10 real world things to consider before scaling your startup
This article is published on December 31, 2012 on Inc magazine and Peter Nguyen thoughts on scaling your startup
We asked 12 successful founders from the Young Entrepreneur Council which traits they believe–above all others–define great start-up leaders. After all, passion is one thing–but what actually makes a good leader great? Their best answers are below.
“No plan survives contact with the enemy.” This variation on German Field Marshall Helmuth von Moltke’s original quote could not be more true. Leaders of start-ups need to be flexible and be able to alter (or even throw out) plans as their business rolls forward. And they need to be able to do it without getting angry, stressed, or insulted. Emotions like that from a leader crush company morale. —Matt Peters, Pandemic Labs
Whenever the company fails, it should also be the leader’s fault. Whenever the company succeeds, it should also be the employees’ fault. Your employees are not a vehicle to fund your ego. If you run a company, your employees are now your customers–and your top priority should be to serve their needs, not your own. —Liam Martin, Staff.com
As a leader it’s easy to get off track with your investment, your time, and your energy. You want to go to every event, every speech, and every dinner. Focus is what really matters. You need to put time and energy into activities that are the most effective for your business and its success. Have a litmus test for what those are and only accept invites and spend time on what passes that test. —Susan Strayer LaMotte, exaqueo
The most successful start-up leaders recognize they do not have time to get all of the facts for the dozens of decisions they make each day. Instead, they just need to gather enough information to make sound decisions so the company can move forward. Some of those decisions will be wrong, but it is better to learn from those mistakes and try again than to be immobilized by indecisiveness. —Doug Bend, Bend Law Group
Starting a new company of any kind isn’t easy. If you look at any entrepreneur, you’ll see a willingness to work through the hard times, but among the greats, it goes beyond that. Seriously impressive entrepreneurs are willing to put in the sweat, even if others can’t grasp the vision. They work through the different bits of a knot, rather than trying to rush through and cut it apart. —Thursday Bram, Hyper Modern Consulting
Vision is the most important trait of a start-up leader. The ultimate test, though, is instilling the dream: encouraging the people around you to believe in your vision and quest. A consistent message and constantly renewed energy will help others to live your passion. —Russell Kommer, ExcelHelp.com
Every start-up leader is different, so no single characteristic is the defining trait for everyone. But, that said, I believe the best entrepreneurs develop a healthy balance of paranoia and confidence. They’re vigilant and realistic while, at the same time, never lacking the the gumption to believe their vision is right.
Great leaders, in any industry, will not let circumstances control their pursuit for making an impact. These leaders see themselves as arbiters of their success and regard external pressures as within their control. When something sets them back, great leaders persevere and take ownership of that circumstance.
A positive mindset defines a great leader. If you don’t buy into a bulletproof mindset of positivity, you won’t make it as an entrepreneur. Business is constantly filled with ups and downs; if the captain of the ship is always positive, he will influence others to feel the same.
The ability to network and sell. Great start-up leaders are always selling. They are selling their employees to work for them, selling investors to invest in them, selling partners to partner with them, selling customers to buy their product. The greatest leaders all know how to sell and network. Tip: Read “How to Win Friends and Influence People.”
The best leaders have an acute sense of self-awareness; they know their strengths, and more importantly, their weaknesses. A great start-up leader is confident enough to be honest about areas for growth. Knowing areas you need the most assistance with allows you to identify the right people to join your team, as well as the best potential strategic partners for your business. —Charles Bogoian, Kenai Sports
The Ability to Listen
Listening is completely underrated in most business environments. In our hyper-competitive world, the person who speaks first–and loudest–is most often heard. But soliciting feedback and internalizing what you hear will always make you a better leader. Your employees will appreciate that you care about their POV and you’ll gain trusted partners for the road ahead. —Brendan Mangus, Habidy
Scaling Your Startup
What could possibly be bad about scaling up your startup? If you’re thinking about growth because the demand is there, you’re clearly doing something right.
But a rush to ramp up too soon can lead to serious growing pains, especially in the human resources and accounting departments. We asked 10 entrepreneurs in the Young Entrepreneur Council (YEC) to share their own experiences with scale – and their best advice for founders about to embark on a big push in the new year.
