Why Scaling is OverratedUmang Dua
One of the most common questions you’ll hear people (particularly investors) ask is ‘how are you going to scale a business?’ Often, the question is posed with a sort of negative undertone with some variation of this implied: “I think it’s a good idea, but I just don’t see how this will scale.”Worse still is if you get peppered in the early days of your company with questions about what specific methods (be it for customer acquisition or otherwise) you’ll adopt to reach scale. So how do you answer this question?
Here’s my answer: you don’t worry about it. Think about it for a second. Here you are: a business plan in hand, with probably zero customers and sales, and you’re already being forced to worry about how you’ll expand to 12 cities in the next 24 months!
While I’m definitely being a little sensationalist with my dismissal of ‘scaling’ as a valid worry, the point is that when you’re starting out, there’s only so much you can think about. More importantly, there’s only so much you know – about the market, about the customers, about your own strengths. While for some business it is definitely fair to be concerned about scale right from the outset, for many consumer internet companies, the scales must tip in favor of making the business work now, and not 2 years down the road.
Getting hands-on: A year ago I was fortunate to get some advice from Nathan Blecharczyk, one of the co-founders of Airbnb, the fast growing home sharing site now valued at over a billion dollars. His advise was simple - doing things that are scalable when you’re starting out sometimes just don’t work; you need to only focus on doing stuff that will work now. Their own story was testament to such an approach. After sluggish initial growth, the three Airbnb co-founders decided to fly out to New York, their biggest market, and go and meet their customer and hosts in person. Obviously meeting each customer is not a scalable growth plan, but they did it nonetheless and even today they attribute that move as being pivotal in reaching the heights they have.
When you’re starting out, you need to be constantly doing things that are hands-on. Meet your customers often, don’t hesitate to ask them to refer their friends, negotiate with vendors in person and use every single guerilla-marketing tactic you can think of. If you don’t do this because it’s not ‘scalable,’ you’re simply shooting yourself in the foot.
Simplify what you’re trying to achieve: Initially, your aim is to prove that there’s a market for your idea and that given the resources you have, you can execute and deliver commensurate results. The best way to reach this goal is to cut out all the less important things (which at some stage will definitely become hugely significant, just not now.) For instance, if you’re business is local, pick only one market to go after at first; if it’s an e-commerce play, consider drop-shipping instead of carrying inventory, and if it involves any sort of sourcing or manufacturing, don’t spend hours trying to get costs down by a couple of percent. There’s just too much to worry about so try and narrow in the scope as much as you can. Most investors would agree that a business is far more valuable if you can demonstrate you made it work in 1 market and can cookie-cutter that approach to 10 new markets, as opposed to saying you have some sort of presence in 10 markets.
Keep what’s scalable in mind and what’s not – The best way to then prepare for the next stage of growth is to be aware of what is scalable and what’s not. Continue doing what you think works until you reach a stage where it’s not viable, but make sure that along the way you literally write down what’s not scalable. Keep an eye out for the silver bullets; the things that you know will work going ahead as well – a few months of actually running the business will educate you about the market more than years of planning on paper. Ideally, the way it should play out is you did what it took initially to get some early traction, and you simultaneously developed a strong hypothesis about what is scalable. It’s unrealistic to have all the answers. If you can show product-market fit and an ability to execute, you’re probably doing just fine.
Recommended read: Are you dumb if you have a non-tech startup?
About the author:
Umang Dua is the co-founder of Handybook, an online platform for instantly booking home services based in New York. He can be reached out @umangdua