11 key learnings scaling over 200 scale-ups
March 27, 2023
There has been a significant shift towards sustainably scaling your business instead of prioritizing growth at all costs. In today's market, where uncertainty and volatility are prevalent, making the right decisions has become more crucial than ever.
Scaling up a business comes with a wealth of learning opportunities. However, there are countless articles and lists of tips and tricks on this topic, most of which cover well-known points. Instead of rehashing these points, we're taking a different approach.
Drawing on our experience of helping more than 200 scale-ups and conversing with numerous founders, we're sharing essential lessons that every scale-up founder should learn from their peers. By learning from others' experiences, you can avoid common pitfalls and accelerate your growth without making the same mistakes.
1. Have a clear product market fit before you even think about scaling
For some of you, this may sound as common sense, and to be honest we wished we didn’t have to write it down. But unfortunately we still often see businesses scaling too early, having sold your product doesn't prove that you have a clear product-market fit.
You need to know that the market is there, that people are looking for the solution, and that your product is the right solution. Or as Marc Andreessen explains in his post ‘The Only Thing That Matters’, “The customers are buying the product just as fast as you can make it – or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company current account. You're hiring sales and customer support staff as fast as you can."
Any earlier and there’s a risk that you will spread your resources too thinly and create unnecessary amounts of complexity, this is when you really start to burn money.
2. Know your ICP
Many scale-ups shoot for almost everything in the universe, but bringing in focus and ensuring that everything you do is in line with your ideal customer profile is essential. Because how can you boost your sales if you don’t have a clear idea of who you are selling to? Of course, in some cases, the product sell’s itself.
However, it’s likely that you have a specific target persona in mind, the customers that can take your revenue to new heights. And given that scale-ups have limited resources, they cannot afford the scattergun approach favoured by corporates. Bringing focus to your processes and making sure that everything you do is in line with your ICP is incredibly important. It ensures that you get maximum return from everything you do.
Segmenting your ICP based on your, expected deal size, sales win rate, the customer lifetime value and readiness to buy is crucial as the first step in building your revenue engine. Once your ICP is finalised, you can align it with your entire sales and marketing strategy. Use your ICP to say goodbye to wasted resources at your scale-up.
Check out our article about why every scale-up should start with determining their ICP.
3. Build end-to-end customer journeys
Developing your customer journey is crucial to expanding your revenue engine. It helps you identify the type of content and touchpoints that are needed to convert your leads into customers, and determine if any additional or different touchpoints are required.
However, before focusing on acquiring new customers, it's important to prioritize retaining your current clients and cultivating them by offering cross-selling and upselling opportunities. While many businesses concentrate solely on acquiring new customers, research shows that enhancing retention rates can significantly boost revenue.
4. Live your value proposition
Creating a value proposition is one thing, but living your value proposition is a whole other thing. Not knowing how to communicate your value proposition in a compelling way and how to make it ‘stick’, is a common problem for a lot of scale-ups.
And of course this takes time, but there’s a way to speed up the process. As part of our onboarding at RocketX every new joiner needs to pitch our value proposition to the entire company. As they’re the ones out there meeting potential future clients. So by living your value proposition and ensuring it’s a compelling story that can be articulated by any employee in the company is fundamental when scaling your business.
And besides that, it’s a lot of fun to hear everybody’s pitch, we’ve heard some great and spot on explanations that we couldn’t have thought of our selves.
5. To get where you want, you need to have the right people on board
As already mentioned earlier, as a founder you’re wearing many hats. And remember that most scale-ups don’t succeed, not because of the business idea not being good, but because the executive team is shaky. Thus, the importance of hiring the right people. However, the types of people and skill sets you’ll need will differ from phase to phase.
In the seed phase, you’re mostly looking to hire generalists. People who can wear many hats and focus on the basics rather than specialists. They thrive on uncertainty and getting things done. In short, a jack-of-all-trades. While in later phases, you’re most likely to hire specialists with specific functions, enabling the business to professionalize.
Without diving into what kind of people you require in every growth stage – we’re already doing that here – it’s important to realise that a motivated team is an effective team. Employees are the single biggest expense in any company. So, keeping your team happy is a number one priority, as especially as a scale-up where money can be tight.
And last but not least, big isn’t always equal to good. Not let the ‘ex-uber’s’ fool you.
6. Build an end-to-end talent management engine
It’s clear now that it’s important to get the right people onboard, booking at the current that’s easier said than done. Over 50% of budgets are spent on people. Failure to hire the right people in time directly jeopardizes the business case. Yet, talent acquisition is stuck in the past. Most of the scale-ups don’t have a content strategy, ATS, insights in funnel performance, automations & nurture flows. Not strange that there’s almost no inbound traffic.
