Now that my SaaS product Upvoty crossed $40,000 in MRR, I'm getting a déjà vu.
Back in 2018, I ran a successful business that was doing over $70,000 in MRR, and we totally made some wrong decisions back then - decisions I do not want to make again.
One thing I've learned - it might be an unpopular opinion:
Scaling your business may eventually kill your business.
No, I'm not being dramatic.
“Premature scaling” is a real thing that you definitely want to be aware of.
At least, that's what I've learned the hard way.
Mistake 1: Moving in the wrong direction
Once we had the resources, we were eager to start all of the projects that we had on standby. There’s nothing wrong with that, but when you don’t have a strategy and a “why” behind your actions, chances are you’ll grow in the wrong direction as we did.
Just think about it: When it comes to the success team, and you’re simply hiring more people without improving the onboarding process of your customers, what will you end up with? An exhausted team that can’t keep up with the demand, and more leads and customers wanting to try your product, and a bad onboarding process.
Lesson learned: Simply throwing around resources and senselessly growing your startup turns out isn’t a good idea. It’ll lead you in the wrong direction!
Mistake 2: Adding too much complexity
Adding more instead of simplifying and improving the process. Once you have the resources, you may feel compelled to invest in adding more tools, more features, more people, and more projects, building a highly complex business, aka a monster that needs to be constantly fed.
Paul Jarvis notes in his book Company of One (wish I'd read it earlier!): “Solving with ‘more’ means more complexity, more costs, more responsibilities, and typically more expenses. More is generally the easiest answer, but not the smartest.”
Lesson learned: “MORE” may end up being messier and worse.
Mistake 3: Wasting money on things that won’t grow revenue
As an entrepreneur (and leader), you want the very BEST for your team. However, “scaling” doesn't mean getting a bigger and fancier office and installing ping-pong tables. Another thing that won't help: buying expensive software you don’t really need.
Do NOT associate growth with acquiring expensive, shiny things.
Ask yourself: Why waste money (for the sake of scaling) on things that aren’t directly related to growing your revenue? Why not invest in getting a business consultant or sales expert to help you and your team improve your process? Why not buy the software you really need? Why not focus on growing those specific elements that are directly tied to your revenue and customer satisfaction?
Lesson learned: Keep questioning your actions.
Mistake 4: Growing the team unsustainably
It’s great to find more professionals that will help you grow your company, but sometimes these hires may be unsustainable for your business.
For example, I hired five more people as part of our marketing team instead of growing the product or the customer success teams. BIG mistake.
Lesson learned: When scaling your team, you should be aware that if your business fails, you’ll need to fire people. To keep your business from dying, you’ll need to make some wise hiring decisions that will actually strengthen your company.
What I'm going to do now: Scaling slowly and strategically!
Don't get me wrong, growing your business is not a bad thing, especially when you have the resources. Scaling your company mindlessly, however, may lead to some negative results.
- See if there are things or processes you can automate instead of investing in new team members.
- Get creative and find new ways of generating revenue with fewer resources.
- Don’t get too excited and waste your time and money on creating more assets. Focus instead on creating a few high-quality assets you can sell.
- Finally, customer acquisition is super important but not as cost-effective as reducing the churn rate. So try to solve the problem of customers who leave your platform.
Wish you a successful scaling!