Scaling a Business: 11 Reasons Your SaaS Startup Won’t Scale

Mallory Merrill

Advice for Startups

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The Risky Business of Scaling a Business...

When scaling a business, a lot of things need to go right in order for your business to go forward. But, the flip side of that coin is that all those things that need to go right… they also have the potential to go wrong...

Scaling a SaaS business is complex. As tech evolves, so does its audience and, consequently, your software must evolve and your SaaS scaling plan must develop along with it. That can be a lot to keep up with, and it’s easy to misstep a time or two on your way.

But, as the high failure rate of SaaS startups shows us, one misstep can sometimes be too many; scaling the wrong way or at the wrong time can clobber your business’s momentum, and once lost, it can be impossible to get that back.

That’s a lot of pressure. But, if you’re conscientious and vigilant, you can evade classic mistakes and step forward with confidence. Here’s a list of mistakes SaaS businesses commonly make while attempting to scale, and a bit about how those blunders can hurt or halt your chances of success.

The Most Common Scaling Mistakes that Can Kill Your SaaS Business

1 Under-/Over-Staffing

Finding the right balance of employees is challenging, especially so in the beginning and as you’re pushing for growth. But that balance is ultra critical to growth success. In addition to a swarm of other issues, if you under-staff, you’re losing business (which is money), and if you over-staff, you’re losing payroll budget (which is money). So the balancing act is crucial to your productivity and to your bottomline.

Usually it’s pretty easy to tell if there’s a disparity between the work that needs to be done and the amount of employees you have to do that work. But if you can’t see it from the outside, talk to your team. They should be able to tell you if the employee base is too lean to be effective, or if there’s not enough work to go around.

You may need to onboard another person, consider a new process that could streamline workflow, or evaluate the clients you’re currently serving. Or, in the later case, you can delegate more work, or downsize your workforce. In either case, make moves to achieve balance.

Here's a nice article about hiring the right team for your SaaS business.

2 Erring on the Underqualified Side

Hiring “low” to save money will shoot you in the foot. The adage that you have to spend money to make money is literally always true, and hiring great employees is not an exception.

In other words, if you hire people that don’t truly fulfill the scope of their position, they won’t truly be able to fulfill the obligations of that position.

At the end of the day, if you hire employees that are not able to help you scale, you’ll spin wheels; you’ll flounder; you’ll lose momentum until you’re stalled. Hiring too low to save a small bit of budget will not help you profit. At best, it will help you stand still.

What’s the solution? Spend more on employees that will yield more for your business.

(Quick Tip: Keep in mind, however, that you can also hire too “high.” Although you want to employ people that can contribute to growth, you don’t want to hire people that are too big for your britches. Don’t overpay for a big fish that doesn’t (yet) fit in your pond.)

3 Reluctance or Failure to Fire Team Members Who Don’t Fit

No one likes to “let people go,” and even cutthroat founders can find themselves conflicted about firing staff. But if your employees don’t cut the mustard, if they don’t pull their weight, or if they can’t jive with other team members or the company culture/values, not only is it okay to let people go, but it’s better.

In fact, terminating unsuitable employees is often better for everyone, including that employee. Effectively scaling a business means doing the hard stuff, so do your part to ensure an efficient, positive, productive, non-toxic work environment by grooming your team.

4 Failure to Foster Growth in Team Members Who Do Fit

Nurture your people! If you have truly great employees, invest in them. Take care of your workforce and they will certainly take care of you.

On the other hand, NOT investing in your great employees will cost you in the long run, so encourage your people to push themselves; help them evolve and excel in their roles. When your employees feel valued, it will drive and support business growth.

5 Bad Budgeting Decisions

In business, your budget will make or break your whole world. If you can’t balance the proper blend of caution and risk, you’ll bleed and hit a wall. Know where you spend each penny, trust the people and the services you hire, consider the equipment/utilities/office space you pay for, and always watch your reserves.

Along the same lines, if you have successfully raised funds in the past, don’t assume you’ll be able to do it again. The market changes, investors lose interest and, accordingly, you can never let your guard down.

