Scaling a business is very difficult. Many get to a level and then it tapers off and they struggle, especially if you aren’t funded by a Venture Capital group.
I’ve been lucky enough to scale a bootstrapped company, a VC-backed company, and now a venture-equity-backed company; each has its challenges, but there is a common thread.
It’s difficult, challenging.
I’ve stated the obvious, but let me back up a bit. My brother and I bootstrapped a small retail company that we bought in 2005 and sold in 2015; we grew it 42% CAGR and sold it to a Private Equity company. Scaling a bootstrap business is tricky; you don’t have japan mobile database excess working capital, and every dollar we had was reinvested in the company, typically into inventory. The problem with scaling is people and money are typically not overly prevalent.
What happens to many businesses is that they get to a point where they are too big to continue the path they are on, but they don’t have the capital to hire the right team that they need. They are personally doing multiple jobs. I was the CEO, CFO, and CTO. That is not sustainable. But if you assume $200k for each C-Level, we didn’t have $400k in excess working capital; it was all invested in inventory. You either bite the bullet and hire the “professionals” or stall or grow very slowly, which isn’t a problem if you are content with it as a lifestyle business.
I will be honest: in 2005, I thought I wanted a lifestyle business. But over time, my drive took over; more prominent was always better, and the race started to be number one.
This same pattern emerges with SaaS startups; it isn’t isolated to retail companies, especially where they are founder-run. They typically run to a point where there is a decision on lifestyle business or scale. Scaling is a tough decision; you aren’t guaranteed any return, and it is a large bet many founders don’t want to make.