
When states across the nation began adopting the Common Core curriculum, many of the lessons and textbooks that teachers had used for years suddenly became obsolete. While new, Common Core-friendly teaching materials entered the market, thousands of educators felt hindered by the lack of flexibility and choice and sought out alternatives.
The reality is that teachers trust other teachers more than experts or textbook publishers to develop new educational materials. The introduction of the Common Core sent demand for these new materials skyrocketing and Teachers Pay Teachers stepped up to fill the void.
The platform has provided a marketplace where educators can buy and sell lesson plans, workbooks, and other teaching materials. In the decade since their founding, TpT has earned over $173 million for their users. Having recently brought on a new CEO, Etsy's former COO Adam Fried, and introduced a stronger focus on technology, we can expect big things from this burgeoning platform in the coming years.
Conventional Human Resource processes like navigating benefits and administering payroll are an expensive nightmare of countless forms and red tape. But Zenefits makes it easy and free for employers. The former co-founder of SigFig, Zenefits CEO Parker Conrad developed software that makes it easy to navigate payroll vendors, health insurance, 401(k)s, and even time cards. Founded only two years ago, this B2B startup already has over 10,000 clients and operates in 47 states.
In its first year Zenefits reported $1 million in revenue. Now they're on target to bring in $100 million by 2016 and they've even leveraged this success to close a $600 million round of fundraising at a $4.5 billion valuation. With 1,600 employees already on payroll and presumably managed by its own software, Zenefits is only going to expand its business as it reaches those three remaining states and beyond.
The next logical step in the company's growth trajectory is to penetrate the American SMB market. Small businesses provide roughly half of all jobs in America and make up 46% of the nonfarm GDP, yet the software company serves only 0.1% of them. With seven million small businesses incorporated around the country, Zenefits has a lot of room to scale.
Correction: An earlier version of this column misidentified the surname of the Zenefits CEO. He is Parker Conrad.