THE BLOG

Growing a Tech Startup: Knowing When and How to Scale

04/24/2015 07:34 pm ET | Updated Jun 24, 2015

Starting a company is thrilling and terrifying all at once. I can only describe it as "energizing stress." I've started and helped start five companies in my career, each one having similarities to those before it. One of the biggest lessons I've learned is that it's absolutely vital to know how and when to scale. Scale too early and you will likely fail. Scale too late and you'll miss an opportunity. Want to learn how to do it well? Read on.

Start Small - Do Things That Don't Scale

Paul Graham of Y Combinator wrote an amazing blog called "Do Things That Don't Scale." The idea is that we all want to believe that successful startups like AirBnB and Zappos were high functioning machines from day one. But in fact, these and almost all successful companies started out the hard way by doing things manually.

The first MVP of Zappos involved a shiny landing page and not much more. Nick Swinmurn, Zappos founder, went to local shoe stores, took pictures of shoes, and put these pictures on a website. When a shoe sold, he walked to the shoe store, bought the shoe, and mailed it himself.

By doing things that don't and can't scale like Zappos did, you learn a lot about your market, what it takes to get customers, and what it takes to delight these customers. And you can learn these critical lessons without breaking the bank or having to raise a Seed round.

The Aha Moment

Yet, at some point, every startup founder wakes up and says one of two things:

  1. "Wait a minute, I might be onto something;" or
  2. "This isn't going to work, I'm throwing in the towel."

You see, up until this aha moment, the root mission of the startup is "don't fail". Sure, you're testing a hypothesis and trying to achieve product/market fit. And you're hopefully doing things manually that don't scale so that you can conduct experiments quickly and cost effectively.

If your aha moment is, "Wait a minute, I might be onto something," you must change your behavior.

That's right. You simply cannot "just" put more effort into the things you have done to date. Rather, it's critical to recognize this period of change and be proactive about materially changing your behavior to reflect this next phase of your startup.

Why? The Greiner Curve, created decades ago by Larry Greiner, illustrates how all businesses go through six distinct phases of growth and relative calm (evolution/growth) alternating with six distinct phases of chaos (revolution/crisis):

2015-04-24-1429912087-7094127-GreinerGrowthCurve.png

(Source: Startup-Book.com)

It is during these distinct periods of chaos that most businesses fail. Your first aha moment represents the first period of revolution, and a pivotal moment for your business.

And, yes, it may feel as though your startup is in a constant state of "chaos," but if you reflect on it, I bet you will discover distinct periods of calm vs. chaos.

React Correctly

Once you recognize this period of chaos, reacting correctly is the main task at hand. Do this:

  1. Consider getting outside advice. Periods of chaos are often the best times to bring in a CEO coach or form an Advisory Board.
  2. Start to do things that scale. Draw a mind map of all areas of your business. It might look like this:

    2015-04-24-1429912160-4350791-BusinessAreas.png

    Identify one or two areas where you feel you are drowning in manual process. Maybe your sales or recruiting pipeline is in Excel. Maybe your marketing consists of emails sent one by one. Do these one or two things differently. Maybe you buy a CRM system or an applicant tracking system. Maybe you change the way your team makes decisions so that decisions are decentralized and not all going through you. Start to scale with the areas of business that could benefit from it most.

And Then... Pause

After you pick the one or two areas of the business that are most thirsty for change, go back to the "calm". Give the new state of things time to adjust, to work. Don't panic. If you do, you'll wind up changing too many things too quickly. Feel confident in your choice and give it a month. Set yourself a reminder on your calendar for 30 days from now to check in with yourself. The key here is to set the reminder today -- don't wait until a few weeks have passed.

Also, for extra credit, write down what you expect to happen. For example: "By using a CRM system, I expect to be able to not drop any sales leads through the cracks and I also expect to be able to close X deals per month."

Repeat

Scaling a business is like jumping a series of concentric hurdles, each one bigger and higher than the one before it. When you start, start small. As you grow, you must get bigger, stronger, faster. And yet, the object of the race remains the same: win.