From Startup To Scaling Up – Be Prepared

The success of every startup depends on scaling: on sustaining and enhancing its effectiveness alongside added investment, more employees, more customers, and better locations. The problem is, however, that startup scaling comes with inherent risk. However, as long as it’s a direct result of a startup’s growth and the timing is right, scaling is a good thing.

Taking the Leap

You have launched your hospitality startup, created a viable business, acquired loyal clients, and started making a small profit—what’s next? This is a bridge every entrepreneur needs to cross in order to grow, the point where they must decide if they are ready to transition from startup phase into scale-up mode.

One of the biggest mistakes any startup can make, whether it’s in hospitality or another field, is jumping the gun and scaling your business early.

Growing Pains Don’t Need to Hurt

It’s vitally important to scale your tech startup only when it is ready. Scaling your business will require you to change your mindset and transition from being a hands-on entrepreneur to a CEO, providing strategic leadership and empowering your team to achieve success.

A business that is ready to scale is one with:

• A business plan and model attractive to investors: Your business model should show real leverage and a potential path to profitability.
• Realistic goals: Be realistic about what your startup can handle. Your plan should be rational.
• Automate to the max: Start looking early at production automation, proven process technologies, and minimum staff approaches before you begin scaling.
• Expect Accountability: You want to identify your pockets of excellent performance, attitude and execution and spread them throughout your organization.
• Subtract as You Add: For most people, scaling is all about more. This often masks what you are losing, what you should lose, and how it will impact your business.

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Rob Johnson, Managing Director Techstars Berlin

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Nice to know, but let’s ask a Pro and one of our startup mentors – Rob Johnson

Rob Johnson is a mentor at the METRO Accelerator and co-founder of Makers Academy. Drawing on years of expertise in the international startup scene, here he answers a few questions on the key issues surrounding mentoring.

What are the signs that it is still too early for a startup to scale?

It strategically makes sense to wait until a company has achieved product-market-fit before scaling. Until 40% of a statistically accurate random sample of your customers say they would be “extremely disappointed” if your product no longer existed, you haven’t yet achieved PMF. Read more at survey.io

Are there any essential steps that startups need to take before they are ready to scale up?

It’s different from startup-to-startup. Other than achieving PMF, I’d ask some tough questions around what it would look like to deliver your product with your current operational functionality to 10x as many customers as you currently have. Then 100x.

What is the one tip you give a founder who wants to expand abroad with his or her startup?

Hire somebody or get an advisor that has experience introducing a new offering into your field.

Is there one example of a startup in the hospitality industry, maybe even one in the METRO Accelerator, that scaled successfully?

I think Zenchef has done a pretty great job scaling internationally. Xavier Zeitoun, the founder, thinks empirically and sets up his customer acquisition process like a machine.

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Last for Longer

Premature scaling is a startup’s worst enemy. According to The Startup Genome Project, these negative situations arise when scaling is intended to drive a startup’s growth but does so by focusing on one dimension of the business rather than all five—customer, product, team, business model, and financials.

The root explanation of most startup failures can be linked back to one or more of these dimensions falling out of tune with the others. Rather than focusing on one, business scaling should be evaluated depending upon demand. For example, adding employees unnecessarily is premature, as is looking for tons of “traffic” that doesn’t have a need for your product.

A dataset showed that 70% of startups scaled prematurely along some dimension. While this number seems high, this may go a long way towards explaining the 90% failure rate of startups.

Be Prepared and You’ll Succeed

While many of today’s hospitality entrepreneurs can differentiate themselves in the marketplace through their product, many fail to build a business infrastructure that scales. It’s a strategic decision, and if your passion is to change the world, or even dominate an industry, scalability is the only way to succeed.

METRO Accelerator can help you find the balance by providing the necessary steps. The goal is for the development of your startup to be a natural progression with timing and planning playing a large role.