Every startup seeks to constantly grow while maintaining efficiency and financial health, sometimes attracting investments to leverage results more quickly. But what is the secret to achieving these goals? The answer lies in making the startup a scalable business. To help you in the mission of finding and maintaining scalability, we will show you what it means to scale a startup, what are the practices that must be adopted to get there and the advantages of being successful in this management model.
What is a scalable business?
Scalability is the company’s ability to grow and meet more internal and external demands without losing the elements that add value to its solution and without raising the costs involved in the same proportion. To achieve this it is essential that the company has at least these three characteristics:
They are not just related to core activities, as other non-operational aspects may end up affecting the business if they are also not scalable. Therefore, issues such as financial and accounting management, marketing strategy and team growth also need to be considered to increase the volume of demands. For example, if the company acquires customers frequently but is unable to maintain the process of collecting and recognizing receivables scalable, it has a non-operational problem with the potential to harm finances. Consequently, it may end up lacking working capital at some point, which affects the continuity of operations. As for generating value, we refer to the specialization of the business considering the general branch in which it is inserted. Good examples of this are the transport market startups that focused on individual solutions at fairer prices, with efficiency, punctuality and freedom for users. This differentiates the company from the competition and adds value to what it offers, as well as helping to scale its practices while maintaining a focus on what is most important.
How to have a scalable business?
The application of this concept in a startup requires the entrepreneur to have an innovative, creative and dynamic posture. However, personal characteristics alone are not enough, as there are organizational structuring steps to create the environment conducive to accelerated growth.
Analyze the business
This should be the first phase because it is from there that you can define the next steps. The idea here is to thoroughly assess the flow of processes and know the indicators main. For example, two of them, fundamental at the moment, are the cost of acquiring customers (CAC) and the operating cost. Imagine that, in a certain period, your company invested R $ 5,000 in the marketing and sales sectors and as a result, 10 customers were won. So, CAC was R $ 500. The operating cost, on the other hand, considers the values related to labour, the necessary tools and other factors that allow delivering the product or service. In the hypothesis, the objective is that the CAC and the cost of delivering the solution are kept at low levels. If they grow in proportion to the increase in customers, the business is still far from scalable. Continuing, the same must be done with all other points of the company. Finally, no bottleneck that creates rework, inefficiency or unnecessary expenses can go unnoticed, which you will better understand how to do next when mapping procedures.
Map and standardize processes
These two activities are essential for scalability because they guarantee more agility and efficiency in meeting demands. Therefore, check all the processes performed in different sectors, list them and see how they relate. Then, identify those that can be simplified, reduced red tape or even eliminated. And change some points in the workflow if necessary, even if it takes a few weeks or months to complete. Conducting brainstorming sessions with the entire team at the mapping stage is always interesting. Thus, it is possible to evaluate solutions and alternatives in order to streamline the work and dry the structure.
Create a replicable business model
A replicable process is one that can be applied to different customers, with the differences for each case being observed within the projects, but maintaining a functional, tested and approved basis. These are essential points to guarantee scalability. But how to do that? One way is to use the Canvas method, which facilitates strategic management and hypothesis assessment. The Business Model Canvas consists of a predetermined visual map that has nine blocks:
Value proposition: products or services that the company offers to the market and that effectively add value to customers;
Customer segment: the sectors that make up the target audience;
Channels: the way in which customers buy and receive the solution;
Relationship with customers: modes of interaction with buyers;
Key activity: the main functions for delivering the value proposition;
Main resources: the items needed to carry out the key activities;
Main partnerships: outsourced activities and other main resources from outside the company;
Revenue sources: ways of obtaining revenue through the value proposition;
Cost structure: the mandatory expenses for the business structure to work.
In addition to organizing strategies when filling out, Canvas helps those responsible to gain insights about the business while thinking about the answers and discussing them. From this, new ideas and actions previously defined may possibly be improved. It is also important to note that the method is not just for the solutions sold. In an adapted way, if necessary, a Model can be made for each sector making it clear how they all should work to keep pace with the pace, efficiency and low structure of expenses of the operational scope. It is important to remember that Canvas has to be kept as simple as possible, as excess segmentation and bureaucracy only hinder the planning and execution of ideas. Therefore, more than one model should only be made if it is really necessary.
Technology is essential in several business issues. And existing devices and systems allow you to reduce costs, increase productivity and repeat tasks in simple ways. Currently, for any need of the company, there is a solution, whatever the size of the startup. So, it is necessary to evaluate which ones need automation for bottlenecks not being created and for the results to be maximized. Often, for the operational, the startup already has automation, which is the solution offered to customers or the main tool for delivering what is sold. Therefore, thinking about automation in such a case requires taking the focus away from the end activities and analyzing how the critical points of business management and other consequences of it work.
For example, some tasks that when automated save a lot of time and expenses are:
Issuing collections and recognizing payments;
Accounting and financial entries, including integrated ones;
Qualification and classification of the best potential customers;
Receipt of invoices.
Develop an action plan for the integration of new employees
Keeping employees engaged and seeking company growth is one of the keys to achieving success. Therefore, it is recommended to create a plan for the team to be sustainable and fluid. It is necessary to invest in appropriate training to maintain the quality standard of products and services, regardless of turnover or frequency of hiring. The choice may fall on different plans, because for each company one or another strategy is more appropriate. For example, the most experienced employees can teach the learning of the new ones or if it can offer support materials that allow each new employee an individual and intuitive integration, only being supervised.
Search for a market differential
The ideal is to have a valuable product or service for the customer, at the same time identifying the one that most meets their specific needs to know what is their differentiator. This procedure can take a few months and requires the development of tests, which consider the prototype of the product, its launch on the market and the study of the response of buyers. With this, it is possible to make the necessary adjustments until reaching the ideal model.
Then, even with the identified differential and a defined solution base, some flexibility may exist. A flexible startup that is able to respond to market and behavioural changes from customers is more likely to succeed, as it is less vulnerable to different scenarios than the current one.
Outsource whatever is possible
Your startup needs a professional, or even an entire department, to dedicate itself only to taking care of accounting and financial management? This generates considerable costs for the business in hiring people and tools and allocating human and financial resources. For this reason, the activities of these areas can be outsourced, when the company pays monthly fees for the completion of the tasks, which usually costs less than salaries, labour charges and other added expenses.
The same can be done with recruitment and selection of employees, cleaning and other services. When the result is a reduction in costs and time in managing people and payments, the decision is correct and leaves the company leaner . On the other hand, for large startups it may be better to have internal departments due to the high need for personalization of activities and the volume of work required. Therefore, when the enterprise reaches this point, and can no longer outsource, it needs to know how to maintain scalability and lean structure for the new sectors and their processes.
Track performance metrics
Metrics analysis helps the startup to achieve scalability and increase its performance periodically. One of those responsible for the escalation of a company is marketing, the strategy of acquiring customers adopted. For her, the metrics should reveal, for example, if more demand and new sales opportunities are generated and if these numbers grow over time.
As for closing deals, monitoring the numbers serves to assess whether the opportunities created are converted into revenue and whether something needs to be modified or improved in this process.
The same is true for activities belonging to other areas. In the topic on business analysis, we mention the measurement of CAC and the definition of other indicators. Once this is done in general terms in the scalability planning phase, all established metrics, financial or otherwise, need to be continuously measured and compared to previous figures. If it is noticed that some indicator no longer meets management needs, or that another is missing, the list of metrics should be updated for the good of management.