How to Turn an IT Startup Into an Evolved Business
Even if your current business seems to be a success and your team, customer base, and revenue grow fast, you never stop improving it.
By VITALY KUPRENKO
Of course, not all startups are destined to become unicorns and earn $1 billion. But it’s always worth trying.
In this post, we’re explaining what to do if you’ve already launched your startup, increased profits, and now need to scale it.
Is There a Difference Between Scaling vs Growing?
Growing means increasing revenue and costs like hiring more employees, opening a couple of new offices. For example, when you’re looking for more employees to support your mobile app or whatever product you’re making.
You earn more and spend more.
Scaling doesn’t always mean you have to spend more on employees or offices. Vice versa, companies scale when they manage to increase their profits while keeping maintenance costs low.
It’s a way to get max profits with minimum investments.
Let’s get back to our mobile app. You’ve grown your customer base but instead of hiring more people managed to partially automate customer support with minimum expenses. You don’t invest as much but find ways to optimise current processes and workflows.
When Is the Best Time to Scale a Startup?
The very first step to take is to realise whether your startup requires scaling.
74% of startups failed because the timing wasn’t right or started to scale up way too soon. Companies that pick the right time for scaling grow 20 times faster compared to premature scaled startups.
Here are some important ‘ready-to-scale’ signs to look for inside your company:
You need to gather more customer feedback
In the first days of your startup, the team should work relentlessly to understand why customers choose your software and figure out what can go wrong and what needs improvements.
Of course, your product won’t satisfy the needs of every customer. If you’ve made a simple HRM for middle-sized companies, small-sized firms could say they’re not going to pay for something they can do in Excel or Google Spreadsheets for free.
You want the sales processes to become predictable
At some period, you may start looking for people who are making repeatable purchases. Like Netflix customers who are paying $8.99 each month to continue using the service.
Repeatable doesn’t mean two customers in a row have bought the same product from you. You’d want repeatable purchases—subscriptions paid once per month, or Uber taxi ordered five times per week.
You achieved current goals
At the launching stage, startups rarely have enough data to predict their revenue, customer base, and costs. They use statistics to set the initial goal according to it. But once your company finished previously set goals—let’s say, reached $500,000 in sales—it’s high time to scale it up.
Your IT systems are ready for the scale
If you’re using business software (CRM, marketing tools, etc.), make sure it can cope with a new, increased load of customers.
Scaling up means you need to store more information, work faster, and automate what can be automated. If your internal or external software is good only for small tasks, it may be the time to upgrade it or switch to something else.
If you’re not sure whether your startup needs the scale, ask yourself:
— Is there enough demand for your product?
— Do you have the right processes and people in place?
— Do you know what your customers want?
— Can your software cope with a new load?
— Do you have your finances in order?
5 Tips on How to Scale Your Startup
If you’ve achieved your previous business goals, have the right people, and a strong cash flow because of repeatable sales, then you’re ready to scale your business. Let’s see how to do that.
#1. Start With the Basics, Scale Later
Make sure you know who’s your ideal customer and what problems you solve for them. Who exactly do you want to work with?
Let’s say you have a startup that is about helping non-tech founders create a mobile app for their business. In this case, you focus on people that already know what they want to build.
Don’t spend most of the time explaining to non-tech people who have no idea what apps they need and whether they need them at all.
By focusing on the right audience, you’ll help your startup grow faster. You’re starting to understand customer needs better, build more focused products, and tailor the product to the needs of your audience.
Finally, make sure you have enough resources — money, people, time — to start to scale your startup.
#2. Do Your Best, Outsource the Rest
Having a huge in-house team is common for big companies. For example, if it’s a full-cycle software development company, they need all the people who support the product from the planning to the release stage.
Business Analysts, UI/UX designers, QA assurance engineers, Android, iOS, web developers, DevOps, PMs—they’re even not all the people who are involved in making a single mobile app.
All these people want a competitive salary, a comfortable office, require software/hardware to work on your product, and so on. In turn, you bear lots of expenses you can optimize with outsourcing.
For a small startup, there’s little need to hire in-house employees for everything. You can choose between in-house vs. outsourcing software development, hiring a few employees or teams to work on your product.
For example, you want to move your website away from Angular to React. What’s the point of hiring a few full-time React developers and UI/UX designers if you only need to do the job once?
By outsourcing, you save on costs and don’t have to focus on something else different from your product.
#3. Pick Your Marketing Channel
There’s no point in building a product for users if users never happen to know about it. Before you start to scale, think about how to make more people know about your startup.
Actually, there are quite a few marketing channels: content marketing, SMM, direct marketing, influential marketing, and so on.
The truth is, almost all successful startups get the most users from just one marketing channel. By focusing on a few channels at once—especially if you’re a startup with minimum resources—you risk spending too much valuable time figuring out which channel to abandon and which to focus on.
#4. Measure Your Success
If you’re acquiring customers without a clear set of objectives, it’s nothing more than just a random activity.
So define your metrics and check on them constantly.
Here are some financial KPIs you may need to check:
— Monthly recurring revenue (MRR) or annual recurring revenue (ARR) — how much your product makes over time;
— Customer acquisition cost (CAC) describes how much money you spend on attracting each new customer
— The lifetime value of a client (LTV) shows the profit you make from one client during the whole period
As for user engagement, you can watch for:
— Daily active users
— Number of user sessions and lengths
— Customer churn (shows the number of users who abandoned your product)
You’ll always keep track of a few metrics, and it may be a good idea to choose a few KPIs to track every day.
#5. Invest in Technology
The startup cannot scale if it’s labour-intensive. Technologies change that, making it easier to gain more scalability with less labour.
Today’s businesses don’t use one software for all; they run on multiple products depending on what your company needs.
The most common are:
— CRM to store data about your customers. By using the information, you answer customers’ questions faster, improve marketing strategy, and analyze common buying patterns. Example: Salesforce, HubSpot, Sugar CRM, and Zoho CRM.
— Accounting software to create timely and accurate reports and make financial decisions. Example: Zoho Books, FreshBooks
— HRM systems to manage people and automate manual tasks. Example: Zoho People, Freshteam.
— Digital marketing tools to create marketing campaigns and measure their effectiveness.
You can use the software to automate different internal and external processes.
For example, you can start with automating customer onboarding to pick up users right after they’ve registered on your website. Once a customer signs up for your product, send them a welcome email with further instructions.
Of course, that doesn’t mean laying off your employees.
By automating processes, you reduce the costs and minimize the manual work, and assigning team members to more important and creative tasks. As well as reduce the risk of human error and save a lot of time.
Today’s a great time to start your own software company. Perhaps, the best time to do it, ever.
But growing your business is usually much more difficult than launching it. Still, if you start a business that really makes a difference and solves your customers’ problems, you can find your audience and scale it.
There are lots of modern ways to get investments these days, for example, well-known AngelList and crowdfunding.
Vitaly Kuprenko is a technical writer at Cleveroad, a web and mobile application development company in Ukraine. He enjoys telling about tech innovations and digital ways to boost businesses.
