21.8.2022
When I started Stagecast, I thought all I needed to figure out was to build a software solution that customers are willing to pay for. From there, so I thought, the rest will be a piece of cake. Little did I know that just because a solution is theoretically scalable, it does not mean that it actually will. In this article, I discuss 5 factors* that need to be in place for a solution to actually be "scalable".
So, yes, in order to scale a business and product, obviously you will need a "scalable" solution. If your product is based on creativity or human time, it's generally rather difficult to scale it, as the Synergy between customers, projects and offerings is little. In other words, unless you hire more people, it will be difficult to serve more customers. That said, that does not mean it cannot be done (take a look at large consulting businesses, such as Deloitte, BCG, McKinsey or Bain who all sell a combination of human creativity, expertise and time), but what we as startup founders are generally after are solutions that a large body of customers can use without making any or only little changes to the product itself.
It is generally believed that software by nature is "scalable". After all, there is close to no extra cost involved in supplying new customers with the same software solution. And while that is true, having a scalable solution is only one piece to the puzzle.
To "scale a business" is just a fancy way of saying "selling lots of product to many different customers" or "selling high volumes of product to a few customers". The key words here are "many" and "high". If your target market does not support such growth, e.g. does not have many customers or does not have a few customers who are all willing to purchase high volumes from you, the requirements for scalability are not met.
Investors often talk about "Total Addressable Market" (TAM), and "Serviceable and Attainable / Obtainable Market" (SAM / SOM), which is measured in Dollars or Euros. The question is: Is your target market big enough and is it reasonable to assume that you can grab a large enough market share with your solution for the pursuit of the opportunity to be worthwhile? If there are simply not enough buyers out there or the competition is too fierce, you do not have a "scalable" solution.
Having a product is not the same as having a business. There are businesses that offer almost the same products, but have very different means of selling it and hence have very different businesses. The pricing and business model is as essential to the business as the product itself.
Take, for example, AirBnB and Marriott - both sell "overnight stays" for travellers. However, one is a market place and the other a hotel chain. While I am prepared to pay a certain sum directly to Marriott for the nights I spend in their hotels, I pay AirBnB a small fee for connecting me with the right supplier - in that case a private person renting out their spare room. From a customer perspective, both businesses solve the same need, but these businesses could not be more different on how they manage to do so: They offer similar solutions with a very different business & pricing model.
Unless you understand how your customers are prepared to pay for your service, you do not have a scalable business. To stay with our AirBnB example - AirBnB would not be as successful as it is, if it would try to monetise the same way Marriott does.
Ok, so let's say you have a scalable product, with an attractive market and a viable business model. Now, the question is: How do you make sure your customers know about you?
Essentially, a Go-To-Market Strategy is your plan to start many customer relationships rapidly. Today, with social media, we have hundreds of ways of reaching our target group. But which one is the channel that your target group is most active on? Or maybe, social media / advertising is not the right go-to-market strategy way for you... maybe it's a different concept - maybe it's Product-Led Growth: The idea that the customers are showing your product to other potential customer by simply using the product itself (Great examples: Slack, Hopin, facebook).
Whatever it is, you need to have a way to reach your target group in a scaled way. What's the best solution worth if your target group does not know about it? I will talk much more about this in my future posts.
And last but not least - funding. You can have a plan for all of the measures mentioned above, but chances are you need time to execute on them. You need time to build the product, build the team, create the marketing campaigns and put everything in order. Funding is what allows you to do so. You won't necessarily need funding from a professional investor like a VC, but you will need funding nonetheless. There are many ways to bootstrap a business and there are many different forms of investors in the market or funds to choose from. I'll make sure to write about those in a future blog post as well.
But fact is, if you do not have the necessary means to build up momentum for your business, none of the other four factors for scalability will matter. We live in a world where there is an abundance of capital available. And most likely (and hopefully), you will try to venture into a market where there are many other players and potentially competitors. Funding is what will allow you to compete. Funding is the fuel to your Startup and is what allows you to take risks and make mistakes. Funding is what enables you to explore, search and discover your product-market-fit and scale our business.
There you have it - 5 factors that need to be in place to start scaling a business & product.
*This list is obviously not extensive, it's simply the top 5 factors which I missed to recognise when I started my business.