Starting a company can be quite different in scaling a startup, and as such require quite different different skillsets. One of the most difficult decisions of an entrepreneur is when to let go of their baby, step aside and let professional management take over. Shiva explains more.
There is a significant difference between a small start-up business and as the famous venture capitalist Vinod Khosla calls it a “zero billion dollar start-up”. The latter has the DNA to become big and have a meaningful exit or growth path. How does one scale a start-up and that too at the right speed? This article of mine shares some ideas.
- Talent: There are two types of talent that a start-up needs – founders who can start the business and prove it through the early stages and executives who can take it from there to the next stages. Often these are two different skills! The best way to scale a start-up is to hire the right CEO and executive team and for the founders to build trust and let them do the right things. Founders have to recognize this early on and get the right people on board or step aside later on. Some insights could also be drawn from a talented advisory board.
- Processes: Instead of having informal work processes, at some point the start-up has to define its processes and figure out how to staff to them or automate them without hampering creativity. Usually, this is a point when some activities are repeating. Activities and functions like R&D and new product development could act like a start-up as can new market development. However, tried and tested markets, products and functions should define what they do and execute accordingly. Not only do they have to execute according to set processes but also staff them properly.
- Strategy to scale: Entrepreneurs in the early stages often follow intuition and a meandering path. To scale, there needs to be a conscious effort to build a strategic plan. The strategic plan is not just the strategy for the start-up but a list of milestones that the start-up needs to achieve in a time box fashion. Milestones can include revenue and the number of people, product launches and associated operational changes to support revenue.
- Reducing the cost of sale: In one of my start-ups, I learnt from two successful serial entrepreneurs that it is important to reduce the cost of sales constantly. What this means is that the time spent in hunting/closing new deals as well as efforts and cost in terms of acquiring new customers must keep on coming down. This is true both for direct sales as well as sales via indirect channels. Once the sales process is repeatable, it is time to get some partners who can bring in customers at a lower cost point compared to direct sales.
- Iterate fast: Intel Co-founder Geoffrey Moore talks about this frequently. The start-up needs to iterate and fail fast towards a successful product and revenue model. If you refer to point no. 2 about processes above, this is the creative part of R&D and new product development.
- Be capital efficient: Aligned to the strategy to scale, a start-up needs to be capital efficient. Capital efficiency comes in two dimensions – raising capital and spending capital. A start up needs to have at least a 6-9 month cash buffer so as to have efficient execution but be in the market for new funds or capital rounds to make sure there is “enough fuel”. At the same time, funds previously raised need to be managed very efficiently. While this is a separate topic on its own, the best way to do this is hire only when necessary, outsource heavily to the right quality players at the right cost and use as many freebies available as possible.
- Make sure culture is engineering oriented, elastic and flexible: To scale fast, the start-up culture needs to be engineering oriented. What this means that many of the early stage employees and the founders themselves need to act like problem solvers and “handymen”. In “iterating fast” (see point 5) and “being process oriented” (see point 2 above), this is like the base DNA required.
- Execution DNA: In one of the start-ups I was involved with, all the pieces were in place. All that was required was for a project/program manager to orchestrate the execution and the employees. However, after stepping into this role, I realized that not only is there a need for an orchestrator but also for all the “musicians” to be “execution oriented”. We instituted a culture of “a personal plan” brought in an execution culture. After this, we shifted into a high gear of execution.
- Hire heavyweights: Not only does the founding team or management need to scale, but also there is a need for hiring “heavyweights” – employees with good solid experience across the board in every function, preferably multiple. If this was not done in the early stages due to capital shortage, it needs to be done for scaling. These are the employees who will become the next generation of leaders and help the start-up scale.
- Think Big: Donald Trump used to say “You have to think anyway; so why not think big?” The fundamental scaling principle needs be in the minds of everyone to think big and not “hey this growth is enough”. Unless this is in the mind-set, backed by realistic estimates of the market size, it is hard to scale.
Hopefully, the above ideas will help you scale your start up efficiently.
Shiva Venkatraman is a guest editor for chinnovate.com has over 20 years of software and knowledge process outsourcing experience across India, China, Singapore, S. Africa, Ireland, and Canada. The author serves on the executive team of Siloon Software (http://www.siloon.com) and as a strategic consultant to Brainleague, an Intellectual Property Portfolio Management Firm (http://www.brainleague.com) and lives in India.
Powered by Facebook Comments