The biggest problem with scaling is you take on commitments. Commitments for offices, technology, employees and any number of assets that can slow you down and bleed your bank account. A great option is remote employment. At Staff.com, we run a team of more than 50 employees from 9 different countries; our employees are more efficient than local ones and we don’t have commitments like offices, payroll or the bureaucratic headaches that local employees produce. We still have some local employees, but each local worker is augmented by remote ones. This relationship produces incredibly efficient employees at a fraction of the cost. – Liam Martin,Staff.com
Spend Money On The Best People
Whether you’re selling a product or service, maintaining quality during periods of quick scaling is hard. At Pandemic Labs, we experienced this in both our agency business and our software platform. Our solution is in our people. When your business is moving along at a steady, manageable pace, you might not see the value of hiring someone for $90,000 when you can fill that position with someone for $40,000. But there’s a big reason, and you’ll see it when business ramps up. A-level people cost more, but they’ll be able to keep a steady hand on the wheel with you in situations where other companies would crumble under the speed of their own growth. The best people will feel expensive at first, but a team of great people can control a train that would otherwise fly off the tracks. – Matt Peters, Pandemic Labs
- Understand What It Takes To Serve 10X The Customers
The biggest mistake startups can make when trying to scale a business is to not understand what it takes to support 10 customers versus 100 customers. As an entrepreneur, project all the resources you will need as you grow. Forecast how each of your key resources (i.e. staff, strategic leadership, infrastructure) will need to be expanded. Yodle scaled successfully because we invested in careful planning in order to be properly prepared for each juncture of growth. In this way, we achieved controlled growth – and this was the best way to manage additional costs and resources. – John Berkowitz, Yodle
Set Up Systems First
My company, RewardMe, is a digital loyalty platform for restaurants. Our success therefore depends on our ability to capture as much of the market as possible. Our initial 100 clients were in Northern California and it seemed like we were ready to scale: hire sales people across the country and implement as fast as possible. But the smartest decision we made was to delay scaling until we had all our systems and training manuals in place. When you bring people on board to scale sales, everything must be a no-brainer: they must know exactly how to get clients, how long it takes to close deals, how much to sell the product for, and the intricacies of the implementation process. Don’t scale until every single aspect from customer acquisition to implementation is a process. – Jun Loayza, Passport Peru
Premature Scaling Kills
There is no doubt about it – startups offer some amazing opportunities to exercise Computer Science and Systems Engineering knowledge. Engineering friends of mine regularly marvel at the amount of data companies like Google, Amazon and Netflix have to process, analyze and serve. Here’s the problem: This opportunity doesn’t exist for early-stage startups, because, by definition, they have no users or customers. Worrying about “scale” in the early days of your startup is simply a bad investment. You may not have even discovered whether a product or market is worth pursuing, but you will have already invested in scaling that pursuit. Startup founders have to develop a craft in rapid application prototyping. Scaling comes later. – Andrew Montalenti, Parse.ly
Listen To Your Customers
One of the best barometers for scaling should be customer satisfaction. If your customers are satisfied, you can scale as fast as you want. Typically, when something starts going wrong or you’re understaffed, your customers will tell you! When we started pushing hard toward the 7-figure mark in our first year, my brother/business partner was left managing customer support from his Gmail account. He was a senior in college, a starter on the baseball team, and working 50-60 hours each week. We knew something had to change, and that’s when we found a full-time customer support staff member. While Scott was doing all he could, I knew our customers were growing restless. Since then, I’ve been able to leverage Scott’s abilities, and our business has never been stronger. – Brian Moran, Get 10,000 Fans
Ride One Horse At A Time
When we started franchising our business, we expanded rather quickly, and it seemed logical to test out new service lines and launch new brands. However, we stretched ourselves thin and ended up over our heads in unfamiliar waters. Our core business suffered, and the new initiatives didn’t work. My advice: Focus on dominating the sandbox you’re already in before branching out. Make sure you have strong systems and resilient revenue streams. Run market tests and grow your business slowly so that every piece is sturdy, stable and cohesive. If you try to ride more than one horse at the same time, you’re going to fall off. – Nick Friedman,College Hunks Hauling Junk
Be Selective, Open Up Slowly
When we launched SaberBlast.com a year ago, it grew so fast that we couldn’t keep up with demand. Our clients would try to send out newsletters with 30,000 or 100,000+ subscribers on it – and either the server would blow up or the resulting traffic would kill us. It was embarrassing. With the recent relaunch of the service, not only have we upgraded our technology, but we’ve upgraded how we onboard clients. We actually have an application process and a waiting period. Then, once a month we open up X number of new spots and email clients who are on the waiting list telling them they can sign-up. This way, by controlling demand and being selective about who we take on as clients, we’re controlling the risk of growing too fast without sacrificing the quality of how our service is delivered. – Matthew Ackerson, Saber Blast
Stay Focused On Cash Flow
The most dangerous problem with scaling too quickly is usually cash flow. I experienced that when building my second business when I was 19. We nearly hit our $1 million in revenue in the first few years, but as we got bigger clients, they required better payment terms. One missed payment from a big client could be disastrous, which is what happened. Cash flow is king in scaling up your business. Most entrepreneurs learn the hard way and this is definitely something that needs to be talked about more. – Peter Nguyen, Literati Institute
Estimate Growth, Then Divide By 2
As much as we love to dream about explosive growth and unyielding demand for our product or service, our passion and excitement may skew the truth about future projections. If you can estimate revenue for the next 12 months, take that number then divide by 2 – and plan your resources and expenses around that number instead. Case in point, I ordered 2,000 jerseys for my new sports business (we ran rec leagues for adults) based on lofty expectations about how may players would sign up to play. We had 75 people show up on opening day and for an entire year I did not know if I was running a sports business or a t-shirt business. Be modest in your expectations and seek outside help for an unbiased estimate. It is never a bad thing to sell out beyond capacity, it creates demand. – Steven Staley, Playbook Community
The Young Entrepreneur Council (YEC), an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.
This article is published on December 31, 2012 on Readwrite magazine and Peter Nguyen thoughts on scaling your startup.
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