As investors of scale-up capital, we help companies prepare for profitable growth. We’ve therefore seen first-hand what works and what doesn’t. Based on our experience, here are our top five “must-haves” for businesses looking to scale.
1. Find your customers
Becoming a leader in your home market is one thing – replicating that on an international scale is a whole other ball-game. A key priority is to define your demand generation strategy and produce a targeted approach to driving awareness and interest in your products and services. Even if you see low hanging fruit everywhere you look, don’t forget that you will eventually have to find and engage customers to whom you are completely unknown – and you need to invest in a process that facilitates capturing these unknowns. You will probably need a local Chief Marketing Officer or Vice President of Marketing who has experience building demand generation programmes in your industry.
With a strong, experienced marketing lead in place and initial testing of a market hypothesis underway, you can hire the first one or two sales people. These need to be self-sufficient, innovative thinkers who will break down doors and get in front of customers. They need to be comfortable with uncertainties around the marketing strategy, precise target market, etc. Their learnings from customer meetings will be a key input to the marketing and demand generation process.
All too often, we see companies trying to scale by hiring a large sales team. However, you need to think about demand generation first and start with a small but effective team. Only once the initial team has too many leads should you consider expanding the sales team.
2. Hire the best talent
Many companies excel at recruiting within their home market, where they have built a local brand and strong network. However, as these companies look to expand, they often find themselves up against strong competition for the best talent.
The best way to overcome this challenge is to have a very clear idea of the candidate profiles you are going after. This list of important attributes may be very long. Once you have defined your ideal profile you then have to figure out how to find and attract candidates. There are many ways to do this. We have found that often working with a leading head-hunter or specialist recruiter is the most effective. Yes, the best talent hunters are expensive and if you’re looking at the US or the UK then probably even more so. However, adjusted for risk/reward it is often the best option. Employees are the most important investment a company makes, so getting the right team is fundamental to your success.
Finally, you need to mitigate against a bad hire. It is almost inevitable to have a bad hire at some point, so it is important to establish a set of performance evaluation criteria that allow you to set clear expectations for new employees and, crucially, which allows you to weed out non-performers without wasting too much time and money.
3. Know your metrics and stick to them
Surprisingly few companies actually have a good way of tracking their metrics, let alone doing so in a context that is relevant to their own position and situation. Trying to scale a company without a solid metrics dashboard is like driving in the dark – you have no way of knowing if you’re going in the right direction and going faster might increase the risk of seriously hurting yourself. So, before stepping on the gas, make sure to get your key metrics dashboard in place.
4. Understand your true competition
“We don’t really have any like-for-like competitors…” is something we often hear from entrepreneurs – but every company has competitors. If you’re Google or Facebook, those competitors may be less relevant, but as a new and rapidly scaling start-up, even if you are unique, you still have competitors.
Moving into new markets often means encountering totally new competitors; getting to understand them and their relative strengths and weaknesses is important. Remember the adage: “keep your friends close, but your enemies closer!” Even if there is no company whose product offering compares 100% feature-for-feature to yours, there are always competitors who try to sell your target customers on a “slightly different flavour” or are competing for your customers’ attention and budget for some other initiative. If you do your homework and ensure you know your competition intimately, you’ll be miles ahead already.
5. Set realistic expectations
If there is one area where pretty much every company we meet goes wrong, it’s in their expectation of how quickly they can scale into a new geography, vertical or category. We often see ambitious companies who have had brilliant success in their home market and therefore presume they will maintain their current momentum as they scale. Unfortunately, this is rarely the case as it ignores the time spent preparing in the home market. Make sure you allow for initial ramp time and plan for slower growth, thus aligning your expectations with the reality of the market. Plan conservatively and make sure you budget for a long ramp time.
When it comes to scaling a business there are a huge number of considerations, certainly far more than five! It’s okay to make mistakes, it’s a natural part of growth. But if you are aware of these ‘big five’ potential pitfalls, and prepare for them, you can mitigate some significant risks - and you will be in a much better position to scale successfully.
Mikael Johnsson, Partner and Co-Founder of Oxx
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