Considerations for Start-Ups When Scaling Their Business

As startups progress through the growth stage and begin scaling their business, they face the need for effective financial tools, controls, and resource planning. This requirement arises as their initial product ideas evolve into marketable merchandise, encompassing various challenges, risks, and dynamic changes. In response to customer feedback, product development must undergo iterative improvements, while the company expands its offerings with new products and services.

To ensure sustainable growth and mitigate risks and uncertainties, it becomes essential to transition from basic accounting software to enterprise resource planning (ERP) tools at the appropriate juncture. This strategic timing is particularly crucial when the business is approaching significant milestones, marking a pivotal phase in its development.

Learn more about these four signals that can help indicate when an organization is ready to make a shift and scale up to cloud ERP.

1 – Increasing Complexity of Operations

During the initial stages, a startup typically focuses on testing customer reactions to a single product or service before expanding. However, as the business grows and diversifies its revenue streams, the integration of data across departments and management perspectives becomes increasingly complex.

An example of this complexity can be seen in the success story of Harry’s, a New York-based unicorn startup in the consumer packaged goods industry. Originally a subscription-based razor blade company, Harry’s vertically integrated its operations by acquiring a manufacturer in Germany. As the company expanded, it diversified into personal care products for men and women, introducing multiple brands such as Flamingo, Cat Person, and Headquarters. To support this rapid diversification, Harry’s needed robust, modular software as a digital backbone to enable scalable growth. Basic accounting software was no longer sufficient to meet their needs.

2 – Investor Expectations and Audit Requirements

Startups often raise funds from angel investors or venture capital firms, which typically require a business audit before making an investment. To prepare for this crucial moment, startups should standardize their processes and ensure transparency of data. By establishing strong accounting practices, startups can simplify the auditing and evaluation processes, making their growth potential more attractive to investors. Failure to have a reliable accounting system in place can lead to increased costs and delays during audits and financial preparations.

3 – Expansion of Workforce

As startups accelerate their product and service development, they need to hire additional employees to support business expansion and go-to-market strategies. However, with an increase in headcount, companies face not only higher payroll costs but also the need for more software licenses and a more complex approval process for management decisions. Transitioning to an enterprise-grade ERP system becomes crucial to handle the growth in the workforce effectively. For example, when Rothy’s, a sustainable shoe manufacturer, expanded from 15 to 100 employees, they sought an ERP system that could automate their business processes and scale to support the growing workforce.

4 – Regional and Global Expansion

Startups aiming to achieve unicorn status and scale their business globally require the ability to scale their products and services both locally and internationally. Becoming a regional player is a significant success factor for startups, but it comes with challenges such as different languages, currencies, and regulatory frameworks. Implementing an ERP system that supports multiple languages and currencies helps alleviate the frustrations caused by these variations. Stronger controls and financial tools are essential for managing new cost centers and facilitating the expansion into overseas markets. According to Ulion Riebe, Rothy’s head of finance, an ERP system serves as a second-generation accounting system, offering multi-language and multi-currency capabilities without the burdensome old-school processes and procedures.

Embracing Your Current State and Future Potential

When it comes to growth trajectory and scaling your business, a top-notch ERP system can play a pivotal role in managing the escalating complexity of your processes and data at every stage. By adopting a cloud ERP platform, you can streamline operations, cut costs, minimize audit risks, and position your startup for commercial success, ultimately making it more appealing to potential investors.

Discover how Navigator Business Solutions has assisted both Harry’s and Rothy’s in implementing their ERP solutions, and explore how Navigator can help scale your business on its startup journey.

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