Questions

When is the right time to scale?

I know the theory: Reach product market fit then scale. But when do you know when you have reached the perfect fit? There is always the temptation to scale too quickly and almost from the outset. But how much AB testing and iterating is necessary in a closed group before scaling is called for? And what are the most NB metrics to look at?

4answers

The biggest mistake I see startups make is attempting to scale a product before validating the direction that their customers want it to go. You'll see companies validate pre-launch via closed beta testing, crowdfunding, or building landing pages and testing everything from messaging to price point to conversion funnel. Given that it seems like you're already doing some of this testing, I assume you've got a good handle on your options here.

The challenge is this: looking for the 'perfect fit' is an incredibly easy way to justify never launching a product, and launching too early is a surefire way to spend your first few months scrambling to figure out why people aren't buying your product like you assumed they would.

Launch when you are sure you've got a core set of customers that will buy your product. Don't wait for the 'perfect' moment - get it out to these customers as early as is practical (even earlier than you probably think) and use them to test your price points, messaging, and product fit.

Scale when you know what is driving them to buy, the price they are willing to pay, and how much it costs you to bring them on board. The numbers that drive this decision vary for every company based on product and industry - if you're selling an online course for learning jiu jitsu, your optimal rollout is going to look much different than a consumer tech product. One thing holds constant - to scale, you need a repeatable process that you know will drive conversion and customer acquisition while keeping your costs at margins that make sense to your business.

Questions I would make sure I can answer between launch and scale:
1. Can you say for certain that you know what customers are willing pay? It's great if they are paying $79, but do you know if those same customers would pay $99? What about monthly vs. annually?
2. Do you know where to find more of these customers in large numbers, and how to drive them to your site/product? If so, how much will it cost you to access these customers?
3. When you do drive them to your site/product, what percentage indicate a level of interest (giving an email address, signing up for your platform, getting on a pre-order list)? What percentage click with an intent to buy right away?

It seems that you're already doing the right things by testing your product first and exploring next steps with an intelligent outlook. Keep that up and you'll continue to make decisions that move you in the right direction.

Cheers,
Chris Justice


Answered 4 years ago

That's a tricky question. I would first talk with you about what size of "scale" are we talking about?

Going from local to regional, by contrast local to national jump is quite a huge difference in strategy.

I would recommend looking at metrics such as how many new customers are you getting daily, weekly, monthly? Additionally, from the moment a new prospect comes into your funnel, how long does it take them to become a customer (paid)?

There's a few variables we would want to go through in order to solve your problem.

Feel free to connect with me on LinkedIn OR call me so I can help you.


Answered 4 years ago

The theory of product market fit has been diluted with too much "explanation" in essence the answer to your question is:
You know you have market fit because your product is being bought, shared, and highly demanded. This will in turn scale for you.. More demand means more production which means financing, hiring, adding to marketing, etc. don't scale if there's no sales. No sales means no product market fit.

That's the definition of market fit; you have created just what's right, no fluff, and marketed just in the right way that consumers get the value and want it.

Once you have a fit... Marketing is the best first option for scalability. Invest in marketing. Drive demand and sales and use that to fund increase in tools, labor or production.


Answered 4 years ago

Some great answers here, let me add my views here. My experience on this topic relates to seeing a mobile app grow into millions of users, a content site growing to millions of uniques and ecommerce site growing over 500k in a few months.

Before getting into actions. Let's consider what scaling means first. Scaling is the simple of action of taking something you're doing well (or that fits well to a set of customers), and multiplying it in size considerably.

That means that if you don't do something well to start with, and you start to multiply it, the result is a grand mess and a shit ton of lost money.

Having established that we need something that works well for a set of customers, how do we know when that's true?

Well there's several ways of going about this:

1. Ask them and let them tell you. Probably not a good idea. Nobody likes to be mean.
2. Check their behaviour and see if it matches their intent. Best way to go.

Depending on your product you can choose different metrics to gauge if you have fit or not. It depends on the type of business you want to scale.

Ideally, as scaling means spending a bunch of money into acquiring new users, what you want is an approximate understanding of the return you will get for your investment.

For this reason, revenue is always a great metric to watch. Even better, lifetime value.

In terms of behavior though, it's really all about retention here. If your users come back fanatically and can't seem not to live without your product on a regular basis, then you have high chance of fit. Look at your cohorts and how they behave. Look at time spent on product.

You can also survey them to support this data.

Once you get numbers that stick. There's your green light to scale.

Good luck with your project. If you'd ever need more information on how to execute all of the above, then simply give me a call and I'll help like with many other companies.


Answered 4 years ago

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