Start seeing talent acquisition the same as customer acquisition! Build an omnichannel talent acquisition engine by leveraging a strong employee value proposition, employer brand and integrate it throughout the entire talent lifecycle. Consider talent acquisition as a sales role and also incentivise accordingly. In the end, you're selling the company to talent, which is the most fundamental resource in building a strong company and setting you up for success.
7. Data quality & quantity is one of your most important assets
Nourish and nurture your data within your systems, as said, it’s your most important asset. But don’t fixate on the quantity of data, but on the quality of your data. Research from Dun & Bradstreet shows that 9 out of 10 leaders agree that data quality impacted their sales and marketing performance, whether positively or negatively.
You can have a lot of data in your systems but if it's not about your ICPs, target personas it will have an impact on the effectiveness of your activities. Aim to gather as much relevant data as possible. Not just about the ICPs and target personas but also on the sales process; How are conversions between stages, personas, and influencers? Why stages and/or personas do not convert?
Gathering this information can help you keep tabs on the sales process and better understand why some ICPs fell through the net and some were converted. This will help you see how to improve your sales technique, nurture relationships and provide better content.
8. Set goals and measure success
Success is a process of learning: doing the work, listening to the data, and tuning your tactics based on what the data tells you. Learning from your data all starts with setting objectives, what is it that you want to achieve? And when are your activities considered successful?
A good way to set goals is by using the OKR methodology, a goal-setting methodology used by teams and individuals to set challenging, ambitious goals with measurable results. With this methodology you easily track progress, create alignment and encourage engagement.
Be conscious of what metrics you are tracking and why. It’s easy to fall into the trap of following metrics that make you look good to others (vanity metrics) but don’t actually help you understand your own performance. Especially in a way that informs future strategies.
9. Invest in a best class tech stack
This is where a lot of scale-ups go wrong, without having a CTO or tech team it’s hard to make decisions without loosing sight of the bigger picture. As specially, if you keep in mind that research, there are almost 10,000 marketing tech solutions alone. Are you looking for the cheapest solution, or software that you can upgrade as your needs change while scaling?
Either way, you need to make sure that before you adopt a new tool, you ask yourself these questions: Do you already have a tool in your tech stack that does what you need? Is there a tool out there that can fully replace multiple tools within your tech stack? Does the new tool integrate well with your existing tech stack?
Trust us, this can save you a lot of money!
10. Structure and test your pricing
In most companies, pricing is often overlooked, and the focus is only on quantity. As a scale-up you’re in a constantly evolving, fast-moving market, but a lot of scale-ups forget that their pricing strategy can move with them. And that you can treat price as a lever of your growth, the same way you look at your marketing spend or your investment in people.
That means adopting a pricing strategy early on, and revisiting it quarter by quarter, always supporting your decisions with metrics like customer satisfaction. If every business customer is delighted with your product, they’ll be less price-sensitive than you think. And imagine what an extra Euro or two on each seat would add up to. When continually optimizing your price, you’ll create more value. A good way to investigate customer price preferences is with the ‘Van Westendorp's Price Sensitivity Meter’. This survey consists of 4 price related questions:
Too expensive: At what price would you begin to think the item is too expensive to consider?
Expensive: At what price would you think the item is getting expensive, but you still might consider it?
Cheap: At what price would you think the item is a bargain – a great buy for the money?
Too cheap: At what price would you begin to think the item is so inexpensive that you would question the quality and not consider it?
With enough data, you can calculate the range of acceptable prices and the optimal price point.
11. Managing your cashflow
That it’s important to earn more money than you spend makes sense. However, when scaling, scale-ups often find themselves in a phase where they spend more than they earn. They’re burning cash, as it’s called. Of course that’s not always a bad thing, but it’s important to have an understanding of how fast you spend your cash, and try to do this in the most efficient way possible.
Because when you are aware of your cash burn, you’ll have a good estimation on when you are out of cash, and can plan your funding rounds ahead of time. This will make sure you are less likely to have your back against the wall – in need of cash fast, and will give you a better negotiating position.
Besides that, you’ll have a better story to tell your investors! Because you can show that you know how to handle the money you raise, and reduces (but doesn’t eliminate) the chance of a follow-up investment being necessary, which dilutes an investor. The higher the efficiency, the faster profitability is achieved. And lastly, if you can use your cash in the most efficient way, you can retain a larger share within the company, because you need less investors.