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You started a business because you have goals, and where you began probably isn’t where you want to end up. Scaling a startup to a small to medium enterprise (or SME) is part of growing and expanding, but it’s not without its risks. After all, 75 percent of VC-backed startups fail.
I started my company by taking part in an accelerator called Start-Up Chile, and then by bootstrapping. There are many ways to organize the financial aspects of your company, but building an SME requires more than just having the cash.
Below, I share four lessons learned from scaling a startup to an SME to help your startup become one of the lucky ones that succeeds:
Lesson #1: Don’t try to do it all yourself
One of the biggest mistakes entrepreneurs make is holding on too tightly to their baby. You want to control every aspect of your business, down to the font size in company emails. It’s hard to let go, but you can’t do it all.
That big job you worked so hard to land? You’ll lose it when you can’t meet the production schedule. If you’re the only employee pulling long hours to put together a creative package, you might miss a glaring typo when you burn yourself out. Not learning when and where to outsource could lead to disappointing your customer.
Know your skill set, know when to delegate tasks, and outsource and hire when needed. Don’t wait until you’re desperate and going to miss a deadline. If you haven’t put the time into interviewing candidates or exploring your outsourcing options before it’s an emergency, you could make decisions you later regret.
Find a mentor. Professional development helps you learn and grow, which, in turn, helps your business grow. It’s essential to have someone to turn to with questions or concerns outside of the company.
Lesson #2: Know the numbers
It’s one thing to chase after new customers, but pursuing growth that you can’t support will lead to trouble. Know your numbers inside and out. Which products sell the fastest, and which don’t garner any consumer interest? Be honest with yourself about how many hours your team can reasonably work in a week and when you’ll need to hire someone new.
At some point in the growth process, most startups need to take on debt in order to continue growing. Knowing what your company can do now, with its current resources, will help you determine when you might need to apply for a small business loan.
You also need to know your market. Read industry guides, look at census data, and keep an eye on your competitor’s growth. Research your current sales growth to form educated growth projections which factor in market trends. If numbers aren’t your thing, hire someone who can interpret and explain them to you.
Lesson #3: Put processes in place
In the startup phase, your company’s culture flows from the example you set. Invoices and budgets might have been written on scraps of paper or napkins. Sales came from referrals within your network or your next-door neighbor.
You’re going to need accounting processes and systems in place, whether it’s Excel or accounting software, to make sure that all of your customers are invoiced and your bills paid. While you may have handled personnel issues as they came up in the past, now you’ll need one or two human resource employees to manage your growing organization and draft policies to protect your company. Word-of-mouth and tapping into your existing network might not be enough to boost sales, so sit down and put together a sales and marketing plan.
Those core administrative functions will be vital to scaling up. The more you can plan for and have in place before it’s needed, the less you’ll have to learn the hard way.
Lesson #4: Seek out partnerships
Did a new digital marketing firm just open its doors down the street? Strategic partnerships should support both companies’ growth. A strategic partnership should solve one of your problems and help your partner’s business at the same time.
Look for partners who are at about your size and growth level; a larger multinational conglomerate isn’t likely to care about your business. Consider your long-term plans and how a partner could give you access to a different market, create production efficiencies, or share corporate responsibilities, and vice versa.
While there’s no guaranteed formula to scale a startup to an SME, these general lessons are meant to guide your growth toward success. If you’re currently trying to scale your startup to an SME, what are the challenges you’re facing?