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New startup founders often ask us if we can build a product that can scale with their business. It’s a great question, and one that comes from a place of optimism: success feels inevitable, and founders want solutions that will serve a large customer base. However, sometimes that optimism comes a bit too early and can cause founders to fall into what we call the “scalability trap.”
The scalability trap
Some founders are so focused on scaling their business for the long term that they overlook what is necessary to survive in the short term. This is the scalability trap: preparing the business to handle future problems, often before the business has paying customers. Falling into this trap can waste precious resources, putting the entire business at risk.
Money can be tight in an early stage startup, so you want to conserve the money you have for things that you can’t do yourself. Prioritizing automation too early can distract you from acquiring new customers. Scalable solutions require significant investment, either in the form of building your own solution or buying something that can handle all anticipated use cases.
For example, subscription-based products need some way to accept payments from customers. You might be tempted to build a self-serve payment solution on day one. However, manually processing payments for your first customers might be the most cost-effective solution for your business!
While a consumer-facing app may need an automated payment solution early on, a business-to-business (B2B) product might not. Customers who are willing to pay hundreds or thousands of dollars for your product are probably fine with cutting a check once a year. Why not start there?
Automated payment solutions may take anywhere from a few days to a few weeks to implement, depending on the complexity of your pricing model. For an early startup, the time and money you might spend on that solution may be better spent on other aspects of your business. Would you rather have an expensive automated payment system and five customers, or cash in the bank from fifty customers who paid by check?
The right time for automation
Our most successful clients avoided the scalability trap. They signed up their first customers over the phone and sent an invoice via QuickBooks. They wrote personalized emails and called each new customer to discuss their product experience. In short, they validated their business models before investing in automated systems.
Early manual solutions improve your decision-making when it is time to automate business processes. Manually onboarding every new customer at first sounds tedious, but the manual work will help you smooth out the rough spots of onboarding. You will hear first-hand reservations, pain points, and other feedback that will help you build a better product. If you jump straight to an automated and “scalable” solution, you might build something that simply doesn’t work for most of your potential customers. You may even build a solution that doesn’t get used at all: what good is scalability if you never gain traction?
Generally, we advise self-funded startups to do things that won’t scale until they need to scale. If you can land paying customers without automating onboarding, then automating onboarding can wait. This is especially true for B2B products, where the customer relationship is more personal than you see with most B2C products. B2B customers are generally more tolerant of a manual signup process. They’re looking for long-term solutions to business problems, not necessarily the fastest sign-up process.
When is the right time to automate? If your business is making money and your manual processes are actively preventing you from making more money, then you should invest in automation. Otherwise, your business may be better served by manual processes that don’t scale (yet).
Automate what makes you successful
This is not to say that every business activity must start as an unscalable, manual process. The decision is dependent upon your goals and resources. What your business needs today may not be what your business needs two years from now, and vice-versa.
Most importantly, your business should be able to afford automation: consider automation a reward for success, not a prerequisite for success. The opportunity to automate is only right if there is a clear return on the investment.