Entrepreneurs often share with me their frustration that things are not moving fast enough. I get it: You want to grow your company quickly. After all, you are convinced you will succeed. At the same time, you are worried a competitor might swoop in and capture a significant portion of the market before you do. The temptation is high to scale up your operations quickly. But be careful. While growth is important, scaling up effectively sometimes requires slowing down.
I have previously written about the importance of giving our businesses the tools and resources to commercialize their products quickly. In fact, in Northeast Ohio we have launched a federally funded program that accelerates the speed to market for game-changing technologies. This need for speed has to be approached with some caution, however. Not every business is ready to scale up its operations.
“While rapid growth is very exciting, it is also very challenging and must be managed properly,” says J. Gary McDaniel, CEO of Catacel.
The high-performance catalyst manufacturer has grown by more than 50 percent over the past three years. It has added equipment and employees to keep up with customer demand and has opened a new plant and technology center in Ravenna, Ohio to increase its manufacturing and innovation capacity. It believes the new plant will enable the company to grow "tenfold and beyond" in coming years.
“Our biggest challenge in managing our growth has been the process of ensuring that the proper resources are in place at the time they are needed,” McDaniel says, “so that we can continue to impress our customers with quality products and services in a timely manner.”
Catacel is one of many exciting companies in the advanced energy field. NorTech recently took three startups from Northeast Ohio – Ashlawn Energy, MegaJoule Storage and Technology Management Inc. – to the ARPA-E Energy Innovation Summit to learn about strategies that can take their businesses to the next level. At the event, they heard from others who have scaled up successfully.
Our cluster members came back with helpful insights. Among them are seven questions you should ask yourself before you decide to scale up.
1. Do I have the right business model?
Many startups are unclear about their business model. Often there’s more than one way to make money. Figuring out which approach to take is not easy but important. You need to understand which business model works for your company and is sustainable over the long-term before you scale up your business. Growth is desirable only if you stick around long enough to turn it into profit.
2. What market do I want to serve?
When you have a great product people will notice and shower you with opportunities. It can be tempting to jump on all of them. The danger is that you spread yourself too thin. If you can’t meet your customers’ needs, they will eventually go somewhere else. Also, some markets might look promising at first, but later turn out to be less so. Slow down and take a closer look. Have you thought about things like IP protection, trade restrictions and other forces that might impact your business? Before you scale up, know the market you want to serve and know it well.
3. Is my technology ready?
Scaling up your operations before your technology has reached maturity can burn a lot of cash. It’s important to understand what your product is supposed to do and whether or not your technology in its current state serves the market you are targeting. If it doesn’t, you might have to start all over again, which could require a completely different approach to your business. Why not do your homework and test on a smaller scale before you take the leap?
4. Have I gotten enough feedback on my product?
It is tempting to think that, because your product is popular in one market, it will succeed in another as well. That’s not always the case, however. Your product might be appealing to a very specialized clientele only. What works for one customer might not work for others. Before you scale up make sure there’s actually a demand beyond your current market.
5. Do I have the necessary relationships?
Few if any entrepreneurs can scale up their business without external partners. These may include venture capitalists, corporate partners, original equipment manufacturers or anchor customers, among many others. Ask yourself if you have the right relationships to expand your business. Pay special attention to your supply chain. Are your suppliers able to keep up with your increased demand and supply larger quantities at a faster rate? If not, you need to find alternatives.
6. What do I do best?
With new customers and partners come new demands. It is very easy to get distracted by product modification and other requests. Remember that you can’t please everybody. Instead, identify what you do best and communicate that to your stakeholders before you expand your business.
7. Do I have the right people?
Growing your business in one way or another will change your company, as you respond to new demands and circumstances. You might have to hire more people and some employees will be asked to take on new and expanded roles. Others might not meet your organizational demands any longer. You might no longer need R&D talent, for example. Before you scale up, identify these human resource issues and make sure you have the right people to grow and expand.
“At Catacel, our greatest resource, and our most costly resource, is our people,” McDaniel says. “We are working very hard to make sure we hire the right people at the right time and that we get them properly trained, so they are ready to step up when we need them to begin producing results.”
What are some of the most important things you had to consider before scaling up? Share your insights in the comments below or tweet them to me at @NorTech!
