Well funded tech start-ups have the potential to grow fast, very fast. They can grow every month more than most businesses expect to grow in a year.
Partly because they are not constrained by physical locations and can reach customers quickly anywhere, and partly because the best companies attract venture financing enabling them to invest and grow fast without generating a profit in the short term.
I have worked in and know of several start-ups (better called "scale-ups") where the business grows more than 20% each month.
The scaling challenges of 20%+ monthly growth
Most people don't get the chance to work in that type of company. It's a rare opportunity and it's doesn't suit everyone.
Most people like to have some certainty in their life about how things work. In a fast growth scale-up, there is almost no certainty. 20% month on month growth means that your business is 9 times bigger within 12 months.
You might go from 1000 customers to 9000 customers, or from 100 orders a day to 900 a day. The type of team and organisation required to serve the business changes all the time and is unrecognisable from one year to the next. In year 2, that 900 might become 8000.
How stuff gets done changes all the time. Change is constant. There are never enough people of hours in the day. What worked last month might no longer work. Problems happen every day.
It suits a certain mindset. For the right type of person, it's very rewarding.
There are some functions that scale slower
Some parts of a business scale easier than others. Things that tend to scale well are technology, product and marketing. Here, a relatively small team can continue to serve a larger business without needing to grow as fast as the business grows.
A few examples of slower-to-scale functions;
- Recruitment. Hiring 5 people can take 5 times longer than hiring one person.
- Finance; doing expense claims for 200 people takes a lot longer than for 20 people.
- Office space. 200 people need more space than 20 people.
- Customer service. Handling support requests on 1000 orders will usually require more people and time than 10 orders
Most things that scale slower tend to fall into the into the "operations" bucket. As a scale-up Chief Operating Officer (COO) I had to deal with many of these slower-to-scale functions.
Operations: slower to scale doesn't mean can't scale
There are big efficiency opportunities in most operational areas. You can optimise processes and introduce systems. You can automate repetitive tasks.
However, these things may come later. First you just need to keep up with the growth without the wheels falling off. Simply hiring enough people and having space for them to work is a challenge in itself.
Optimisation comes later.
First optimisation needs to focus on quality of the customer experience and the team culture.
The next phase of optimisation is about efficiency of resources.
Optimisation for efficiency usually comes second to growth and quality. And so it should. If there is a trade off to be made between growth or efficiency, growth usually wins.
The scale-up COO role
The scale-up COO cares about the capability of the organisation.
Their journey typically looks like this;
- Own the least scalable parts of the business, e.g. finance, HR, facilities, customer service, sales
- Grow and develop the organisation to support the business growth which is driven by product, marketing and tech
- Standardise repeatable and predictable processes to improve quality
- Identify efficiency improvements and introduce appropriate systems, processes and controls
Every scale-up has a different organisation challenge and therefore no COO role is ever the same.