August 5, 2016
Startup Genome analyzed surveys from 3,200 startups to conclude that, of startups that failed, 70 percent did so due to premature scaling.
Jeff Haynie agrees: His 20-year startup career taught him a thing or two. Writing at Recode, Haynie detailed five lessons he's learned in the process, from the need to monetize early to the willingness to outsource to the reason behind measuring all data possible. But one point is a little counter-intuitive: Why scaling fast is bad. It's a big part of most startup plans, but it only works with an established, steady process, something that's hard to have when you're focused on disrupting the tried and true.
Scaling Fast Is a “Mismatch” for Startups
Here's Haynie's explanation, followed by additional advice on how to proceed:
“[I]t’s close to impossible to scale fast successfully. The biggest reason is that you need a lot of things to make scaling fast work that are inherently a mismatch at a startup, including well-defined processes and people that work well with and know those processes well.
By definition, startups rarely work well in conditions conducive to strict structure. You’re almost always single-threaded in many areas (HR, finance, operations, IT, etc.) for awhile. When you go into hyper-scale mode (i.e. hiring a lot of people over short bursts of time), the things that worked previously become a huge tax and drain of your attention overnight.”
How to you fix this? By scaling slowly enough that you know your process works.
Build a Solid Foundation
As Karl Stark and Bill Stewart, co-founders of Avondale, wrote for Inc, scaling too fast can tank your business. To avoid the problem, make sure your process is solid first.
“Once you've built a solid small business with a set of core customers, you can think about the next step in scaling your business, and the next set of trade-offs. Will you lose some aspect of product quality or customer service? Those elements can be measured once you understand the value of your core customers. Without this core base, any scaling strategy is likely to fail.”
Slow and steady wins the race, essentially. And don't worry: The slower you start out, the faster you'll be able to go in the future. All startups eventually hit the make-or-break stage of scaling up quickly. You just want your startup to take it's time getting there.
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