How scaling down can help founders

Scaling down may seem like the last thing ambitious founders may want to do. But reducing one’s responsibilities can create huge benefits for them and for the company.

In our previous article, we described the art of delegation and the advantages that this process can bring. From freeing up time for you to concentrate on core tasks, to building confidence and expertise across your workforce, scaling back in the near term can significantly help a new company on its long journey of scaling up.

Here are some of the ways that scale yourself down can boost your startup’s odds of succeeding.

Networking

Building relationships is critical to the success of any startup. Having a knockout product or service on its own isn’t enough to guarantee that the profits will roll in. Wearing out the shoe leather (literally and metaphorically) to build a strong network of contacts is essential.

Unfortunately, networking is an energy-intensive and time-consuming activity that founders can struggle to fit into their day. This is where delegating non-core functions to other staff can really pay off.

Thanks to the internet, networking can be done much more efficiently than in years gone by. Business leaders can use social media like X (or the platform formerly known as Twitter) or Facebook to get noticed and exchange ideas, or they can engage in online forums related to their industry. Connecting via LinkedIn is another great way for professionals to communicate.

That’s not to say that the importance of face-to-face interaction has diminished, of course. Attending trade shows, industry conferences, even hosting your own networking events can help accelerate your startup’s growth.

Networking has many advantages for owners of new companies, including:

• Trading ideas and experiences. Talking to others in the industry can help startups learn from the experiences (and mistakes) of others. Chatting to other business leaders and industry experts can yield a treasure trove of information to help fast-track earnings growth.
• Access to investment. New companies can use special events to get in touch with angel investors, private investors and silent partners in order to raise money.
• Acquiring other resources. Networking can provide other opportunities for you as a business owner and for your staff. Educational resources like workshops and online tutorials, for instance, are common benefits that can enhance the skills and knowledge of your workforce.
• Securing sales opportunities. Getting out and about in person and online can connect you to possible customers. It may also bring you into the orbit of people who could open your product or service up to new markets or provide an opportunity for partnerships and/or commercial alliances.
• Brand building. Networking increases the visibility of the company and its products. This can be useful for attracting consumers through word-of-mouth referrals or social media interactions.
• Attracting staff. Attending job fairs and industry conventions — as well as using online business platforms like LinkedIn — can boost a leader’s chances of building the best possible team.

Don’t overhire

Founders who come from large, successful companies often fall into the trap of expanding the workforce too quickly. This can be an unwanted side-effect of delegation, where founders take on more staff than they need for roles that have been vacated.

Having more staff doesn’t always supercharge the rate at which profits grow. In many cases the only effect is that business-related expenses go through the roof.

It’s not just wages and benefits that business leaders need to consider. Training, administrative costs, perhaps even taking on larger premises can also result in large and unnecessary labour-related expenses.

The money here could perhaps be better spent in areas like product development, marketing, or even training existing staff. And for startups with less-robust balance sheets, it’s a mistake that can prove fatal.

There are other considerations other than financial cost, too. Expanding the workforce can add extra complexity to the management structure, lead to communication and supervision problems, and adversely impact the in-house culture. Larger workforces can also cause firms to lose flexibility, which in turn means they respond more slowly to market changes.

Recruitment should therefore be embarked upon very carefully. A good rule is to only take on new employees when the business is showing consistent and sustainable sales growth. In this scenario there could be a clear need for more hands-on deck to meet customer demand.

Plugging obvious skills gaps and making sure than current staff aren’t regularly overloaded with work are other signals that hiring is a sound idea. Fresh product or service launches and entry into new markets may also need people with specialist expertise to boost the chances of success.