Five Key Lessons On How To Scale Your Business
Effective capital allocation is key to scaling a startup. If the funds are allocated to the wrong departments, the returns are capped even though the functions were operated optimally
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Starting a new venture is one of the most exciting and rewarding experiences. Doesn’t matter if you’ve just graduated from university or a veteran 40+ year old who has gained experience in a particular domain and is persuaded to start his own business. Taking the initial leap of faith is extremely daunting. It is one’s confidence in the business, market, and themselves, that leads to the establishment and scaling of a business.
However, scaling a business is exponentially harder. While scaling a company, a founder needs to control a variety of variables such as product, traction, culture, financials, etc. Initially, a founder has a vital role to ensure the smooth sailing of the business. They need to have contingency plans in place for unforeseen circumstances.
Hence it is very important to maintain a structure while scaling a business. Here are a few things to keep in mind!
Culture, Culture, Culture..
Culture is a cluster of a firm’s values and its vision and mission. It’s living the core values when you hire, when you write an email, and when you are working on a project, etc. Culture is defined by what your team does when no one is looking. The stronger the culture, the less firefighting by an entrepreneur. When the culture is strong, the founder can trust everyone to do the right thing. People can be independent, autonomous, and entrepreneurial.
There is a reason why Google receives around 2 million job applications every year and why employees at Google love to work even on weekends! It's the culture that this company maintains. What is the difference? - It has a fun work environment that encourages creativity and the employee’s overall personality development. In order to foster creativity, Google strives to create an environment where employees can offer their own solutions or simply express their creativity in the way they work. This boosts growth at a personal level. Thus, it becomes a two-way benefit for both the company and the employee. Its open communication policy is a cherry on the top! Every team member at Google is open to voice their opinions. This way, transparency is maintained between higher-ups and employees, regardless of their titles. Google encourages mobility within the company so that employees can work on their strengths and weaknesses. The idea is to provide employees with the exact job designation within the company and then help them with the transition.
Employee retention is greatly enhanced as most companies do not grant such leeway. In addition, some recruitment and onboarding costs can be saved. A great culture creates longevity in your business. It is important to realise that players will change over time: leadership will transition at some point, but the new leaders will continue to chase the same mission. Having a strong culture within the team enables the new leaders to imbibe the culture of your company, and operate on the same wavelengths as others!
Optimise for velocity, and not speed
The saying that speed is the primary reason for a successful startup is partially true. Speed refers to how fast an object is moving; velocity refers to the rate and direction at which an object changes its position. The mantra of “launch fast, fail faster,” encourages startups to take risks and pivot quickly when things are not working out. However, failing fast encourages companies to release features or launch products that may not be beneficial to the consumers. They’re doing things quickly (speed) but not making much progress (velocity).
An entrepreneur should always take time to evaluate, strategise and then execute. Running a successful company is similar to playing chess and the best way of viewing a chessboard is by being away from the chessboard (strategising) and not by being on the chess board (executing).
Hire the best talent
Recruiting employees is often considered the hardest thing while scaling a business when compared to raising funds. An entrepreneur’s priority should be hiring the best talent. It is the highest ROI activity, leading to immense growth for the company. Primarily, a founder should devote a minimum of 30-50% of his time to scouting the best talent and getting them onboard.
It is estimated that Zappos CEO Tony Hsieh has lost "well over $100 million" due to his own bad hires. He cites his team leader's bad decisions and further hiring inexperienced candidates as the causes of the loss. In his opinion, most companies hire quickly, then fire slowly, which should be reversed- "hire slowly, then fire quickly."
A bad hire can set back your company by a minimum of 6 months. Only focus on hiring A+ level members in your company .A+ players will always hire A+ players, but B players hire C players and C players hire D players, it doesn’t take long to get to Z players. Ultimately the success of your business depends on the people driving that business.
There's nothing worse than one bad apple spoiling the whole bunch. There may be a reason why employers cannot defeat disengagement, since it is contagious. Disengaged hires cause good employees to burn out as they try to make up for it.
Fund allocation is more important than Fundraising
Effective Capital allocation is key to scaling a startup. While funding from VCs will majorly get affected by external factors such as macro, economical, etc.; being a great capital allocator allows the company to reach the metrics faster. If the funds are allocated to the wrong departments, the returns are capped even though the functions were operated optimally.
The best operators are able to identify departments, allocate capital to set up the team/operations, and reach profitability. Furthermore, they subsequently move on to creating another department, which is ancillary or complementary to the existing services in the company, and then start growing that department. This leads to strong feedback loops and allows the business to scale at a faster rate.
(The given article is attributed to Jayant Panwar, Co-Founder, PropReturns)
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