But what is premature scaling of your start-up and how can you avoid this?
There is a notion that if your business isn’t growing its dying, this is very true although what happens if you grow too fast without capturing the value from your customers? This leads to panic disorders that stop you focusing on what’s important and focus on nothing, going around in circles on the start-up hamster wheel.
Premature scaling occurs when you expand your start-up faster than you or your business is ready for it (Maurya, 2012) Think about it, your sales are low, you want to accelerate so the best course of action is to hire a salesperson. Right? Wrong, this will only rip out the heart of your business and potentially ruin that salespersons career as you are not ready for this.
A good example of this is from my coaching practice, I was coaching a start-up that had been trading for around 4 months. They had brought samples of their product from a supplier and decided to push this. When they first engaged in my coaching program, they had been going around in circles so much on the hamster wheel that they were starting to become worn out. When I asked them to pitch to me the idea, they were very excited about their grand plans, targeting both the UK and International markets and had offered a salesperson a role in the company with a starting salary of £30,000. It sounded very promising and I had assumed that they had already had a full order book and healthy pipeline? Wrong again.
The company had not sold one item, had very poor messaging and channel management and the entrepreneur hadn’t even spoken to his target market to determine if this was something they wanted. The entrepreneur should have put on his sales hat and investigated with real customers the market, problems and areas of improvement then gone to market and only scale in a manageable fashion once they have achieved growth.
Over-hiring, unmanageable customer acquisition and rapid market expansion are common examples of premature scaling. With unmitigated growth, problems are more likely to get swept under the rug and become harder and more costly to fix down the line.
During my career I have seen start-ups spend vast amounts of money on expensive ad campaigns, blanket messaging on social media in the vain hope of attracting customers. But again, this is only viable if you understand the problem that you are trying to solve. So instead of focusing on everyone, holistically look at your business model and ensure this works first before you waste time and effort. Yes, you may gain some customers with a machine gun approach, but you will also spend a vast amount of time either not speaking to your target market or dealing with unqualified leads which kills your motivation and momentum (Maurya, 2012)
Building on the previous point, trying to sell a product that doesn’t provide any value to customers will cause you to focus on developing areas that are not important such as building unnecessary features and investing heavily in the product branding before the market is ready. Spend time focusing on understanding the real issues your customers are experiencing and then build your product in stages to address these issues (Priestley, 2018)
A common method is to build a mafia offer, this was developed by Ash Maurya (2012) to provide a low-cost option for gaining your first customers. Instead of building a Minimum viable product which although cheaper than a full product still occurs financial cost and time, build an offer using a simple presentation tool. This will allow you to design and shape your message towards your target customer by focusing on the right action at the right time (Maurya, 2012) and build a pipeline of potential customers. Even better to get them to pre-order the item once you are ready to build and this again reinforces a previous mindset of building traction.
As discussed earlier, the first thing a start-up does when they launch is to hire more staff. They go out and hire product specialists, accountants, salespeople etc which only adds to the financial pressure within the business and the need to growth intensifies. You should only grow when you or your follow founders are at breaking point (Priestley, 2018). It is much better to use specialists in a subcontracted approach to help you develop your business offering. This introduces an important factor that entrepreneurs often fall foul of. I’m pre-revenue and so cash poor and time rich, I’ll do it myself (Maurya, 2012) This is a huge fallacy which occurs when you bootstrap your business. But you forget about the sweat equity i.e. the amount of time it takes for you to learn and to make mistakes which are in involved. But you need to focus on the main aim of being a start-up, which is traction towards your goal. Hiring a subcontracted specialist will get you to grow a lot faster than struggling to learn yourself.
This element was an eye-opening factor when I started my coaching business. Like many entrepreneurs, I focused on the cost of doing something, but I came about a video from the Click funnels founder, Russell Brunson (2017) who created an epiphany moment for me.
“Focus on the who not the how”
A 21st-century entrepreneur has access to a vast array of specialists from all over the world using platforms such as Fiverr, marketplaces etc. You can easily have a website developed, marketing material completed, or videos created etc. Due to the world becoming a global market space, you have access to specialists in countries such as India, Pakistan etc that provide high-quality outputs for a much lower cost than western businesses. So instead of watching the pennies for small value purchases, value your time and apply the who not how mantra and see your business accelerate.
The last thing I want to discuss is focusing on gaining funding too early. An influx of cash can spell out trouble for undisciplined start-ups and you should only apply for funding once you have a clear message (pitch) and importantly traction. Without this, you will ultimately sit in a lot of investor meetings and find it is an expensive, wasted trip. You are much better focusing on the right action of gaining funding when you can demonstrate that you have a viable business model and the traction needed.
So, the many elements of this article focus around not Premature scaling which leads to wasted financial costs and importantly time. We need to ensure that we see ourselves as investors in our business, value our time by focusing on the right actions at the right time. Don’t fall into the trap of building a global business (Priestley, 2018) before you have even determined who your customers are and the problem you are trying to solve. As Ash Maurya quotes
“At any given time, there are only a few key actions that matter. You need to put all your energy towards those actions and ignore the rest”. (Maurya, 2012).
In the next article, I will outline the next mindset of permitting yourself to scale the business, which should be approached in a staged based form.
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Maurya, A., 2012. Running lean: iterate from plan A to a plan that works. “ O’Reilly Media, Inc.”.
Priestley, D., 2018. Entrepreneur Revolution: How to develop your entrepreneurial mindset and start a business that works. John Wiley & Sons.
Brunson, R., 2017. Expert Secrets. Change, 3, p.2.