Mar 23, 2023

Preparing for the challenges of startup growth

It’s often thought that the biggest challenge that startup businesses face is raising funds from investors, so that they can turn their ambition into reality. While this can be challenging (read our blog here on how to make it easier), it’s navigating all the hurdles of the growth phase that often catches out the unwary entrepreneur.

In 2022, there were 305 million businesses started all over the world – but in the long run, only 10% are expected to succeed as viable operations. Those who achieve their goals will be the ones who plan their growth phase carefully, and make the right decisions at the right time to scale proportionately. This blog details how to give yourself the best chance of being one of the 10%.

Why scaling is a make-or-break affair

When you start a business, it’s easy to think that keeping things simple will enable you to scale and grow effectively. However, things are never quite that straightforward in practice: there are always complications and issues that crop up along the way that can derail your plans or simply cause you to lose focus on your overall objective. 

Three issues are particularly common, the first of which is your team getting distracted from the matters at hand. Prioritising growth of your client list is pointless if you can’t get around to fixing bugs or improving features in accordance with user requests, so team members must know what their priorities are.

The second is increased or unexpected expenditure, as you hire more staff, invest in more software and hardware, and pay for more overheads. You may find you end up spending more than you expected in your business plan, and that you don’t have the cashflow to scale as you would like.

The last of the three issues is an inability to respond to business process issues, especially with regards to compliance, security and business continuity. Scaling can often expose these issues, which can grow out of control if there’s no plan B ready to go.

The mistakes to avoid

Having to deal with the above often causes startups to make these common mistakes:

• Doing too much, too soon: businesses that scale too quickly often find themselves out of their depth, spread too thinly or unable to keep pace with developments. The right systems, infrastructure and people need to be in place to support demand, growing gradually and organically over time

• Making quick hires out of panic: a natural reaction to problems that emerge is to hire a new employee to take care of it. However, this short-term approach can cause more harm than good in the long run: especially when a bad hire can have serious financial consequences. Building out a proper C-suite and employer brand with a coherent hiring strategy makes you better equipped to deal with any challenges that come your way.

• Failing to develop leaders: nearly a quarter of startup failures are attributed to not having the right team in place, and especially a lack of experience in leadership roles. Rather than keeping a tight leash or taking on too much work personally, founders have to learn to delegate so that their business can grow with proper structure and accountability

In summary: our tips for safe scaling with confidence

To help you perfect the balance of scalability and ambition, we’ve put together this four-point checklist. That way, you can keep your business on the most likely track to success in the long-term:

• Quantify demand: evaluate the need of the market for your product, and assess the level of demand – and therefore your workload – accordingly
• Get ahead of challenges: be proactive in identifying any issues that may arise in the future, so you can make plans to respond and stay on top of them
• Create infrastructure: put the right people and technology in place for the long-term, including a sound hiring strategy, so all the right building blocks are there for success
• Expect the unexpected: realise that it’s impossible to plan for every possible scenario, and make sure that you’re ready to deal with any challenges that can’t be foreseen

At InfinityVC, we give our partners more than just investment – we give them the benefit of our experience and expertise so that they can succeed. Learn more about the businesses who’ve already grown with us here.