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Home Blog Business The 10x5y Rule: Scale a Start-up Quickly

The 10x5y Rule: Scale a Start-up Quickly

Well done! It seems that you’ve bucked the trend.

Your company is one of the 10% which has made it through the last 12 months. But, instead of congratulations – here’s a token of information to help you reach a more meaningful milestone:

10x growth potential in 5 years.

The good news is this: if you continue with the same commitment (we’ll define what it means in a moment) – then your chances of success will increase. But your window is narrow – 5 years. That’s a sink or swim period. Here, you’ll need to face your growth opportunities, for which you’ll need to plan.

Of course, time is of the essence! And if you fail to plan, you plan to fail – with very quick and dramatic turbulence.

I want to describe several examples, from across finance, technology, and lifestyle start-ups. Let’s scale and grow your new business now!

Two Things to Get Started

1. You Must Prepare Before

Innovations – or put more simply – being ready to try new ideas and approaches. This will mean testing ‘the untested’ assumptions, by taking advantage of new technologies, selling new products and services, and tapping into new markets. It’s easier said than done, of course. But with that said, we know that fortune favours the brave – or so the saying goes.

2. You Will Acquire After

Prepare for growth, exponential growth. Rather than linear growth, think ‘outward expansion’. This is a likely scenario for when your start-up focuses primarily on technology and is mainly digital-based. That’s because technology provides leverage, often at a marginal cost of production close to zero.

Your Main Focus while Scaling a Start-up

Put your attention onto what your good at, before moving into second-tier tasks. Rudy Mawer of ROI Machines puts it very well. His advice is to focus on your team, core product, customer experience, customer service, and internal systems.

Once you define these and are confident in them, you can move on to more advanced responsibilities. These include reducing expenses, improving your average order value, boosting customer lifetime value, and streamlining automation.

The following paragraphs will tell you what you need to know before moving toward the actionable steps.

Know Your Business

The first, most important thing to know is the nature of your business, and its ability to scale. Some start-ups are not suited to scaling at all. Instead, these businesses become leaner.

Some reasons for lack of scalability include saturated markets or limited potential for real growth. Be particularly cautious if, according to Start-up Genome, your enterprise is in the AdTech, Gaming, or Education industries. Ultimately, it all depends if your business can acquire enough funding to make it through the unprofitable periods of your business’ life. But consider internal factors too. Will your production cost decrease, or remain close to zero?

Know Your Product

It should come as no surprise, but a bad product is the number one reason for start-up failure. Yet, many businesses fail to assess the viability of their productions. This can be due to bad marketing or an ineffective product.

Your task will be to develop an MVP, or Minimal Viable Product. A good way to objectively evaluate your product is by determining if it satisfies a product viability test.

Be sure to understand your product’s size and scale, lifespan, seasonality, and price points. Another critical factor is whether this is a digital or physical product or a combination of both. How do you plan to distribute your product, and which marketing channels will you use to demonstrate its power to the world?

Know Your Stakeholders

A stakeholder isn’t only a shareholder; it’s anybody with a vested interest in your start-up. You can consider your customers, investors, employees, and society-at-large to be some form of stakeholder, each with its own influence the way you define your business.

But who are they? You need to know these individuals and define their characteristics, such as age, geography, and income levels. Think about how you will sustain value to customers throughout your growth.

Don’t forget to think about your investors in similar ways – who are they? Are they a reliable group of people, and how committed are they to supporting your venture’s development?

What You Can Do Now

Once you have the fundamentals figured out, you can take more decisive actions and focus on advanced concerns. These features are some, on which you can focus to build your business outwards.

Sustain Customer Growth

You may have heard of these start-ups: billion-dollar ideas, growing on their own, offering sweet ROI with minimal effort. They are either rare exceptions to the rule, or fantasies. Think of your start-up as a fern plant. They will grow fast, but it will need regular watering, nourishment, and care.

Your earliest customers will form the backbone of your business in the future – which is why you must act immediately, and regularly. Define your marketing and omnichannel strategies for the next five years. This should keep in mind assertive contacts, follow-ups, and strategic touchpoints critical to your growth stage.