Be honest and realistic about your cash. Know how it ebbs and flows, how you spend it, how you accrue it, how you risk it, and when you might run out.

6 Technical Debt Avoidance

Tech debt happens, but avoiding it is like wearing a “kick me” sign. Because it will (kick you, that is). Living in tech deb denial will kick your... keister. And it will affect the performance of both your software and your engineers.

Have a plan in place to regularly deal with tech debt, and it won’t get big enough to hold you back.

7 Poor or Incomplete Planning

Sometimes surprises and guessing games can be fun, but not while scaling a SaaS business. When you’re growing a startup, you need to plan for everything.

Plan, strategize, map, anticipate, prioritize… Do all those verbs, and you can stay ahead of progress-sapping surprises and even death-blowing stumbling points that can bury a startup.

8 Too Much Copycatting, Not Enough Differentiation

The best way to get attention is to do something different, and the differentest thing you can be is true to yourself and your story. Because no one else is/has that. No one.

That waxes motivational, but it’s just dang true. Your brand, the context of your business, the things that brought you to where you are, your audience, your team, your goals-- all of those things are unique. So use them as a resource to stand out and get recognized.

And when it comes to branding and marketing? Market research and copying your competitors are not the same. Even if a similar business has found success with a bewitching campaign and you’re super tempted to “replicate” it, results cannot be guaranteed. Don’t just copy another brand’s vibe and expect that it will work for you.

Success can inspire other successes, but there isn’t a foolproof formula to follow. If you start doing exactly the thing some other business is doing, even the bewitchingest campaigns can get tired and boring really quickly. Don’t become monotonous by piggybacking on something that worked for someone else.

(Quick Tip: Real people always respond to realness. Be authentic and true, and THAT’S what will be memorable.)

9 Inability to Pivot When Necessary

For a huge number of factors, you might need to strategize a new angle for your business. But this is not a failing, it’s not a precursor to business collapse. Instead, it can be a life preserver. It’s learning, adapting and evolving-- all things you need to be able to do to sustain a successful business.

Maybe you have too much competition, maybe you misread your market, maybe your product doesn’t perform exactly as you’d expected, or maybe you and your business have simply changed. At the end of the day, if you’ve reached a dead end, you need to pivot. If you don’t or can’t, you’ll sink.

Don’t get so fixed on one vision or idea that you can’t evolve. Pivot and prosper!

10 Failure to Be Fully Transparent

“Transparency” is a popular buzzword because it’s actually super important. Keeping communication open and clear, keeping goals and expectations known, and being unambiguous about changes in your company or new directions you’re pursuing as a company--- these things are critical to scaling a business and overall business success.

Another thing to remember is that transparency is important all the time, not just when you’re doing great or you’re jazzed about particular results. You need to be straightforward, upfront, honest and open with your employees, partners and investors all the time.

11 Biting Off More Than You Can Chew

Attempting to grow too fast is a recipe for breaking down. Take things slow, be calculated, and be smart about which objectives, projects and clients you can take on.

While it may seem like taking on a boat-load of clients is a profitable step, it can actually take a huge toll on businesses that are not set-up for rapid growth. If you burnout your team or your resources, you’ll deliver poor quality work and you’ll lose clients as well as your reputation.

Instead, focus on doing great work for fewer clients. Be consistent, deliver awesomely, find your footing and make your clients happy. That is scalable. As your team matures and your process becomes more refined, gradually take on more clients and grow your resources along with your clientele.

(Quick Tip: Even if you’re ready for more customers, it’s still important to be considerate of the types of clients you prospect or accept. The type of customer you take on affects your profitability and the perception of your work/company. ---In other words, don’t work with clients you can’t satisfy. If they need something you can’t provide, you’ll undoubtedly underdeliver; that wastes everyone’s time.)

Wrap Up…

As you can see, a lot of things can fracture your pathway to scaling a SaaS business. But knowing what these things are, knowing how to avoid common mistakes and anticipate roadblocks will decidedly increase your success rate.

To scale your SaaS business most effectively, be smart, be clear, be picky, be ready to evolve, and… yes... be yourself. You got this.

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