How is a Scaleup Different From a Startup?
The Venture lifecycle from TechQuartier
What is a scaleup? The main distinction between the two is the different stage of company growth they are currently at. A scaleup has already achieved some success and is classified as a ‘high-growth’ company that has grown at a rate of 20% per year for the past three years. When a startup achieves this degree of success, it becomes a scaleup. A scaleup is a safer investment for investors since they have often established what makes them successful and are less likely to stray from it.
Scaleups are now making decisions that will have a long-term impact on their identity, such as their company vision or corporate culture. Scaleups have reached the point where they may hire specialised staff who are experts in specific fields. Due to a lack of accessible capital, startups frequently have employees performing similar tasks at the same time, which ultimately leads to mistakes.
Finally, compared to startups, scaleups are a few steps farther along in their success journey and are now trying to take the firm to the next level, which in this case is becoming a global brand.
When to Scale and When to Grow
When to Scale and When to GrowScaling a business and growing a business are two very different things. It is understandable that in the early stages of taking a company global your returns may not improve and could even take a hit. This would be classed as growing your business, and in this situation, investing in overheads to maintain efficiency on a global scale would be necessary, even if it meant a dip in profits for one or two years until you are fully established as a global business.
Scaling your business entails laying the framework and providing the support it requires to expand without jeopardising your profits or efficiency. Scaling necessitates extensive planning and ensuring that the correct personnel are in place to ensure that the expansion period runs well and without major issues. A company that can scale effectively sees an increase in its customer base while avoiding a loss in earnings, which is very appealing to a potential investor.
How to Take your Scaleup Global
Hiring the Right People
It’s critical that you hire the proper personnel. As your company expands, you’ll be strained even more with a growing number of tasks and individuals to see. You need employees you can rely on to complete tasks to a high degree even if you are not present to supervise them. When you’re trying to expand, it’s often a good idea to use outsourcing in areas where you don’t need highly qualified people. Outsourcing allows you to get the workforce you need without having to go through the time-consuming employment procedure. If you can make yourself ‘excusable,’ meaning your business can continue to run without you, it is a sign of true global scaleup success.
Leadership
Being able to lead a startup with a small team does not automatically imply being able to lead a large business. Understanding how various individuals work and leading by example with behaviours that are connected with the company’s core values will always keep your staff on your side and working to their full potential.
This refers to having a clear line of command from top to bottom, not only your personal leadership abilities. Having people you can rely on to make judgments when you’re not available to, ensures you are not micromanaging your company.
Strong Marketing
It is critical to get your marketing techniques right when attempting to scale up on a global level. Potential customers who you have not previously been able to reach out to must be told that you will be available to them; otherwise, how can your customer base grow if no one knows you are going global? Understanding which marketing channels are appropriate for your organisation based on past data is critical to achieving the highest potential return on investment.
Understanding the Key Metrics Affecting your Business
It is critical to understand the essential metrics for determining the success of your scaleup; otherwise, you will be unable to discover areas for improvement or good aspects. When things are not working well and you don’t know why, not taking the effort to do so might have major long-term consequences for your organisation.
Conversion Rate
This indicates how successful your business is in converting viewers into taking action.
Customer Retention Rate
The CRR is important in understanding the overall progress of the business.
Gross Margins
This is the percentage of revenue that a company retains after all costs of sales are deducted from their revenue number.
Growth Rate
This allows you to measure how fast your business is growing by comparing revenue to consumer base levels.
For more information on how to measure these rates, read our blog on measuring startup success with Product Market Fit. And don’t forget to check out Part 2 of the ‘How to take your scaleup global’ series for industry examples of successful (and unsuccessful) ways British startups have tried to go global.
Amit Khanna, 7startup Founder
Amit has 18 years of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising. Amit & 7startup assist startups in the pre due-diligence process and help connect them to our vast network of investors. Reach out to us today and see if we’re a fit!
For more information on the same topic, read our blog post How to Successfully Scale Up Your Startup.
