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Scaling Up? Lay a Strong Foundation for Your Startup

Scaling Up? Lay a Strong Foundation for Your Startup
Credit: Jacob Lund/Shutterstock

Although getting a startup up and running is an immensely challenging task, taking it to the next level can be even more difficult.

A study recently published in Business Horizons found that the transition period between the startup and scaling phases can be a demanding time for entrepreneurs and one that must be navigated successfully in order for a business to grow.

Joseph Picken, the study's author and founder of the Institute for Innovation and Entrepreneurship at the University of Texas at Dallas, said past research has identified the most common reasons for failure or CEO replacement, but nobody has told the entrepreneur what to do to succeed.

"During transition, the founder and team must impose essential structures and discipline, and lay the foundation for a scalable business," Picken said in a statement. "The failure to do so will result either in the failure of the venture or the replacement of the founder by a more experienced CEO."

The study shows that in the startup phase, new ventures are best served by having a loosely structured, flexible, and informal organization, while the rapid growth and scaling phase requires structure, process, and discipline. [See Related Story: 3 Steps to Successfully Scaling a Startup]

Picken said as startups enter this transition period between the two stages, founders must evaluate the business's needs, assess their personal capabilities and limitations, expand their skill set, and adopt the management practices and leadership behaviors essential to retaining the top job.

In the study, Picken outlines the transition hurdles that have to cleared when evolving from a startup to an organization that's capable of having sustained and profitable growth:

  1. Setting a direction and maintaining focus 
  2. Positioning products/services in an expanded market 
  3. Maintaining customer/market responsiveness 
  4. Building an organization and management team
  5. Developing effective processes and infrastructures
  6. Building financial capability
  7. Developing an appropriate culture
  8. Managing risks and vulnerabilities

When the time comes for startups to grow up, the entrepreneur also has to grow and learn all the skills to be a CEO, according to Picken.

"If you're in a large, established organization, you may be groomed for 10, 15 or 20 years before you assume the broader responsibilities of CEO," Picken said. "An entrepreneur has only a couple of years to do that."

In order for entrepreneurs to successfully shift from being a founder to a CEO, Picken offers these tips:

  • Shift your attention and focus. Entrepreneurs need to adopt a broader external perspective.
  • Extend the time horizon. Instead of reacting to circumstances, it is critical to start anticipating what's coming next.
  • Learn new skills. Being a CEO isn't the same as being a company founder. Entrepreneurs looking to transition into the CEO role need to broaden their functional skills and expertise. They also need to expand their personal skill sets and adopt new leadership styles.
  • Be flexible. When transitioning to a growth stage, entrepreneurs need to be open to new ideas and leverage the experience of others.

Picken said that although it's hard to do, entrepreneurs have to grow in all these areas simultaneously. He said many people don't have the perspective or ability to do all of that in a short period of time.

"It's a tough challenge for a young, inexperienced entrepreneur who has not been there and done that," Picken said. "You have to recognize you don't know it all and get a lot of help from mentors and advisors."

Chad Brooks

Chad Brooks is a Chicago-based writer and editor with nearly 20 years in media. A 1998 journalism graduate of Indiana University, Chad began his career with Business News Daily in 2011 as a freelance writer. In 2014, he joined the staff full time as a senior writer. Before Business News Daily, Chad spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including local and state government, crime, the legal system and education. Chad has also worked on the other side of the media industry, promoting small businesses throughout the United States for two years in a public relations role. His first book, How to Start a Home-Based App Development Business, was published in 2014. He lives with his wife and daughter in the Chicago suburbs.