How to Scale a Tech Company – Stories about Scaling Startups

By 03/08/2020Blog

So, you have completed your beta version of your new world beating mousetrap, tested it on a couple of friends -ouch, and are now ready to conquer the world.

Wait a minute mate! The world outside your neighbourhood, region, state or even country is a very, very different beast. To expand your business or “scale” it successfully you are going to need a different looking product and team of buddies. Firstly, you need to understand the difference of “growing” your business versus “scaling”. Growth is when your business increases proportionally in both revenues and costs however, scaling occurs when you can dramatically grow your revenues and customer base without the corresponding massive increase in costs. If you look at the classic hockey-stick curve it’s the dramatic upswing portion.

You may be experiencing rapid growth, but this is not scaling your business. You need to have strict disciplines on understanding and controlling costs both in production of your product and as importantly in distribution costs and customer acquisition costs before you consider scaling the business.

Very few products can scale globally without some major re-work on the look and feel and even the functionality and most certainly your local surf crew are probably not going to have the experience to contract and distribute across International borders.

Money…money oh not that again. To successfully scale you are going to need much more money than you forecast for organic growth or have told your investors. As a rule of thumb start with the premise that you will only make half as much revenue as you predict in scaling your business and will spend twice as much on overhead.

Tough decisions need to be made on what you as a business can scale efficiently and what you may need to outsource and essentially lose control over. Don’t hold everything too close to your chest – the death of many a start-up is when the founder won’t let go.

Entrepreneurs fall into the trap of thinking that their best friends who have helped them launch to date in the local landscape are also going to be perfect to run the business across multiple markets and countries, plus the lure of travel is very enticing. The skill sets needed to scale successfully especially into International waters are going to require you to hire or contract experienced professionals and in-country experts, read “older” folks like me – I’ve spent over 30-years living and working in Asia, Europe, USA and Middle East, and I’m still learning and figuring out ways to beat the costs down!

Research and choose new markets very carefully as there may be local competitors who are below the radar spending peanuts on marketing, just waiting for a foreigner to blast the market with ad dollars in a new product launch. Then suddenly you have a couple of local look-a-likes riding your wave of success and priced well below your cost of entry.

Their cost of customer acquisition is a fraction of yours and all too quickly they will erode your initial market share even with vastly inferior products. They will steal your ideas, your looks and possible even your intellectual property – and if you try to fight them you are seen as the big bad wolf, shame on you. Once market sentiment is swinging towards a local version of your product or service it’s time to get out, otherwise you are going to have to invest significant amounts in local marketing and PR. Be prepared to try a market with strict KPI’s and milestones and if not meeting those goals, cut your losses quickly and get out – move on to the next market, lesson learned and don’t repeat those same mistakes.

One of the most obvious scaling challenges is going to be language, the non-Romanised languages like Chinese, Indian or Arabic characters are written and read in a very different manner to our beloved English, left to right, top to bottom logic. So, if your website or app has icons neatly aligned on the left next to text, in Arabic that’s all going to be on the right side. And it’s not just alignment that becomes an issue, text length and spacing also cause problems, in Thai there is no sentence punctuation and some words reach thirty to forty characters long, how will you display that on a mobile phone screen?

Never just rely on Google translate to change to another language. You must get a native speaker to check all language translations, meanings and even cultural sensitivities. The damage to your brand, reputation and image can be disastrous if this is not done correctly.

Code language is another barrier to scaling. Twice I have been involved in start-ups in Asia where the coders have written thousands of lines of code including local language bites only to later find out that it was not as universal as we thought and it would not operate in other languages or domains and could not be internationalized without major re-work and in one instance the investors refused to pump in more money and we shut the company down.

A simple plan from day one to write code to International standards and format, it takes longer and costs a little more but… would have saved a lot of pain. Open source code formats and resources are worthy of a second look even though your coders want to all be unique and write their own version. That’s a big trap cause later on you are going to need these guys to stay onboard as without them you are screwed to make any changes or updates to the source code, and they may hold you to ransom over that – be warned.

Additionally, if you need to host your product in another country you will require local support staff that are proficient in the core code language used so make sure that your application is written in common coding formats that you can hire International staff in other countries.

In the late 90’s when the Internet was still dial-up I was tasked with scaling Thomas Cook Travel’s new online B2B travel booking system out across its network of over 2,000 outlets around the globe. We produced a CDROM with clear install instruction’s and mailed out to recipients – very simple and any issues they will call us in UK headquarters.

Weeks went by with no calls and alarmingly no transactions on the system? We started calling the Agents to ask what the problem was only to find most had not bothered even opening the package and those that did and installed it certainly were amazed at the extensive range of information on travel products displayed online but preferred to book passengers on flights and hotels manually through their existing systems. They wanted change but it was easier to just keep doing what they had been trained to do.

We had not considered the customers triggers to make change happen. Culturally we had not realised that our new online system was too smart and made the agent redundant or lose face to their customers, after all the Travel Agent was the travel expert not the computer. Fast forward to today and the Internet is now the expert on travel information and Agents supplement this – so our timing was wrong, the market was not then ready for us to scale our offering. Even more damning was we were pitching to the wrong customer – the Travel Agent was the wrong focus – we could have launched this as a B2C application for consumers and become another Expedia or Booking.com.

To scale successfully therefore define carefully who your customers will be (they may not always be the same as your home customers) and understand exactly the local triggers (including language, culture, colour, taste etc.) that will motivate them to use your product in their environment.

The other lesson here is scaling too early, we should have tested it more rigorously locally and expanded it around neighbouring countries before trying to conquer the world. Investors may pressure you to scale quickly as they may want to see an early exit option while growth is occurring but stay firm and grow organically until you feel momentum is there from customer demand and the product is ready to scale.

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