One of the biggest challenges start-ups face today is scale. That scary, aspirational word that every investor wants to see before they invest and every founder wants to achieve so they can prove the model works. It used to be that VC money was doled out early and often to help prove the model and scale the business, but the economic climate has changed and now founders and C-suite folks are being asked to prove scale before they get their early rounds. It’s also becoming a prerequisite for any subsequent rounds of funding. So, how do you scale on a shoestring and, more importantly, is your team ready?
The biggest mistakes I see companies make over and over again as they start to scale are:
1 – Hiring the wrong people
2 – Hiring too many people
3 – Spending time and money doing the wrong stuff
The Right People
Let’s start with the people, aka scaling your staff. I am often asked to come in and help fix people problems. Many of my clients have fallen into what I call the “intern trap.” They look at their Marketing team, or lack thereof, and decide to hire interns and junior jets first, which is a disaster most of the time. Interns and junior contributors are a critical part of the mix, but without the right strategic leadership, guidance and mentoring, these folks are left to their own devices, which can often lead to inconsistent work, sub-par work and re-work. Why do companies hire these folks first? They’re cheap. But, as I always say, you get what you pay for. Don’t get me wrong, these folks can be total rockstars but you can’t count on it and you need to be clear up-front about what you really need and is this person going to make it happen. To that end, you should read a great post from Anita Brearton, of Golden Seeds and CabinetM fame, “Stop trying to hire digital marketers.” Her clarity on understanding what you need before you hire is spot-on and her perspective on outsourcing versus hiring FTEs is music to my ears and where I see the staffing trend going. The bottom line is that you want the best people – the right people – to do the right work today. That work might change tomorrow, so having flexibility and specialization of skill sets is becoming more and more important and tougher to do with full-time staff. Consider your options here carefully before pulling the trigger on full-time staff that adds big dollars to the expense line.
The Right Time
The second staff scaling problem is the make it or break it for most start-ups. I have lived thru what the Startup Genome calls “Premature Scaling”, what they describe as a recipe for failure. They say:
1. 74% of high growth internet startups fail due to premature scaling.
2. No startup that scaled prematurely passed the 100,000 user mark.
3. Startups that scale properly grow about 20 times faster than startups that scale prematurely.
If you haven’t read the Startup Genome paper and you are a founder, entrepreneur or savvy business person, you must read it here.
The problem with funding is that most founders and C-suite execs feel the need to staff in order to scale. In some ways, that is the right approach and in others can lead to being a statistic. In every start-up, there are critical roles that you can’t live without in order to meet your business objectives. That said, not all of those roles need to be full-time, big salary, percentages of stock, full benefits people. Think about what you need for say finance and accounting. Do you need a CFO to help with modeling and proper set-up of the books and process, etc.? Yes. But do you need that person full-time? Most likely no and there are great ways to outsource key C-suite roles in an insourced way. It can be far more cost-effective and gives you the flexibility to dial it up, down or different based on how your business is ebbing and flowing.
I have watched too many companies fail because they over-staffed and got cool office space and a fooseball table. While all of that seems like living the start-up dream, if you do this too quickly, your fooseball table will be on eBay and you’ll be closing the doors on what could have been a great business. Instead, ask yourself:
- What are the critical roles I need to achieve our business goals?
- What are the skill sets of the people I need?
- Can I do this with a part-time person versus hiring someone full-time?
The Right Stuff
Scaling ain’t easy. Most start-ups are on shoestring budgets and can’t afford lots of missteps. Without the right people – whether they are full-time or part-time – doing the right stuff is going to be really tough. Most of my clients come to me because they need help scaling. When we peel back the onion, they typically don’t have the right skillsets which means they are not working on the right stuff, which means they can’t scale their product or their audience efficiently. Doing the right stuff requires focus, something that is hard to do with a zillion priorities that are constantly changing. It all has to start by answering the question: Why would someone pay $1 for our product/service (aka your brand’s value prop), and then your priorities need to line up against that. Having guardrails that help you make good, focused decisions will control your burn and ensure you have metrics and ROI to optimize what you’re doing. My guidance to my clients is always to do less better. Don’t try to take on everything at once. Get the brand story and value prop solid. Understand your audience and what they will and will not pay for. Build a marketing plan. Create a resourcing plan and budget to execute. Draft a dashboard of KPIs to manage the tactics and be strategic about shifting focus, budget and resourcing. It’s always a lot easier to just do a bunch of stuff half-baked. Focus your time, energy and dollars on picking a small group of activities that will move the needle on scale and deliver measurable returns. Have a longer-term plan but be ready to pivot at any time. Small doses of testing and learning will keep your burn in check and drive scale for the long-run.