Three Reasons Founders Are Afraid to Scale
Scaling is a sign of success. Scaling means more revenue and profitability. Every startup wants to scale.
So why do some startups get stuck? Why do Founders hesitate? Here are a few reasons - a fear of failure (an obvious one no doubt), risk of scaling prematurely, and the need to hire experienced talent and give up some control.
Fear of Failure
For many a fear of failure plagues every stage of building a business – from starting a business to selling your company or making its IPO (and everything in between).
When it comes to scaling the business that fear of failure manifests itself in many ways. First, and something I wrote about previously, making the transition from a Founder to CEO is hard and many Founders struggle as the role expands. The questions become am I capable enough? Smart enough? What if I am found out – I have no idea what I am doing?
For many, there is a fear of letting people down or disappointing them. That may be your investors, family, friends, and your team. These people have put their faith in you, their energy, and their support.
Fear will make you play it safe. Maybe you stay in the market you are in, offer the same products, stick with the same team. But, to scale you have to take risks. You have to push forward into the unknown.
Letting Go
Scaling means you have to hire more people. The functions become more discreet, the challenges more complex, and the leadership structure more dispersed.
You can no longer be that small, tight circle of generalists you started with (which also may mean you have to get rid of someone who was there from the beginning – insert fear of firing!)
As you build out the team the leadership structure changes and there is a fear of losing control. You are used to calling all the shots. With each additional hire, decision-making authority is shared across the team. Managers start to make decisions that can impact the performance of the business.
You resist. You think nobody knows the business as well as you do. This is my baby.
Or, nobody will do the work as well as you do. Some of this is ego but much of it is fear. If you take yourself out the middle of it all you won’t know everything that is going on, so you can’t manage execution risk.
Even if you accept that you can’t be in control of everything or if burnout has proven that point for you, is there good talent out there? Is this person qualified? Maybe you know you need to hire a senior person but what if you spend all that money and it’s a bad fit? A senior hire is a big step that most Founders wait too long to make or make to quickly. In either case, mistakes are costly.
Is the Business Ready?
Many businesses fail because of premature scaling. How do you avoid this or how do you know if it’s premature? Failures happen if you over-hire, the product isn’t ready or there isn’t a true market, you don’t have a customer acquisition strategy, you don’t have the processes in place to support scaling and so on.
Whether the business is ready is also a question of money. Do I have enough? There is a fear of spending what money you have - what if there isn’t enough demand? Do I spend on the team and infrastructure first, expecting the business to grow at a certain rate? Or the reverse? It takes time to onboard and find good people, but I don’t want to over-hire. Do I spend all my money on marketing but what about operations?
Maybe you know you need more money. What if you raise from the wrong investors? You don’t want to give up equity. What is too much? Many startups fail because of poor cash management – too much, too soon. How much should you ask for? What if I take the money and I can’t meet investor benchmarks?
Fear will always be part of the equation. And it is an equation. Scaling means taking risks to reap the rewards. Balancing that trade-off becomes harder as the stakes get higher. At a breakfast recently, the speaker, Lauren Maillian, said whenever she is making a big decision, she always asks “Is it worth it if I fail?” Building a business you love is worth the risk.
