How to scale up your tech company
A lot of tech entrepreneurs want to grow their business. But some want to scale. Their dream is exponentially fast growth—20-40% or more per year. They may even hope to create the next billion-dollar unicorn.
But scaling isn’t just growing quickly. It’s also a different kind of growth. “Normal” growth usually requires major investments in a business to increase revenue. Scaling involves massively boosting revenues while costs remain relatively low.
Why scale your tech business?
Every entrepreneur has their own motivation and journey. Some entrepreneurs have ambition, drive and vision to take over the world. Others want to grow to get a bigger exit. Scaling is at the heart of their strategy.
But scaling is also useful for those who simply want to stay small, be the best in their market and create a great work environment. It improves profitability and helps you stay competitive in today’s fast-changing world.
Exciting time to scale
You may have heard this before: Canada is very good at creating high-quality tech start-ups, but we don’t produce very many large tech companies—often called unicorns—that can serve as anchors for the community.
The reasons we have fewer unicorns vary. Some founders struggle because of a lack of homegrown role models, slowness in going international or an inability to raise funds. Others sell early before they get a chance to scale and get bought up by U.S. strategic buyers or competitors looking to snap up our pioneering technology.
The lack of scale-ups brings down Canada’s level of innovation and hurts our economy.
The exciting news is that it’s changing. We’re developing a stronger Canadian tech ecosystem, fostering more ambition and encouraging founders to wait longer and grow before they exit.
4 steps to scale your tech firm
So how do you scale? I’ve worked with hundreds of scaling and growing companies of all life stages during 25 years with BDC. I find it often boils down to four essential questions. If you get these right, you’re on your way to scaling success.
1. How do you create the right team and culture for scaling?
When you’ve got a tech start-up, you wear multiple hats as the CEO. But scaling is impossible if you keep all the hats for yourself. It’s very important to hire the right people and delegate so your business can run with little or no input from you. Good leadership actually means letting go!
Encourage your team to try things, innovate and even fail.
Hire people who complement your strengths
We often hear this advice: Hire people who are smarter than you. It makes sense, but it’s not always easy to do.
Really successful CEOs whom I admire are able to do an ego check, be humble and realize they can’t be an expert in everything. Take a look in the mirror and ask yourself: “What’s missing in my skill set to scale my company?” Be really honest. Where are your knowledge gaps?
Trust your team
When a CEO doesn’t trust and respect their C-suite, it’s very hard for a company to grow quickly.
When you hire people, it’s critical to empower them to be the experts in their domain. Stay out of their way. Encourage them to try things, innovate, even fail. Recognize learning instead of punishing failure.
The CEO’s relationship with their CFO is especially important. The CEO’s job is to be optimistic and a dreamer. Meanwhile, the CFO is watching the dollars. When they don’t work well together, it can be very difficult for the company to achieve its goals. But a business is in a great position to scale if the CEO and CFO respect each other, listen to one another and balance out each other’s strengths.
Build a team of advisors
The right team isn’t just your employees. It’s also essential to surround yourself with people who can give advice or serve as mentors.
Consider creating an advisory board and seeking mentors and advice through business incubators and accelerators. Scaling companies also aren’t shy to turn to accountants, lawyers and their bankers for advice and introductions.
When a company doesn’t have good culture, you can feel it when you walk into the office.
What is the right culture for scaling?
A good culture is indispensable for scaling a tech firm. Culture is a word that’s thrown around a lot, but not everyone agrees on how to create it.
One thing is for sure: When a company doesn’t have good culture, you can feel it when you walk in the office. You may notice unhappy workers. Or no one there to greet people at the door. Turnover might be high. Forget about scaling if you have bad culture. The business may even be at risk of failure.
Good culture isn’t about having lap pools or a basketball court or Friday night cocktails. Those things are nice, but other things are more central to culture:
- What is the day-to-day like?
- Does your team feel valued and empowered?
- Or are they micromanaged with every decision needing to be checked from above?
It starts from the leadership. If the CEO can’t let go, they starve the company.
It’s also important to develop and share a clear vision and mission for the business. When everyone buys into that and believes in it, you’re on your way to having a culture set for scaling.
Operational efficiency isn’t just for manufacturing companies.
2. How do you create scalable processes?
Creating scalable processes usually means investing in automation and other technology. Often in a start-up, a lot of work is done by hand. One of the first steps in scaling up is to look for ways to automate repetitive tasks in every function.
Boost your efficiency
Scaling is about becoming more efficient. In a tech start-up, the owner or managers are often bogged down with putting out fires. They have no time or energy to be proactive and plan their growth.
Getting leaner as a business eliminates wasted effort and resources. Efficiency projects aren’t just for manufacturing companies. They can help tech firms cut costs, address chronic business challenges, encourage innovation, improve retention and engagement, and make customers happy. Useful steps include:
- analyzing your processes to identify the 8 types of waste
- using structured problem-solving methods to find root causes of recurring challenges and optimal solutions
- monitoring data to benchmark your performance, gauge improvement and foster a culture of continual improvement
Many businesses make the mistake of pursuing a new market or developing new products in an ad hoc way.
3. How do you develop a strategy for scaling?
Technology businesses are constantly presented with different opportunities for growth. Picking the right ones is often what separates a scaling business from one that grows more slowly or not at all. How do you do this?
The answer is strategic planning. Planning is a must for any business; it’s a must-have for scaling. Many tech companies make the mistake of pursuing a new market or developing new products in an ad hoc way, without evaluating whether they offer the best pay-off.
Create a strategic plan
Strategic planning involves stepping back and deciding on your objectives, then sitting with your team to sift through all your opportunities. The idea is to choose the most promising ones to focus on.
A good strategic plan includes an action plan with specific initiatives, along with a timeline, metrics and who is responsible for getting each project done. Regular team meetings to discuss progress on the plan are also important to ensure it isn’t forgotten in a filing cabinet covered in dust mites. Meetings help generate buy-in from employees and get everyone pulling together toward your scaling goals.
4. Where do you get funds to scale?
Scaling requires investment. You may need money to hire talent, implement automation or carry out planning and efficiency projects.
Many founders aren’t aware of debt financing or only pursue it as an afterthought.
The usual instinct for early-stage tech companies is to take on equity financing from venture capital, angels or other investors. But there are other options. Many founders aren’t aware of debt financing or only pursue it as an afterthought. This is a critical oversight.
Debt financing such as a working capital loan can be a good option for many scaling tech businesses. It’s non-dilutive and keeps control in the hands of the entrepreneur. If you take on equity, it’s very hard to go back. Debt is also usually cheaper, available faster and offers flexible repayment. And it can help you achieve a higher valuation between investment rounds by extending your runway.
It doesn’t have to be only one or the other. A combination of debt and equity is another possibility. Be sure to inform yourself about all your funding options so you can evaluate the right type—or mix of sources—for your company’s scaling ambitions.
It often comes down to what kind of a business you want and why you want to scale. Whatever your ambition—from being more profitable to building a unicorn—understanding all your options will put you in the driver’s seat in your scaling journey.