So you’ve started a company which solves a key problem in the market. Now if you’re doing that well for a group of people, you have to think about how to replicate that process to solve the problem more efficiently and for a larger group of people. You’re in the right place. Let’s talk about scaling.
Scaling will require you to rethink the way your business is run. You might need to start automating processes that you may have previously carried out manually. As a business leader, you might have to start streamlining high-touch processes as well. For example, in a B2B model where sales cycles are typically longer, you typically need to invest time convincing a first set of clients or stakeholders in a large corporation. Scaling will become a challenge because you need to use a large chunk of your sales team’s time to sell more.
When you start a business or are in charge of a certain vertical in a large corporation, you end up getting involved in all aspects of the business. The real test for a business leader is to scale while also making yourself redundant. Scaling should happen without your involvement in the delivery of your product or service. That way, you free yourself up to oversee the entire business, and shape the direction in which the company will grow. If you are involved in the delivery, you will end up being a bottleneck.
That is, if you’re the person doing all the sales, reading through all the paperwork, and signing off on all the marketing campaigns and feature changes, your company may not be ready to scale. Your company should scale when operational decisions are managed by other employees on your team, leaving you – the business leader – with the bandwidth to focus on the direction of the business.
To ensure operations run smoothly, you should hire qualified individuals who communicate effectively, as well as investing in developing the tools and processes to help them succeed. If you’re able to take a two week trip and the company hums along without you, you’re in a good place to scale. If you find yourself checking emails and signing off on decisions every day of your trip, scaling should wait. Don’t scale for the sake of scaling. Make sure you’re ready for it and have the systems in place to support the company.
Before you begin scaling, another factor to consider is whether or not your actual users are responding positively to your product. A strong validation, to me, is when you talk to your users and they say, “Your product really made a difference to my life, or my business. I cannot imagine a time when I lived without your product.”.
Now, keep in mind that a lot of people will absolutely love your product. But are they willing to pay for it? Before you start scaling, think about whether or not people will pay for your product, and at what price point.
In the early days of iflix, we were faced with the challenge of getting users to pay. The TV subscription service model was taking off in the US, and most companies offered new users a 30-day free trial. The idea was to convert these users to paid subscribers at the end of their free month.
Within a few months of launching, we had people using the service but hardly anyone wanted to pay for an iflix subscription. We wondered if payment channels were the roadblock. In most countries in Southeast Asia, Cash-on-Delivery is still the preferred payment channel, because a large portion of the population don’t have credit cards or e-wallets, so we decided to experiment with Cash-on-Delivery to collect payments from iflix users who were on trial.
On the 28th and 29th day of a 30-day trial, we offered our users the option of paying the SGD 3 subscription fee by cash. We would send a person on a motorcycle to their homes to collect the cash, which obviously cost us a lot more than the actual subscription fee. Yet we wanted to assess whether this new payment option would impact our numbers positively.
As it turned out, people still didn’t want to pay for the subscription. Payment channels weren’t the issue. When you’re planning to scale, test whether both your product and value proposition are robust enough, as well as whether people are willing to pay for it consistently. Remember that usage is not validation. People may use, and even enjoy, your product, but validation happens only when they’re willing to pay for it.
When you’re thinking of scaling, there are no absolute number of users that you should have before you take the plunge. An e-commerce platform should typically have tens of thousands of daily active users before scaling. On the other hand, a company in the digital therapeutics space IPO’d at over a billion dollars. This company has only 150,000 users after seven years. So in the first couple of years, they only had around 5,000 users.
What you should instead think about is whether your product is fundamentally changing the lives of your 5,000 users. If you have repeat customers who are purchasing your product several times, or B2B clients who are doing phase two or phase three work with you, those are indicators that your company can scale.
Also, are you able to define more than one segment or use case for your product? In building Naluri, we worked with corporate employers, but also started receiving interest from pharmaceutical companies and hospitals. That showed us that there was breadth in different revenue models we could pursue. When new segments show interest in your company and you’re therefore able to test new business models, you should think about scaling.
In order to scale, you should remove bottlenecks in decision-making processes in the company. By consistently documenting and refining your processes, you will be able to successfully delegate decision making to others in your team.
For example, at the point of hiring someone, you only have 50% accuracy on whether they’re a good fit for the role. Three months into joining, your accuracy will go up to 95%, as you’ve seen the person in action. All the fluff from the interview peels away to reveal their true capabilities.
What you should do is go back to your interview notes to look at the criteria you used to measure their abilities. Which of those were relevant predictors that helped you decide whether someone would be a good hire? Which of the eight or ten criteria gave you the best indication of a person’s likelihood to succeed in the role?
When you go back and evaluate your hiring decisions consistently, you can make more accurate hires. If you don’t improve your hiring process, it could pose a bottleneck to scaling. Especially if you’re a business leader, you should stop relying on instinct and impulse to make hiring decisions. Rely instead on your statistics and facts. For every decision you make, think about how you can tactically close the loop.
This principle applies even to marketing campaigns. Let’s say you have had 500 successful marketing campaigns. If you don’t know what specific elements of each campaign contributed to its success, you can’t sustainably replicate them. Instead, look at how decisions were made for each of those campaigns, and which decisions ended up playing a big role in the campaign’s success. If you find certain commonalities across various campaigns, you have found powerful predictors of success for future marketing campaigns.
Avoid the trap of on-the-spot instinctive decision making. Refer to a portfolio of decisions that have worked in the past, and you’ll see a difference in the outcomes. This will help you scale effectively. Personally, if I find myself making five decisions at once, it’s a signal for me to document my decision-making process and delegate it to someone else. Business leaders should never hold up the company while scaling.
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Former CEO | CEO
Air Asia x Berhad | Naluri