If you are one of those fortunate entrepreneurs who has come up with a successful idea for a startup, then you will quickly turn your thoughts to making it grow larger. While it is easier said than done, you should think through what it will take to grow your business prior to launch as it will save you headaches and perhaps even your business in the future. It’s like playing a game of chess — where you map out your strategy prior to making your next move in order to gain an advantage over your opponent.
1. Picking the right business model
It is critically important that you pick the right business model for your startup before you launch. Your business model involves many things, like who will produce your products and services, how they will get delivered to the customer and how you will get paid.
In today’s online world you no longer have to do everything yourself, but you need to decide what you will outsource and what you will do yourself. For instance, if you are developing a new App for iOS and Android then you have many decisions to make before someone even writes one line of code: Are you going to do the development yourself or will you hire a consultant? Will you create the iOS version or Android version first? Will you make money from downloads or advertising?
Answers to some of these key questions will drive your business model over time and will be difficult to change in the future. To demonstrate this point, let’s say that you decide to use an outside developer for your App and your first version will be for devices using the Android operating system. You made these initial decisions because it’s less expensive to hire a consultant to develop your App (at the outset anyway) than to hire engineering talent, and there are more Android than Apple devices in use.
After you launch your App and it becomes wildly popular, you learn that your consultant is now tied up on another project and can’t start on your Apple iOS version for another 6 weeks. To make matters worse the Android version she designed only works on half of the devices. So now you are stuck with either trying to bring the development work in-house, or waiting for you consultant to get back to your project.
While there is no way to predict exactly what will happen with your startup after launch, you will be wise to consider as many outcomes as possible and try to minimize your risk. Focus on important items that really matter and could severely impact your business if you need to change course.
2. Identifying key resources required to grow your business
In most businesses, people and money are the hardest things to manage.
As your business expands, you will need more people to support a larger operation and you will have to identify where they are going to come from at the outset. One of the reasons why so many tech businesses are started in Silicon Valley is because that is where the talent is. Likewise, if you were starting a new financial institution then you would probably want to be closer to the financial centers like London or New York.
The other key resource you need to grow your business is money. It is very unlikely that you will be making enough money organically to expand your business significantly over time. At some point, you will need outside financing from friends and relatives, banks and venture capitalists. You’ll need the money to buy inventory, move into a larger space, or to develop a key piece of infrastructure. Think about where that money is going to come from and start planning ahead on how you will secure the financing you need to grow your startup.
3. Understanding your supply chain
In addition to securing money and people, you need to have a deep understanding of your supply chain. This is especially true for manufacturing companies as well as many service types of businesses that rely on others to supply some or all of their finished product or service.
Imagine your startup requires a custom microprocessor for every product you sell. If you only have a single supplier for the chip, then what do you do if that supplier goes out of business or gets a bigger order from someone else and decides to postpone your delivery? Unless you have an alternate supplier or a large enough inventory, your supply chain will shut down and you may be driven out of business.
You also need to be careful about how you manage your inventory. If you to order too much inventory and the technology changes, you may be left with a warehouse full of products you can’t sell. If you order too little inventory and have a surge in demand, you will end up leaving money on the table and may face a lot of dissatisfied customers.
Managing your supply chain is a balancing act. Ideally you will order what you can sell, and sell everything you order. Unfortunately no one can do this perfectly, but the better understanding you have of your supply chain can help you reduce these risks.
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