Starting a business is an exciting and gratifying experience, and the temptation to expand quickly is an enticing one. But, with 74 percent of web-based startups ending in failure due to "premature scaling," rapid growth is a temptation to avoid at all costs.
Look at Zenefits' recent troubles. Once the darling of Silicon Valley, with a valuation of $4.5 billion, the company recently fired 250 employees -- along with its CEO -- as a result of overhiring early on, without the necessary capital or training in place.
Premature scaling, then, can be the death knell of any business. But, if you scale properly and keep pace with demand, you're more likely to grow roughly 20 times faster than those trying to grow too quickly. You also increase your chances of raising capital, attracting customers and expanding internally.
So, how exactly do you scale properly?
1. Do your research.
When telehealth provider HealthSpot closed its doors, theories circulated regarding the reason for its demise. The clear consensus was that the business had failed to properly research the needs of its customer base.
Getting to know your potential customers should be your No. 1 priority. Spend time talking to people and seeking feedback from early users. This will help challenge your assumptions, and the more you do that early on, the better product you'll build -- not to mention, the increased speed with which you'll build it.
2. Build a road map.
In the early stages of a company, focus and accountability are two critical drivers of success, so devote time to building a comprehensive road map for your company. Establish milestones for the next 12 to 18 months, be they for growth, revenue or product features. Communicate these priorities to your team members, and have them use these goals as their guide.
In fact, setting these milestones will provide a series of stops for you to reach along the way to your company's ultimate destination. As you arrive at each stop, you actually start to wire your brain to continue to achieve, which will increase your chances of success.
Related: Why Our Brains Like Short-Term Goals
That said, road maps should remain dynamic. While the best milestones are concrete, feel free to update your stops as you move toward your goal. Otherwise, you could miss out on opportunities along the way.
3. Pick the right set of metrics.
Zirtual hit its iceberg when it went on a hiring spree, taking its team from 150 to 400 over the course of 18 months. The move was an attempt to further differentiate the business from its competition by staffing full-time virtual assistants, as opposed to contract workers. But this was a costly change that didn't match the needs of the consumer, and the mistake ended in all 400 employees being fired in a single email.
There will never be a one-size-fits-all set of key performance indicators. To define your early success, think creatively about what data to collect and measure. Base these key performance indicators (KPIs) on the nature of your business and industry.
Consider using the "garbage in, garbage out" approach, where you collect only relevant and accurate data. Get rid of the rest. If you keep everything, you may cloud the results and impede the trajectory of your organization's success.
Related: What's Your Business Telling You?
4. Repeat the process.
As your company grows and scales, reevaluate each of the previous steps, and adjust as necessary. Doing this is especially important when your product or service has achieved market fit.
Rental company HomeSuite is a prime practitioner of this method. After finding success in San Francisco, the company decided on a small expansion into the similar market of Los Angeles. With each successive expansion, lessons from the company's previous ones were applied or adjusted, leading to HomeSuite's current success in five major U.S. cities.
If you think of your own company's growth in stages, you can increase the chances of anticipating future needs. You'll be much more aware of what's going on when making decisions and can justify the changes necessary to scale -- and scale at a pace befitting your products or services.
Without the right milestones and metrics, however, you could find yourself pushing growth before you're ready, and that's no way to maintain growth or momentum.