3 business challenges when your startup scales up

‘Do things that don’t scale’ is a mantra made popular by Paul Graham, startup investor and founder of the popular accelerator, Y Combinator.

The essence of Graham’s advice is that startup traction only happens because entrepreneurs make it happen. In your early days, your business may not have enough momentum to acquire new users on a recurrent basis. By doing things that never scales up in your startup – like manually recruiting every single customer, or installing the app for your customer, you can establish a customer base that will set the base for future growth. Lead generation needs to be automatic in many ways.

While acquiring your first few hundred or thousand customers may be the hardest part of running any business, things don’t really get easy once you succeed in scaling up. In fact, there are new challenges to overcome when a business scales up. Here are a few issues that you might encounter and tips on how to resolve them.

Resource bandwidth

Startups often encounter sudden spurts of growth that can throw your entire operations haywire. What happens when a startup that normally sees twenty orders per day scales up rapidly to start receiving hundred or more orders in the same period? Your logistics team might face a tough time fulfilling orders. At the same time, your customer support team may start seeing a spike in the number of complaints from angry customers who are disappointed with the slow delivery. Left unchecked, your success might ironically bring about the downfall of your startup.

The way to resolve this growth pain is by hiring third party contractors who can take care of your logistics. Such contractors handle thousands of orders every day and might have the bandwidth to handle your growing needs. However, it should be noted that these are temporary measures and it is always recommended that businesses handle their logistics in-house over the long term.

Culture & branding inconsistency

It is easy for an early stage startup with only a handful of employees to ensure branding consistency across all marketing platforms. But when your company grows, founders may find it challenging to inculcate your startup culture, values and marketing messages to your newer employees. A startup thus routinely finds itself diluting its brand value and positioning through its growth phase.

Knowledge management is extremely vital during this phase. Developing a ‘constitution’ that underlines all the vision and values of your company helps new recruits get up to speed with what your startup stands for. Given that a startup is constantly evolving, a document management system that all employees get to access helps keep all the latest startup marketing and management material in one place.

Cash flow

Startups that witness exponential growth often hit a cash flow ceiling that prevents them from expanding as fast as they should. Businesses need money to hire more people and make capital investments. However, despite a growing user base, your cash flow may not always be healthy enough to make these new investments.

Finding investors is the only way to fix this problem. A startup that scales up, witnessing dramatic growth, is in a great position when it comes to seeking investments. It is possible to negotiate attractive equity arrangements with your investors during this phase. However, startups often have a very short window to execute this since protracting your negotiations could bankrupt your business. Ideally, you should start seeking fresh investments when you still have at least six to ten months worth of cash left in the bank.