Sustain Your Revenue Streams

Instead, the best way to a stakeholder’s heart is through their balance sheet. Aim for tangible, and documented growth, with clear evidence of consistent income and stability. These points are clear fundamentals from which to present optimistic growth potential.

When pitching your idea to investors, you will be tasked with presenting an optimistic picture of your business. A self-fulfilling prophecy of growth is the key to gaining attention and investment.

Sales are also significant, as a driver for further gains. From my experience, a lack of sales focus is far more dangerous than inferior products or services. You may have the best developers, but somebody must be ready to find new customers when the big projects end.

Use Your Data

Take note of your customers activities, behaviours, and intentions with digital insights. Business intelligence programmes offer an indicator of your customers and actionable suggestions on how to proceed.

With BI software, you can make data-driven decisions on your growth directions and which customer group you should allocate resources. As you grow, you can then optimise your business processes and sustain product quality, in addition to customer engagement levels.

Digital insights will boost your chances of 10x5y as it optimises your sales funnel and helps you to better-understand online conversion metrics. This tool also helps identify popular elements within your page, as well as pain points in your business.

Keep Costs Low

Trimming your expenses is easier said than done. But the key to maintaining right cost-saving measures is to aim for as lean a business as possible. Your focus should be a high revenue – low expenditure operation, with minimal overhead.

Staffing will be your most significant investment, contributing to the success or financial failure of your start-up. As you scale, you will find that hiring full-time staffs may not always be the most sustainable strategy, due to cost constraints, or even talent shortages.

One of the great alternatives is an Extended Team Model.

Outsourcing is key to keeping expenses under control and guaranteeing a consistent skillset within your organisation. Digital start-ups may have low overheads; however, maintaining online infrastructure will also demand particular attention. Remote IT teams can act as extendable staffs, offering digital expertise at favourable costs.

Invest in Strength!

Software houses can be your most reliable partner, in building and scaling an online business. Depending on which development partner you choose, you can look forward to expertise and experience in building and sustaining start-ups. With a competent software development team, you can also expect to discuss growth areas and develop a prospectus for your business.

As you expand your growth strategy, you must consider investments into new web features, outreach to customers, and maintaining your product quality throughout your business growth. You will have to revise your plans from time to time; therefore, be sure to revisit this strategy and build on it regularly.

Strong Leadership

A strong vision and leadership are your driving force and should be the focal point for your investment. Take time to develop and maintain a common vision for your company, and the kinds of people you wish to retain for the long-term. Will these be steadfast employees or risk-takers that represent the values of your future organisation? Ultimately your new recruits should reflect on this company vision.

Management will be central to this, as your leadership and passion will help channel the company vision, through nurture and consistency. I have founded many start-ups over the last four years, and it has become clear that original co-founders will confront different views for further developing your business’s strategic directions.

Key Takeaways

The most important thing to note is that your business can face any eventuality. An unprepared business has a 90% chance of failure within a year of operation. But your chances will move in your favour, to a 50% failure rate after five years, and if your business qualifies as a ‘scalable’ enterprise.

Failure, of course, is not an option. Your focus must be on the principles of 10x5y growth, which requires self-awareness, confidence, and conviction in your actions:

  • Know your business
  • Know your product
  • Know your customer

In order to realise your success, your task will be sustained growth and revenues through marketing and assertive contact with customers. Be sure to use technology, as data and digital insights will be central understanding your business operations, most loyal clientele, and investors.

Keep expenditures under control by objectively assessing your product’s viability, avoiding unnecessary staffing, and exploring outsourcing options. Invest in the intangible aspects of your business, such as quality, integrity, and vision. In this case, management will help sustain your identity, whereas professional software development will provide valuable input to your business prospects.

Much can happen in 5 years, but through technical insight, strong vision, and expertise, your business has the potential to grow tenfold within that period.

Having founded three companies, I share this piece of advice: be brave – 10x5y is within your grasp!

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A successful, experienced senior manager and business professional with a track record of growing both revenues and margins. He has over 30 years of managerial experience in the fields of strategic, operational and sales in leading local and international companies operating in Sweden and Poland. Specialties: Business Development, Sales management, Start-ups.