Scale and Grow
As we discussed in our previous post, growth hackers typically use quantitatively-oriented techniques centered on virality across different channels: app stores, social media, email marketing or search ads. Even offline marketing. “A growth hacker finds a strategy within the parameters of a scalable and repeatable method for growth, driven by product and inspired by data”, describes growth hacker Aaron Ginn. “Growth hacking’s goal are based in marketing but driven by product instincts. A growth hacker lives at the intersection of data, product, and marketing”.
So growth hacking is about your product. But scaling up is about your business model.
“Scaling refers to the period in a startup’s life when management and board feels like they can systematically accelerate growth with confidence that the resources they put in will yield great and measurable results”, describes VC Fred Destin in the scaling up Quora thread. “It normally happens after product-market fit has been found and the search for a repeatable sales or customer acquisition model has yielded enough positive data”.
If you have ever talked to VC’s you might be familiar with the term. An investor will look for products that have a) the possibility of an exit; b) a scalable business model. It means you can prove to grow your model without rising up the costs. “Simply stated, it means that your business has the potential to multiply revenue with minimal incremental cost”, says Forbes writer Martin Zwilling. “Ready to scale is when you have a proven product and a proven business model, about to expand to new geographies and markets”.
If you think the moment is right for your startup, here is some advice to help you in the process based on the experience of models we know and find useful.
Know your product
Know your product, because not all of them find a scalable business model. Software products often fit this definition – basically, as the model grows and the market does too, the product keeps the costs low. What are you? A B2B? B2C? Web, app, both? As Zwilling continues, “not everyone needs or wants investors, or a highly scalable business. Ninety percent of small businesses today are family businesses, which can be very successful, satisfying, and small by design. It’s a strategic decision”.
Invest in one process and write it down. Then keep optimizing at every step
Invest in one process and write it down. Then keep optimizing at every step. Find a process and repeat it everywhere you are going to replicate the model. This startup launched in 30 cities in 6 months is a great read on how Homejoy, a house cleaning service that expanded in the same way as on-demand economy companies like Uber, Airbnb or Postmates: city to city, in a scalable way. “You could say we had a playbook — which sounds fancy — really it doesn’t have to be more than a Google Doc with a checklist. No special features required”, her founder explains.
When Homejoy had figured out its process, they handed the document to others to replicate. “You should only attempt to grow when you’ve written your process down so that someone else is able to implement it flawlessly with little to no oversight. That’s your inflection point. It’s okay to be manual at the start, but always be looking for ways to automate”.
Simplify your model
Simplify your model. “Analyzing Postmates’ Growth” takes a look at the growth that the company has experimented with. Postmates is a simple facilitator between couriers and consumers: the user requests an order via the app and if the courier accepts, it is executed. Again, we have an on-demand model. The software and team costs have probably increased too, but scaling means they grow slower than the business does.
It took 116 weeks to reach 500k deliveries, 20 weeks to 1M and 10 to 1,5M. As Techcrunch points out, “Postmates has high gross margins on a per-order basis but has other costs, including software work and support. It isn’t clear that at its current revenue pace the firm is profitable, but if it can keep growing as it has, the idea doesn’t seem too implausible”.
Measure. Similar to growth, if technology has the ability to facilitate on task it is measurement. Define your KPIs (key performance indicators) on scaling, keep track of them and change if needed. “You need to be systematically measuring your enterprise and iterating on data. You should be measuring ahead of scaling, but most companies I know don’t do that too well. Once you scale, it becomes mission critical”, explains Destin in that Quora thread. He recommends a couple of resources: if you’re a web startup, Dave McClure‘s metrics for pirates; if you’re a b2b company, complement this with David Skok‘s blog.
“Define a business that is open-ended and continuously improving”
“Define a business that is open-ended and continuously improving”, as Forbes summarizes. “If your startup sounds like a one-trick pony, it won’t be perceived as scalable”. That means: focus on solving one problem, do it very well, grow it and then find out how to replicate. “Don’t try to solve every customer problem at the same time, but build a strategy and plan that shows continuous innovation, leading to follow-on complementary solutions well into the future”.