Your business model proved valid, your product-market fit is a fact, your customer base is continuously growing, and you secured another round of funding. You know you can go further, add new features and refine your product, yet something is holding you back.
And yes, this is as much about your IT as it is about your business strategy.
Given the high failure rate of technology startups around the world, coining the term “scaleup” has helped to differentiate sustainable and scalable businesses from the rest of the entrepreneurial pack.
Your company can qualify as a scaleup after it moves past the early-stage barriers, demonstrates a track record of high growth, and shows potential for even more success. This stage is usually a moment when businesses start unlocking new growth opportunities, access new markets, expand their teams, and build upon their core strengths.
The transition from the startup stage to the scaleup one rarely happens overnight. Scaling is usually filled with challenges – it’s all too easy to make cash flow mistakes, overestimate certain sales, let customer service fall behind, or hire the wrong people. Not to mention common problems with ensuring a robust IT infrastructure that can adapt to your changing business realities – and accessing skilled people who would make it happen.
So how can you know if your business is ready to scale?
You probably sense that the decision about scaling should not be taken lightly. Premature scaling can kill the best business idea – and this research from Startup Genome links it with the demise of even 70 per cent of new companies.
There are a few tell-tale signs your startup may be ready to scale. If your cash flow is consistently positive, you managed to build a sturdy organisational structure, and your customer base has grown to the point that you need to turn some clients away – then it’s time to expand.
Remember, however, that your scaling efforts must be synchronised with the rest of your operations. You need to consider all aspects – the product, the customer, and the team – to ensure that you are moving at the right pace. These three elements are inextricably intertwined – so without advancing them all at the same, or at least close to, it may be challenging to scale your business in a secure and sustainable way.
This task can be extremely tricky without a reliable IT infrastructure, especially if you are investing in growing an online business. This is what we observed at Scalo while working with several companies that started experiencing increased traction and demand from their customers. They already had functioning products in place and went through seed, Series A, and B funding rounds.
What they were struggling with was building a strong software team that would ensure product development at the rate required by the expanding business needs. Many times, their existing teams were simply too small or lacked the skills needed to accelerate the process. And this situation was effectively blocking our clients from scaling, penetrating new markets, and attracting even more funding.
This is the reality all startups come to realise at some point: if you want to scale your business, your product needs to meet and exceed your users’ expectations.
To achieve this goal, you need to be able to scale your IT operations and infrastructure up and down to satisfy your ever-evolving business needs. Technology is the baseline – you won’t be able to move forward without it. An in-house development team may suffice in the initial phases of your startup development, but as your customer demands expand, you will need to grow your human resources quickly.
Let’s be honest – this takes not only a lot of money (around $50k per full-time hire) but also time and effort. According to data from the World Economic Forum, the EU market alone may be missing almost 800,000 ICT specialists by 2020. The more heads on your payroll, the higher your fixed costs get – leaving less room for potential mistakes or necessary pivots.
Access to skilled workers is already a key factor impacting the success of companies. Having to compete with a plethora of other companies to attract and retain the right talent can be tricky – especially if your startup doesn’t have yet a HR and employee onboarding processes in place.
To scale faster, many CTOs choose to outsource some or even the majority of their software development work. According to data cited by Entrepreneur, more than 70 per cent of companies already rely on external IT specialists, and these numbers will most likely go up.
While IT outsourcing comes with some risks we described in this entry, it also enables unprecedented flexibility and speed – which can become a game-changer for your growing business. For one thing, you will be able to increase the expertise and output of your company quickly and efficiently, but without increasing your fixed costs.
Depending on your actual needs, you can choose to extend your in-house team with external IT consultants to fill in specific knowledge gaps or build a cross-functional IT team with your required skill set from the ground up.
There are many ways in which IT outsourcing can fuel your transition from startup to scaleup and beyond.
Get in touch and let’s talk which software outsourcing model and destination will best work for your business–and this will also be the topic of my forthcoming entry.