As a startup entrepreneur, one of your biggest priorities is scaling — in other words, growing. Modern startups, especially SaaS companies, have business models contingent upon their ability to reach a wide audience. With 10,000 users, you might be able to make a slim profit, but with 1,000,000 users, you could be a multibillion-dollar enterprise.
Unfortunately, a good business model, a novel idea, and a strong leader aren’t enough to guarantee a successful opportunity to scale. There are many things that can go wrong during the scaling process, and you’ll need to find a way to resolve them if you want to succeed.
The good news is that there’s a solution to nearly every problem. You just need to plan proactively.
Scaling is a vital strategic element for millions of modern businesses. For some, it’s just a matter of volume; operating with a bigger footprint and more customers leads to more revenue and more profit. But for many, profit only begins to become relevant at higher scales.
Let’s say your overhead costs are $500,000 per year, regardless of how many users you have. Each new user subscribes to your service for $150 per year, with additional costs to your company of $50 per year per user. With 5,000 annual subscribers, you’ll break even. With 4,500, you’ll be losing money. With 5,500, you’ll be making a profit of $50,000 per year. And with 50,000 subscribers, you’ll make a profit of $4.5 million per year.
This is a simple model, but it demonstrates the central idea: for many businesses, scaling is a matter of life and death. If you don’t grow to reach a certain threshold, the business model simply doesn’t work.
To scale effectively, you first need to understand the many ways that scaling can go wrong.
These are some of the most common:
So, what can you do to scale more effectively?
Scaling a startup is a complicated, messy business – even if you have a strong business plan and a great leadership team in place. Even with all the fundamentals in alignment, there’s no guarantee of your success.
Take your time, do your research, and proactively prepare for these scaling challenges to put yourself in a better position.
Image Credit: anna shvets; pexels
Originally appeared in ReadWrite