Pop culture tends to characterize startups as DIY operations run out of garages, late-night sprints, and “disruption” with a capital D. In reality, startups are like most small businesses who simply want to run efficiently and grow sustainably. Scaling up doesn’t require radical action.
While it’s not as flashy as movies and TV like to make it, scaling a startup the right way requires standardized business processes early on, so you can take on bigger workloads without losing momentum or revenue. It also means taking a hard look at your company culture to determine if you’re creating a workplace where your team can be their very best.
All of these can sound tangential to the goal of growing or turning a profit, when in fact (to borrow from the startup lexicon) it’s “future state”. So if you’re a startup that’s preparing for the next stage of growth, here are the key areas where you should be focusing your attention to make your scale-up successful.
Determine Where You’re at in the Startup Lifecycle
Scaling smartly isn't simply rapid scaling or profit-first growth. It's reaching a series of stages in a product lifecycle without getting too far ahead of yourself.
It’s common to think of startups as having only two modes of growth: aggressively rapid scaling or a “profit first” pumping of the brakes. But scaling smartly isn’t simply one or the other — it’s reaching a series of stages in a product lifecycle without getting too far ahead of yourself.
According to the Startup Genome Report by researchers at the UC Berkeley & Stanford, there are 6 stages in a product’s lifecycle that correlate to the healthy growth of a startup:
And supporting these 6 stages are your customers, your team, your finances, your business model, and your actual product.
The report concluded that premature scaling is the most common reason for startups to perform worse — whether it’s prematurely scaling their team, customer acquisition strategies, or product. Specifically, 60% of inconsistent startups were found to focus on validating a product while still in the Discovery phase, and 80% of consistent startups focused on discovering a problem space. If you’re still uncovering user needs or examining product/market fit, then it’s probably not the best time to start scaling up aspects of your business.
But let’s say you’ve passed those milestones. You have a complete product with a decent user experience, you’ve secured financial backing, and your business model allows you to get costs lower than revenue at scale. What now? It might be time to start looking at expanding your team.
Find the Right Team (and Keep Them)
If only we could snap our fingers and suddenly have the right specialists, doers, and thinkers by our side. It’s a dream for many startups. Access to talent was the critical issue affecting 63% of startups in 2019. And in a recent study of postmortems from failed startups, 23% of startups reportedly ended up failing because they didn’t have the right team in place.
On the face of things, it seems extremely challenging as a growing startup or small business to attract the best candidates without being able to provide competitive compensation. But while an unbeatable salary might not be in the scope of what you can offer in early growth stages, unbeatable benefits and perks can be.
Having top-quality benefits and perks enables smaller startups to measure up to bigger companies when competing for talent. And they also set the stage for happier, more satisfied employees who feel taken care of.
This is why one of the best friends of a growing startup is a Professional Employer Organization (PEO), which provides small businesses with access to big company benefits and perks — from health insurance to commuter benefits to FSAs/HSAs.
PEOs do this through co-employment, which allows them to become a co-employer with you and help you with some of the more cost-prohibitive aspects of a business, like administering health insurance, as well as tedious employer-related tasks, like running payroll and filing payroll taxes. This brings us to the next step in a successful scale-up.
Related Article: How to Build an Effective Employer Brand for Your Company
Automate Payroll, HR, and Other Administrative Processes
Being lean and agile doesn’t always work well when standardizing business processes. If tedious administrative tasks bog down even the biggest companies, they can be a death knell for a startup that’s trying to move fast.
But these administrative burdens can’t be easily dismissed. Business functions like running accurate payroll and complying with various employment regulations both carry financial consequences if not done correctly. And they spell trouble for startups who make mistakes. In fact, the number of civil penalties related to inaccurate, delinquent, or unpaid employment taxes amounted to $29.3 billion in 2018 alone.
The balancing act of processing accurate payments on-time while staying on top of administrative HR takes up a lot of time and resources — two things that startup leaders can’t afford to lose.
This is why startups and small businesses end up turning to the payroll and HR experts. The balancing act of processing accurate payments on-time while staying on top of administrative HR takes up a lot of time and resources — two things that startup leaders can’t afford to lose. The best HR and payroll solution is the one that not only streamlines the operational side of these tasks for you, but also reduces the burden of employment-related compliance.
So if you’re a startup that’s spending more time than necessary on HR task management, payment and deduction calculations, and record-keeping, it might be time to find a more scalable solution.
Maintain Your Company Culture
The last major pillar of successful scale-up is company culture. As you grow and scale, the complexities of running a bigger company can sometimes consume the company culture that got you where you are in the first place. And when you take on new employees, introduce more management hierarchies, and possibly hire remote teams, you must have an unassailable company culture that keeps everyone united.
Culture is not as simple as adhering to a handful of company values (although, kudos if you already have your values mapped out). Culture is also about communication.
The risk of communication silos, which can greatly impact company culture, becomes more and more prevalent as your team grows. Often the best solution for preventing these silos is through support structures — additional means of communication like “All Hands” meetings or company-wide emails to provide context on topics and situations.
Customers also play a part in culture. Putting customer satisfaction front and center, even within your internal processes, will ensure that the values your team embodies are the ones that fit your company. (It’s why Justworks launched a 24/7 customer support team a few years back.)
Related Article: 5 Ways Happy Employees Lead To Happy Customers
Find a Partner to Help You Scale
As a successful startup ourselves, Justworks has been on a mission to help small businesses grow and run with confidence. We believe that with access to the right benefits, tools, and services, any startup or small business can flourish into the company they want to become.
To learn more about how Justworks provides a modern support system for work and life, check out our introduction to Professional Employer Organization (PEOs).
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.