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Starting Up To Scaling Up — The Road Less Traveled

It is difficult to answer what is more challenging — starting up or scaling up your business. While one requires courage, the other requires perseverance. The game plan for a founder changes significantly when the business becomes sufficiently funded after being bootstrapped, goes from having five employees to over a hundred, expands from one region to over five regions or has multiple products instead of a single product.

The questions that often occur during this transition are mostly centered around: What should you focus on when you expand? How do you choose the right markets? Where and how much should be invested? And most importantly, who are the people who will drive this fast-paced growth from starting up to scaling up?

This is undoubtedly one of the most crucial phases for any startup, because one wrong decision could lead to stalled growth and eventually losing your edge. Statistically, of all small businesses started in 2014, 80% made it to the second year, and only 56% made it to the fifth year. The top reasons for failure included lack of product-market fit, absence of funds, and the wrong team.

Here are some of the learnings from my entrepreneurial journey, from starting to scaling.

Assessing Product-Market Fit  

There are numerous cases when founders spend years building a product or a solution that customers don’t need. Either it is premature for a market they thought existed, or, with so many players in the market, the differentiator is simply not good enough to make a winning case.

But how do you know this beforehand? The answer is with the test-fast, fail-fast principle, where you test, fail, learn, pivot.

The earlier you do it, the better it is. Early prototypes and the minimum viable product (MVP) often don’t look good to your own eyes, but then they aren’t supposed to look the “best.” They have to be improved with aftermarket feedback. This is where courage plays an important role.

The lean startup methodology, coined by Eric Ries, stresses on the fact that getting the MVP out is the first step to actually know whether your product is going to work or not. Some entrepreneurs even try selling before developing the product to know the right fit. This stage involves having a business model to be tested and a value proposition that makes you stand out.

Don’t hesitate to question. Ask all the questions — Why is your e-commerce company different? Why is your revenue model more sustainable compared to your competitors? Why do you want to launch yet another car-sharing app in a particular market?

Getting Focused

If you are trying to solve too many problems, you are not really solving anything. Most successful products solve one big pain point for their customers and double down on that. It is easy to say “yes” to every problem your customers face, but it will not get you a reputation of having a strong value proposition.

The decision of choosing your focus areas becomes complex when 1) you have a strong suite of products and 2) there are sufficient funds to deploy in these product streams.

With deployed capital, your decisions have to be wiser, faster and smarter. Remember to revisit the feedback on your MVP. Listen to everything your customers said, and then prioritize solving the critical problems that have a faster turnaround time and on rectification, yield better business impact. For optimal utilization of resources, insist on getting clarity about what customers are willing to pay for, and then propose a value-based solution.

For instance, if you are providing data-driven solutions to large brands, identify one problem that you are solving for them, better than anyone else, and their urgency for solving that problem.

Creating A Data-Driven Culture

Most large organizations such as American Express, Ford Motor, General Electric, General Motors and Johnson & Johnson are having a tough time creating a data-driven culture. As a startup, the sooner you do this, the better it is. Startups are lean and it is easier for them to make data-led decisions that help shape growth strategy.

In a startup, a lot of decisions, especially those around hiring and partnerships are based on your gut. However, in the long run, a data-driven culture will help you make the simplest decisions, like identifying various target groups in new geographies when you look at expansion, mapping the customer journey and finding patterns that will help you boost growth.

Building A ‘People-First’ Foundation 

You could have a great product, sufficient venture funding, a well-thought-out growth strategy and a strong business model, but if you can’t build the right company culture, scaling up will be a great challenge or rather impossible.

According to Deloitte, 82% of respondents believed that culture is a potential competitive advantage. Yes, people leave bad bosses, but there are even more who leave bad organizational cultures. People leave because of unsatisfying work relationships and not the performance or business model of the company in most cases.

In Mark Twain’s words, “Find a job you love doing and you will never have to work a day in your life.” The dream should be to give that job to all employees, irrespective of whether you are just starting up or are in the phase of scaling up.

The journey from a young startup to a high-growth company is exciting and challenging and requires some tough decision making along the way. But smart hiring practices and the willingness to learn from mistakes can help you overcome roadblocks. To be able to smoothly scale the entrepreneurial road, it is important to preempt what can go wrong and plan ahead.

Published in Forbes.

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