How to make your startup scalable

Growth | How To | Start-up
Ritam Gandhi

Ritam Gandhi, CEO and founder, Studio Graphene

Over the past five years, the UK has witnessed the emergence of a huge startup community that is disrupting the day-to-day lives of businesses and consumers. The numbers are impressive – between 2012 and 2017 there were 3.5 million startups launched across the country.

It is clear that an increasing number of people are taking the entrepreneurial leap, and positively, this is something that has been actively encouraged by the UK Government, extending from dedicated funding initiatives to incubator programmes. While this is something to be applauded, it is important not to overlook the major challenge facing this ever-growing collection of startups – long-term scalability and growth.

Business birth rates may be flourishing, but when we consider how many startups actually make the successful transition to a scaling SME, the numbers are less promising. In fact, more and more are failing to stay in operation for more than three years; of all the companies established in 2013, approximately half (53.7%) made it through to 2017.

It’s true that entrepreneurs have never been better positioned to launch a startup. The task now, however, is ensuring more of these young companies reach their full potential and confidently stride past the crucial five-year milestone. As someone who has worked collaboratively with a great many startups in the four years since launching Studio Graphene, I have seen a common set of obstacles facing those seeking to transform an initial concept into a fully functioning business.

So, for those who want to establish a successful startup, they need to consider two fundamental questions – is there a market need for their product or service? And have they put the right structures and processes in place to grow commercially?

Establishing a market need

The core proposition of any successful startup is achieving a product-market fit. What this means is identifying a significant gap in the market that affects a large number of people or organisations and offering a product that effectively addresses this problem. While all entrepreneurs typically begin by determining a product-market fit as part of their initial business model, there can be a tendency to overlook a couple of important points – is there a big enough target audience that would willingly pay for the product? And is the product scalable?

For entrepreneurs, the key here is to think practically about a simple proposition, and not become distracted by an all-encompassing idea that may sound interesting on paper, but in reality, is either not relevant to what customers are really looking for or is too complex to actually create to a high standard. Contrary to what many people may think, it is often the most simple and refined products that are the hardest to come up with. However, once found, the likelihood of a startup achieving an effective product-market fit is much higher.

Importantly, a startup’s offering must also be scalable. If a company’s offering appeals to a small audience, their ability to scale and grow will be inherently limited; they will find the market competitive, and the number of available customers will be naturally capped. Alternatively, creating a product that has mass-audience appeal, but isn’t in high customer demand will lead to similar problems. To overcome this, a startup needs to create a product that not only satisfies a significant market need but is also positioned to evolve and appeal to a growing customer base.

It may sound obvious, but demand is something that cannot be manufactured, no matter how much is spent on marketing, branding and advertising. Moreover, market need is not static – consumer and business preferences are constantly evolving, and startups must have the foresight to ensure that their USP will remain in demand for years to come. Indeed, that’s why the most successful entrepreneurs are usually the ones who launch products in sectors they already have a very strong understanding of.

Creating the right structures for commercial growth

When mapping out a business strategy, always remember to measure growth based on regular targets. The key here is setting what I like to call ‘incremental milestones’ that are attainable, rather than mammoth tasks that demand significant time, energy and resource. Not only do regular milestones boost company morale, they also reduce the costs and risks involved should a startup be pursuing a particular objective that is unrealistic or unattainable.

It is important to remember that all decisions made by an entrepreneur are based on the assumption they will ultimately improve the business.

For example, an app developer might decide that they need to create an add-on feature in order to increase the number of customers willing to download and use their app. At this point, the developer has two options – immediately allocate a large amount of resources to build this new feature or focus on improving the core USP of the app while simultaneously conducting tests to see whether there is actually customer demand for the add-on. Should the developer go with option one, there is a higher risk of this feature not delivering the desired effect, resulting in a huge sunk cost. Option two, however, mitigates the risk and allows the developer to test whether the add-on feature is actually needed.

In this example, the trade-off is clear. And in most startup cases where resources are limited, it is vital to reduce risk where possible and not overexpose the business to unnecessary hazards.

There’s no denying the wealth of opportunities that currently exist for entrepreneurs seeking to launch a business in the UK. The country has fostered a hospitable environment for startups, and there is a clear desire from the Government to ensure the country remains a hotbed for innovation and disruption. There are plenty of support structures currently in place, but this does not remove the need for a succinct business strategy that is guided by a product-need that is scalable, has a clear target audience, and can be measured through incremental milestones that are regular and achievable.

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