Are you experiencing a growth spurt in your startup for the first time? Well, growing from a startup to a scale-up is a transition that comes with some inevitable pains. If your startup grows too slow or too late, you miss the opportunities to establish your presence in the evolving market. And, if you grow too fast or too soon, you might spend all your finances before controlling the revenue generation.
This ‘too much, too soon’ scenario when your business expands faster than you are ready for is premature scaling. According to Forbes, over 70% of the startup companies fail due to scaling too quickly. Therefore, avoiding premature scaling is imperative for startups before it gets too late.
Below are the six premature scaling signs or mistakes which you need to avoid-
Hiring Too Many Employees Too Early
While new hires are essential when scaling up your business, hiring too many people who may or may not add any value to the business is a red flag. Moreover, high salaries or large staff without an understanding of the cash flow is something that needs to be avoided.
Don’t just take anybody who seems willing; you may end with the employees who are not aligned with your company’s values or practices. Consider proper onboarding programs to ensure that you hire the right employees who would deliver what your brand promises to the clients.
Overspending On Customer Acquisition Efforts
Tech startups tend to spend more on customer acquisition efforts before they establish a robust product alignment. They try to compensate for their absence of product by spending money on
marketing strategies or public relations.
In other words, an entrepreneur tries to build a product that is guaranteed to succeed and convince the customers to buy it. Instead, they should try to build something that the customers actually want.
Not Meeting The Success Metrics
When your startup starts gaining traction, decision making becomes more complex. It’s common for entrepreneurs to make poor decisions out of pressure that affects the company’s potential to succeed. Further, most companies die due to an excess of opportunities than the lack of it.
Thus, it is necessary to have the right goals and metrics, and these must be clear to everyone in your team. Have a clear vision of what success looks like for you. It will allow you to see how well you are doing against your success metrics.
Postponing Funding Too Long
As it is just the beginning, it is crucial to prevent running out of money. Moreover, to grow means having sufficient cash on hand to make investments in
marketing, sales, etc. But, startups are often interested in ‘any’ funding sources and don’t vet the investors and end up looking for new sources of funds.
Many times, they find themselves in troublesome times when they are left with no other option than seeking last-minute funding. Such a situation could threaten the company’s existence. So, it is necessary to prepare your action plan and get ready to convince the investors early for series A funding for your startup.
Customer Experience Not Living Up To The Expectations
Customers don’t base their loyalty on products or prices, but on the experiences they receive. Further, customer experience is an opportunity to grow your business. Thus, if the scaling up of your startup company results in you not providing the customers with the experience they expect, it is time to scale it back immediately.
Your Team Is Overloaded
Another sign that you want to do too much too soon is to see if your team is enjoying work. If they are showing any signs of pressure or burnout, for example, they have to work for longer hours than they like, it means they are overloaded.
Usually, it happens due to unclear goals, direction, and poor leadership. They might get stressed out and come pointing the finger at you in no time. It is something that needs to be taken care of.
These are some of the premature scaling signs that might kill your startup if not avoided on time. It is necessary to keep away from these so that your business scales up systematically.