How to Scale Early Stage Startups From 0 to 1 With Limited Funds

This article has been contributed by Sanjay Sehgal, Founder, Chairman, and CEO, MSys Technologies.

Your dream of launching a startup is not a dream anymore. You have successfully launched your business, developed it, and chalked out the next plan. But how about scaling up your business? Every year, hundreds of startups open their doors, but only a small percentage of them survive globally. Only one in 200 of them can successfully scale up their business. While 74% of startups fail because of premature scaling, the rest do not know when to scale, and they end up being small companies that eventually get shut down or go through a fire sale to another company.

Starting a business is not enough. Understanding when your business is ready for scale-up and how that will happen is quite crucial and is also heavily dependent on the availability of funds.

The Difference Between Growing a Startup and Scaling a Startup
When to Think About Scaling Up Your Business?
How to Scale Up Your Startup

The Difference Between Growing a Startup and Scaling a Startup

Startup growth is about having a consistent customer base and a steady flow of resources. The company has a larger influx of money, which results in more production and increased hiring. Finally, the company starts using a more refined marketing budget.

But for startup scaling, it is different. In this case, the startup grows exponentially and makes more profit. However, the investment remains more or less the same. In this case, the business has already gone through the growth stage, and now it is ready to gain more customers and revenue without increasing expenses or needing more funds.

Let’s understand this with an example. You started a company that used to cater to a small locality of 1,000 people. Now, you have ensured growth to service a part of the city that will comprise 50,000 people. But now, you have to scale up your business, as you will have to be prepared to serve 10 lakh people residing in the city and then eventually expand to other cities and, who knows, other parts of the world. All this could create overwhelming demand that will paralyze your business.

When to Think About Scaling Up Your Business?

The idea of scaling up is tempting. But at the same time, you have to keep in mind that premature scaling will leave you bankrupt. So, to understand when you can accelerate growth for your business, you have to have some checkpoints.

A Reliable Customer Base

Having a large, referencable customer base will help your business grow exponentially and generate more revenue. It proves that you are actually solving the real problems of customers, which will give you market stability. Also, there is another thing that you will have to keep in mind. Having a loyal customer base means that your customers will repeat their purchases, and they will also be your endorsers, generating more indirect sales for you. Make sure you have the employees and inventory to manage the demand.

Achieving Previous Targets

When you started your business, you surely had some goals in mind. So, now that you are considering scaling your business, have you achieved those goals? If you have achieved them, then great. But if you have not, then before you think of growth, find the pain point and reflect on what stopped you before.

Positive Cash Flow

There is a difference between business profitability and cash flow. While profits prove that your business ideas are viable and in demand, your cash flow is required to stay afloat. A positive cash flow means that you are making more money than you need to sustain your business. To achieve this, you can take an advance from the customers, speed up your invoice system, and accelerate the process of cash conversion.

Valid Concept and Robust Infrastructure

Before you focus on the active growth process, you need to make sure that every part of your business is working like a well-oiled machine. The concept that you started your business with, is it a valid one and working in the market? Can you upgrade it for some sales and profit? Is the internal business structure adequate to support scaling? Ask yourself these questions to understand if this is the right time to scale.

Analyse scenarios to Minimize Risks

Scaling up your business will be risky. You will face many challenges. But this does not mean you cannot deal with these risks. You can analyze the risks first under various scenarios and then minimize them with the help of effective strategies.

How to Scale Up Your Startup

Now that you have already recognized how prepared you are for scaling up your business, let’s find out how you can do that.

Automate More

For scaling up, saving resources, reducing errors, and getting real-time activities are necessary. Automation is the best way to ensure all of these. Using chatbots can help you provide real-time customer support without much chance of error. On the other hand, automation can gather customer data and analyze it while taking care of payroll within the company. In fact, today, with the help of AI, you can reduce the necessity of using more resources for marketing too.

Know the Expectations of Your Customer

Unless you know what your customers expect from you, you won’t be able to manage them and cater to their needs. For that, you need to do the research. You need to use tools and resources to find out how your competitors are getting an edge in the market. For your MVP or the first batch of products, gather customer feedback and use that constructively to improvise.

Invest in Technology

Now that you know what your customers are looking for, it is time to invest in the right kind of technology. Use software systems that will help you increase production, increase efficiency, and reduce pain points. At the same time, ensuring the safety of the software systems is also a must. In this case, partnering with a SaaS company can be a good decision.

Plan Effective Marketing

How are people going to know about your product unless you make them see what you are offering? Hence, investing in marketing strategies is a must. From content marketing, SEO, PPC, and social media marketing to print and digital advertising, leave no stone unturned. Create the right brand persona and reinforce that with your strategies.

Funding and Steady Revenue

Yes, your goal is to scale your business while keeping the budget more or less the same. But let’s face it. When we are talking about a sustainable business model, having the right funding and a steady flow of revenue is important. Approach angel investors or VCs so that you can carry on and increase production, which will, in turn, bring you more revenue.

Conclusion

Now, while doing all of these, stay calm. Getting overwhelmed will result in making the wrong decisions or procrastinating. So, the go-to advice is to take a pause, reflect, and meditate. Get clarity on what you want to do with your business. Then tread forward.

From Pre-seed to Late Stage Funding - Sources of Every Funding Stage

As the business grows, it requires funding for expansions and research. There are different stages of funding that respond to the different needs of a growing business.

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