Growing pains: Tackling 5 scaling challenges most startups face

Posted on March 20, 2020

After finding a product-market fit, startups set their sights on growing their customer base. That requires scaling both their teams and operations. As any founder knows, scaling is an exciting and fast-paced period, but it can also make or break the startup. While high growth is incredibly rewarding, it comes along with new challenges that early-stage companies are often unprepared for.

We spoke with Joep Arends, the Accelerator Hub Lead at the Think Forward Initiative, to understand his 5 key points to consider when scaling your team and operations.

Don’t rush to scale

Premature scaling can kill an otherwise promising startup. You have to take several steps before scaling to avoid that costly mistake:

  • Ensure that there is sustainable demand for your company’s product/service.
  • Truly understand who your users are and what they really value in your offering.
  • Ensure that existing product functionality can easily cope with increasing demand – scale fast but cost efficient!

Focus on must-haves

Scaling up operations is an incredibly trying time for the team. Having a larger, more diverse group of users means a lot of team’s effort will go towards testing new features before roll-out, fixing unexpected bugs, and answering users’ questions. That leaves considerably less time for product development. Focusing on the must-haves rather than trying to implement a long wish-list of features becomes essential as well as balancing your release management.

To consistently get versions out to production environment one needs to balance bug fixes and new features into a new version release.

Get ready for increase in spending

Most early-stage startups have costs that are largely fixed (the so-called “burn rate”). But as their customer numbers grow, so do the costs. Scaling is expensive: Additional infrastructure, marketing and analytics, and customer support require extensive investments. You should consider how the expansion of your business will be funded. Is the revenue growth sufficient to cover additional expenses? If not, you have to secure additional financing from investors and/or banks before scaling.

Find the right people

The hiring process will have to accelerate to support the company’s growth. You’ll need to recruit more people, faster than ever. To make matters more complex, scaling requires adding new capabilities to the team. Sometimes, that translates to setting up entire departments from scratch (legal, public relations, HR).

It’s not an easy thing to do, but there are a few ways to make it manageable. To start with, set up a continuous recruitment pipeline to build up your company’s talent pool. In addition, tap into your team’s network by using employee referrals. And don’t wait until the hiring moment to create a structured on-boarding experience. After all, working at a startup can be hectic enough, and a good on-boarding will give new joiners a head start in navigating that dynamic environment.

Create alignment in a growing team

In a small team, it’s easy to get used to the convenience of aligning with everyone over lunch or coffee machine. However, as your team expands, keeping everyone in the loop will become much more difficult. As a founder, you may also risk missing important information from front-line employees simply because you can’t speak to all of them. To address that, create a transparent organisational structure with clear roles, responsibilities, and reporting lines. That will reduce complexity and help both tenured employees and newcomers to bring their questions and insights to the right people. At the same time, a key challenge is creating company-wide transparency while avoiding information overload.

Carefully consider which information needs to be communicated to all employees, and what is best reserved for specific teams. For example, town-halls are a great way to update everyone on company-wide news, while stand-ups can be used to share domain-specific knowledge. As a founder, you need to find a balance between being transparent on the latest strategic developments, while at the same time not share news about strategic changes too early, because it will distract people from their core tasks and might initiate rumours and turmoil.

In a couple of months, we will showcase the startups’ journeys and achievements in the Growth Track during our Demo Day. Stay tuned for our next article.

The Growth Track is a six-month program that works with start-ups who are impacting the lives of people in the areas of smart spending, good saving, generating income and financial decision making. It supports start-ups’ growth needs and helps them to scale faster.