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7 Killer Mistakes in Scaling Startups

AnonymousBy Edwin Miller 7 years ago
Home  /  Strategy  /  7 Killer Mistakes in Scaling Startups

While the need to grow or scale up is embedded in the DNA of every single business, entrepreneur or leader that I have ever met, I am yet to meet one that hasn’t ever had a misstep while scaling startups! Understandably so, since there is no formulaic approach to scaling a business; each entrepreneur forges his/her own path for growing his or her business. But in the quest for more – more profits, more revenue, more employees, bigger scale of operations or broader product and investment portfolios, there are some big, killer mistakes that leaders can commit. Here’s a roundup of what I think are seven killer mistakes that leaders should identify and banish as quickly as possible.

Mistake #1:Not understanding recruiting

Recruiting no longer means simply about putting up an ad for a vacancy, and adding a few bullet points to the job description! Hiring is not just limited to the HR department. Business leaders need to be extremely savvy about how and who they recruit. This decides your company’s primary grey matter. Start by being a great person to work with and carefully crafting a strong organizational culture. Hire ‘A’ players, and they will attract other ‘A’ players! Trust me when I say, “candidates these days are interviewing their next jobs!” I have personally interviewed people for more than two years or six months when I felt they were the right person for the job. Just as much as I interviewed them, they interviewed my company and me. As a CEO or entrepreneur you need to be out there networking, attracting talent, and giving people a sense of why they need to be working with you.

Why this is a mistake: Not understanding how to play the recruiting game increases your company’s susceptibility to bad hires who can have a ripple effect across the organization.

Mistake #2:Recklessly Grouping Product Management and Marketing

It is shocking how many leaders still recklessly pair two fundamentally different functions – product management and product marketing. Product management needs engineers, people who understand technology, people who can design and develop products based on market requirements. On the other hand, product marketing requires people who understand business and commerce. Marketing is responsible for messaging, lead generation and acting as bridge between a potential lead and the sales team. However both teams need to be equally analytic and equally people oriented. They can no more be classified strictly as a left-brained or right-brained function, but still expecting your product manager to market your product can be disastrous. Marketing needs to guide product development based on the needs of the target market. While paring these two functions, one needs to exercise caution and align the two in an intelligent way.

Why this is a mistake: These two functions exist for very different reasons. By recklessly grouping them, you set up both teams for failure and put unnecessary pressure on your human capital.

Mistake #3:Focusing too heavily on Sales

“When should I hire sales?” and “How many employees should I add to my sales team?” are questions that plague many startups, mostly because the revenue generated by sales is the lifeblood of your business! But hold your horses now; there is such a thing as hiring sales too quickly and over hiring sales. This is mainly so because sales is no more limited to just one team, every member of your organization makes some contribution to sales! I am not saying don’t have a dedicated sales force, but make sure to coach members in other teams who have sales acumen to sell too. Your brand image as a CEO and company, marketing messages and even the way your
product manager manages the product, indirectly contribute towards sales.

Why this is a mistake:By focusing too heavily on sales, you are limiting the resourcing available for other important functions like marketing, operations, and product development.

Mistake #4:Not properly aligning functions

Let’s get this clear – all the functions in your organization need to be aligned to long and short-term objectives, but it is even more crucial for your product management, product marketing, and sales teams to be closely aligned to each other. The teams under these functional divisions need to align their understanding of products, competitors, markets, clients, team, and organizational goals! This may all sound overwhelming, but for the most part, in a startup, organizational alignment happens when communication flows freely!

Why this is a mistake: By not aligning functions, your teams will be working in different tangents, have mismatched goals and even undo each other’s efforts.

Mistake #5:Jumping on the executive talent bandwagon

Jumping on board the executive talent bandwagon is particularly popular with startups and small businesses. Small businesses or startups are more prone towards over-hiring or prematurely hiring executive or C-level talent, often because they seek validation. What businesses need is the right blend of strategic and operational talent. In most cases, startups need more resources at the operational level. While most organizations need the vision and guidance of executive talent, you have to be sure that you are hiring a C-level resource because a genuine need exists.

Why this is a mistake: Executive talent is expensive, and in startups, cash is king (burn rate). By hiring prematurely, you may realize that the executive is doing what you as a leader have the bandwidth to do. By over-hiring executive talent, you are going to have too many strategic level resources to manage, will eventually lose focus on the operational level, and rapidly burn through cash.

Mistake #6:Not letting go of the reins

Get this straight – you cannot scale startups by yourself! So let go of the reins and be open to invaluable insights you can receive from your employees and colleagues. While scaling, you may be hiring C-level talent, this means you will need to let go of your ego and listen to the experts! I have learnt that I not only need to let go of the reins but I also need to empower my employees along the way as I scale.

Why this is a mistake: Well, it is impossible to scale all by yourself. You will eventually burn out trying to do so!

Mistake #7:Always scaling up

Businesses scale because they want to grow to be more profitable. In some cases, businesses both small and big need to scale down in order to grow. This may mean scaling back on operations, scaling back on accounts that are going nowhere (firing your unprofitable customers) and much more. Scaling down does not mean reducing your human capital or downsizing, it could very well be about streamlining your systems and process by trimming the fat! More companies are now following a scaling down to grow strategy. As a startup you actually have the advantage of being able to clearly pinpoint unproductive operations and resources. This gets harder to do in larger organizations.

Why this is a mistake: By constantly scaling up, you could bite off more than you can chew. Every now and again take stock of your scale of operations and cutback on unproductive undertakings.

When it comes to scaling startups, you need to bring your change management ‘A’-game. You need to change yourself, be open to taking risks, constantly be learning and stay alert at all times. You also need to help the organization manage the changes that happen while scaling. That said, also be forewarned that as your business grows, the complexity of scaling further increases too! Watch out for these seven killer mistakes and other missteps along the way.

Edwin has authored 9Lenses Insight to Action:A Social Approach to Business Optimization and Snapshot9 What’s Your Picture?:Accelerate Your Business Performance. Click here to download the first chapter of 9Lenses Insight to Action for free!

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