When to scale?

13 Jan 2016

One question we have asked ourselves a lot, be it for our clients’ or our own products. Now before we get any further, let us go over a bit on the basic:

What is scaling?

Short answer: Scaling is the act of making what already works work under a bigger, badder, and scarier load.

Take for example, you have a coffee stand. Every morning your lovely neighbor walks in, asking for an Americano. Every time, you go over to the machine, hit the button, wait for the cup to get filled, bring the cup to your customer, get the money, then back to your seat waiting for the next customer.

Let’s say your coffee stand appears to be a fine business, and more neighbors walk in each passing day. One day, 10 neighbors show up at the same time.

Okay bad example, no one literally is that popular among the neighborhood, but, you get the idea.

And so, while you’re waiting for the cup to get filled, another customer is trying to order something, while yet another customer is calling you over to give you the money.

You feel tired. But that’s not all, because yet another customer appears to have problems with his drink. Probably too much sugar? And last but not least, your wife’s voice comes over from inside the house: “<insert_your_last_name_here>!!! WHAT DID I TELL YOU ABOUT LEAVING THE TOILET SEAT UP?”

*pardon me for the seemingly sexist example above, but believe me their should be countless equally disturbing example coming over from the wives’ side

Now you feel literally overwhelmed. You’re surrounded by things concerning your business (the coffee stand) and your NON-business (your wife).

In order to keep things running well, serving 10 to 100 to many hundred walk-in customers every day, eventually you hire some baristas to treat the customers, purchase more machines to make the coffee, hire an accountant to collect the money and keep a record of your day-to-day revenue. It is so that you have at least some time for yourself to take care of your NON-business things, a.k.a your life.

What you just did is called “scaling”

So, the slightly longer answer:

Scaling is the act of expanding your business to serve more customers, gain more revenue, and still have everything under control.

Now that we’ve gone over what scaling is, the real challenge is:

When to scale

You see, in the example above, the case was that your business does appear to be running well. In business terminology, we call it validated. A validated business is one where it’s easily proven that: there is a market. There are obvious demands. There are obvious approaches to satisfying those demands. There are clear methods of delivery & payment. You see, there are some conditions on which a business is deemed validated, but a rule of thumb in the context of our discussion today is:

1. Never “scale prematurely”

Let’s again go back to our coffee-stand example. Imagine every day only 1 neighbor walks in, and there are days when none visits, and you have 5 baristas running around operating 10 coffee makers. Your accountant sits there petting your dog most of the time. In this case, you’re literally doing nothing other than mourning over the money you have been, and will be, spending on all those people and machines, a.k.a operation cost.

No one likes the idea of spending too much money while gaining back too slowly. Scaling prematurely is a surefire way leading to that scenario.

Unfortunately, it is not always clear to tell whether it is premature or not. Those of you who are a bit experienced in life will understand the “daily experience” versus the “lifetime experience” (The Sims ™ anyone?). It is the same in businesses, where what you see and feel day-in-day-out may mask over what has been subtly lying there for quite some time.

It is worst when you feel optimistic, but in fact things aren’t.

Example? Your favorite neighbor always drops by, and every time he does, he praises your Americano like it is the God’s nectar, the sweetest drink ever made in the universe. And you feel pumped. And you forget he is but one of a million customers you will need to serve in order to call your coffee stand a real business.

So, ask yourself: if only a handful of people likes your product / service, is it worth scaling the business? or, if only a few actually pay to use your product / service while the rest only look at you when you offer free / promotional stuff, turning their heads away when you charge, then is it worth running the business?

This ambiguity is what sets us different. Some of us will realize when it is the right time to scale. Some will scale too soon (and burn out before the right moment comes). Some wait (or have to wait) until it’s too late (and other players enter the market and call their good parts of the pie already).

All this leads us to another rule of thumb:

2. Only scale when financially prepared

It is obvious to see that we will definitely starve if scaling too soon, but we cannot stumble to our death if scaling too late. When you realize you’re scaling too late, it is often either one of these cases:

Your competitors are overtaking you. Fine, it means the business is truly validated (as discussed above). It is worth noting that the market is big enough for most industries. So if you do your job well, you will gain customers. You should have your part of the pie eventually. Yes it might be tougher to climb to the 1st place, but much better than drowning in a pile of debts.
Your current customers keep complaining about your service (because they keep coming to you but you fail to serve them all in a timely manner). Still, remember there is always a gap between complaining and total neglecting. So, take your opportunity and slit in while it’s still open. Recall that all it takes for scaling is money ( * ), and if you run your business right, you’re supposed to have enough fund / credits to scale. As soon as you scale, some customers will cease their complaining, and things will only get brighten up afterwards.

In either case, it is much better than scaling prematurely then filing your bankruptcy forms, especially in this day and age (this article is written Jan 2016) where it gets more and more difficult to tell whether a business is really validated or the pie is still big enough to chime in.

Okay, all that talk and you may ask why we discuss this at DKLAB? It is simply because scaling internet products is our business, and we have seen our clients as well as our younger selves struggling trying to scale our online businesses. Again, take our coffee-stand example and imagine the store being a web platform, such as the whole platform behind Amazon Webstore, or Uber, or Ebay. All those platforms were nowhere near what they are today when they first launched. It was through trials and errors that they scaled, and now they are serving a global market.

Scaling is a fun thing ( ** ) (if done right). And we take pride in helping you do it right.

( * ) depending on the business, it actually takes a certain amount of knowledge to scale properly & efficiently, but money can buy knowledge, and we all learned that the first day we turned in our university tuition fee, no?

( ** ) for some businesses, it takes more sweats and frowns to scale than others. We always learn for ourselves bits of new things every time we deal with a scaling case, so we are here to confirm that we’ll definitely be as supportive as we can in the journey to scaling up your business.

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