Is It Time to Scale Your Startup? Here Are Five Important Questions You Need to Answer

By Al Gomez

It’s true that the first couple of years as a startup are the hardest. But then once an entrepreneur gets past that, the next question becomes, “Now what?”

For most businesses, the answer is an obvious “forward.” This typically means expanding the company to include more products, more capital, and more people. These can be exciting times.

But with remarkable growth comes deadlier challenges. Not to mention that nagging feeling f your business was ready to scale in the first place. Although you’ve come this far, remember that even the most successful companies can still fail at this . If done wrong, scaling will present more problems than opportunities.

Before you launch a second product, change your business model, or hire your next worker, be sure to ask yourself these top five questions:

1. What do we need and why?

First things first: if you’re ready to grow, what do you scale? There are several ways to scale a startup, but the most common are people, products, and technology.

For businesses that have a growing fan base, they can introduce new merchandise to appeal to customers. Startups that want to improve on productivity may choose to purchase better equipment or digital-based tools to help their workers. Meanwhile, small companies that already have an excellent product line and have invested a great deal on equipment but lack manpower to deliver goods may opt to hire new employees.

Don’t be so quick to expand! Take your time to reflect on what has changed over the past years and how much revenue you’re earning now. If you’re still breaking even, it may NOT be such a great time to scale. Thinking that problems will disappear if you grow your people/products/technology is a common misconception. Solve these issues today–NOT when you’re about to grow your startup.

2. Do we need more people? What would they do?

One of the toughest things you’ll have to decide on is whether you need more people or not. During our transition, I wasn’t so hasty to get more folks on board. But as I saw how operations were suffering because each worker needed to shoulder more responsibilities (thus, contributing to too much multitasking), I knew we needed help.

Scaling in terms of adding more employees doesn’t necessarily mean hiring full-time. For a while, we did great with part-timers who took on lighter duties. We also used interns and freelancers, which were paid on a per project basis.

If you intend to hire full-time employees for expansion, be absolutely clear on their roles and how much they will be compensated. The last thing you need is a headache because you can’t make payroll. You also need to consider how new employees will represent your business’s vision. Do they have the same passion you do? Do they understand what the business stands for? How long do they intend to stay?

Don’t count heads as an identifier that your business is doing well. Just because you hired 20 more people doesn’t necessarily mean that your business is going to do better.

3. Is there anything we need to cut down on?

Believe it or not, scaling doesn’t always have to mean “adding something.” Business owners can also cut down, trim, or do away with things that could hamper their company’s growth. For example, during our own transition, we had to change business models because we were adding a new lineup to the services we were offering. The old one just wouldn’t work anymore, and pushing it would mean more financial burden for me and the team.

According to entrepreneur Sujan Patel, cutting down is a necessary evil during expansion. Similar to gardening, most plants won’t grow unless you trim off leaves and excess branches. Be brave and face any issues head on.

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4. How are we going to afford this?

Your next question is to find funding for the additions to your startup. In the words of long-time investor Jeri Harman, “very few big businesses are self-funded.” That’s because if you want to be BIG, you need financial education and assistance. Your savings should be left for emergencies and household needs.

Explore the types of funding that you’re willing to bet on (traditional bank loans, angel investors, crowd-funding, invoice factoring, etc.). Understand their pros and cons. If you’re not sure, don’t hesitate to ask a professional. Expert advice may seem expensive, but consider it a worthwhile investment. Just imagine your losses if your scale up doesn’t work out.

5. What happens when things go bad?

This may seem counterintuitive, but prepare an exit strategy at the same time that you’re planning your startup’s expansion. Again–things are pretty exciting while your business is growing, but things could always go wrong and you want to be sure that you’re not going to be buried once it’s all over.

Be sure that you’ve mapped out common issues that may arise from the scale up that you have in mind. For instance, if you’re hiring more employees, one of the problems you could face is a mismatch in values. New employees may not work as hard as you do, or they could go on short notice, leaving a trail of trouble behind.

Work with your business partner or with an expert to come up with realistic solutions on how to combat these concerns. Remember: you’re going to be busier than ever, so problems may not be addressed as quickly.

Scaling the good

Stanford business professor Robert Sutton believes that there are different ways to scale up a business, but they all pose the same challenge: “The difficulty of spreading something good from those who have it to those that don’t–or at least don’t yet.”

Startups scale because they’re already on the fast track to success, and entrepreneurs want more of that. But in your quest to grow what you began, you may often feel that you’ve bitten off more than you can chew. Evaluate your goals, sleep on big decisions, and create an exit strategy. It’s not going to be easy, but nothing that’s worth having ever was.