Business Growth Fundamental 1 - Be ready to scale

Once a new venture achieves product to market fit, devising the right economics for the future of the business, it should look for capital to grow as fast as possible. Yet, Josh Lerner, Harvard Business School's venture capital guru, estimates that 90 percent of new businesses can't bridge this gap and end up shutting down because of it.

As a London based growth marketing agency, we looked at a number of fast growth companies - clients and non-clients - trying to distil what makes that click from product-market fit to an accelerated venture receiving continued growth investments.

We distilled the learnings into a guide The 7 Fundamentals of Business Growth.

This is the first of a series of seven blog posts detailing each of the growth fundamentals - which you can also download from the Growth Tools page.

Growth Fundamental 1 - Be ready to scale

The marketing team is well placed to validate whether the business is ready to scale.

Ultimately, the decision on when to scale the business should be heavily influenced by your team because you are the ones with the best understanding of whether there is a big enough market for the product, if the product is well-enough liked by customers and whether enough customers can be acquired at a price that delivers good unit economics metrics.

“No market need” is widely cited as the number one reason for scale-up failure. There are plenty of horror stories of businesses that chose the wrong moment to rapidly scale up before they were ready. Homejoy was one - billed as the Uber for home cleaning, the company began with a period of explosive growth, but abruptly collapsed after 2 years. A large contributor to their demise was aggressive expansion into markets which had not been thoroughly researched - and weren't a good fit for their product.

The questions you should be able to answer are those that any VC would ask when deciding whether to invest in a business:

How big is the pool of potential customers? You need to research:

• Current size of the market.
• Growth drivers (economic, political or social for example).
• Competitors and their market shares.
• Untapped groups are similar to existing customers.

What sets the product aside from its competitors? You should assess:

• How well the product meets potential customers’ previously unmet needs.
• How different the offering is from similar products on the market.
• How the product could be developed further to resonate more with the market.

What will it cost to acquire customers? You should assess:

• Suitability of different acquisition channels.
• Channel cost comparison.
• When will acquisition efforts become profitable (using growth economics forecasts).

Once you have answered these questions affirmatively, in an unbiased way, you may assume the company may be ready to scale.

Download The 7 Fundamentals of Business Growth and learn how to calculate, enable and drive business growth.