A founder explains when to scale and when to stop. Necessity sometimes forces your hand, but scaling requires strong leadership or you collapse. Stop if you're not consistently profitable. Fix bottlenecks, hit a profitable quarter, re-test it, then decide.
A recent study revealed that 2/3 of the fastest growing startups ended as failures. Here's how we learned when to scale and when to stop.
This actually is not an easy discussion to know when to start to scale or when to stop the efforts, especially for me, because I'm a visionary and I always have 10 to 15 more companies in my head at all times. But for us, the way we figured out how to make this decision was really based on the necessity of bringing those companies in house. So as a real estate turnkey company, we had renovations outsourced, we had property management outsourced, both of which were failing as a result of those outsourced companies failing. It was hurting our internal business, which required us to very quickly bring those in house and start scaling. So necessity is one of the reasons to scale, but the danger of failure is not having leadership in place in order to do it. You if Flip and I were going to try and do this on our own, we very likely could have failed. But instead we put leadership in place, gave them the responsibilities of guiding that company, doing the research, overcoming the challenges, and pulling Flip and I in anytime they needed us to make sure that we are continually on the right path that led us to success, even though we were scaling fast. Now, stopping is tougher than scaling, at least for me. And stopping really has to do with sustainability and profitability. So. So if you are not yet sustainable in your business, if you have not reached profitability and have continually sustainably kept the profitability, you really should stop. There's something wrong in the business. There's some gaps, there's some obstacles, there's some bottlenecks. You need to identify what those are, create the processes and systems that are going to correct them, and then see if you can sustainably go through a quarter of having a profitable business. If you do, I would probably go one more prove the technique that you just created, and then at that point in time, then you can go ahead and scale from there.
What is this word stop you keep saying?
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