The Startup Genome Team studied over 3200 startups and came to the conclusion that 70% of them scaled prematurely. They also concluded that this fact is a major contributor to the nearly 90% startup failure rate. While growing your business is important, it’s vital to know when the right time to do it is. For a startup, to determine this moment you need to consider the market, cash flow, and your current goals.

3 Signs It’s time to scale your startup

1. You’ve achieved and overachieved your goals

Rob Fulton, founder of Exponential Black said that he realized that his business was ready to expand when he achieved his goals before the timescale he set. That’s the number one sign that shows your startup might be ready to scale regardless of the market.

However, when thinking about this, you need to consider the rate of your success as well as evaluate your resources realistically. By how much have you beaten your timetable? How consistent is your growth rate? Do you have what it takes to go to the next level? Really?

Only if your answers to all those questions are positive should you even consider expansion. And even that is best done if there are other signs that indicate the imminent success of this plan.

2. Your market is growing and more opportunities show up

This sign must go hand in hand with at least one other because the growth of the market itself doesn’t mean that your business will grow as well. What it does mean is that there are many opportunities waiting and you might have a better chance of grabbing them with a bigger team.

A detailed market research is essential in this case. For example, the web hosting market has been one of the fastest growing in the last decade, states data from Statista here and here. That’s great incentive for starting a hosting business. But a closer look at this market shows that only a few top brand names prevail on this market, so as an independent provider, your chances of successful scaling are low. On the other hand, if you use a reseller plan and leverage the strength of one of those top brands, your success is nearly guaranteed.

Therefore, it’s essential to assess your business’s situation from every angle. Then consider how the industry layout and growth will impact on you. Expand when there are more than 70% of factors in your favor.

3. Your cash flow is strong and stable

The most important requirement for scaling a startup is resources, and money is the main of those. That’s why you shouldn’t even consider expansion if your current cash flow isn’t positive.

Note that stability of that flow is as important as the fact that you actually generate income. If your current rise in cash flow is unsustainable, you won’t be able to support a bigger business.

Scale up only when you have a good number of repeated sales and stable growth of your customer base. But even then you should wait for a few months to understand whether this trend will continue.

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