The annals of entrepreneurship are filled with promising start-ups that appeared ready to change their industries—but weren’t able to navigate the difficult path from exciting small business to big, well-functioning company. Chicago Booth’s Ram Shivakumar says that journey is fraught with big decisions and important changes, and founders need to be prepared for the obstacles they’ll encounter. In this video series, Shivakumar helps entrepreneurs identify the questions they should be asking and the steps they should be taking, from establishing key organizational attributes to identifying fundamental pivot points in the business model.

1. Creating a market

As founders take their companies to scale, many will find they need to pivot their business models along the way. Shivakumar says that entrepreneurs need to ask themselves foundational questions about their products and companies: What are we offering? Who are we targeting? What value do we bring? Determining precisely what the product is, who the right customers are, and which channels are right for reaching those customers is crucial to scaling successfully.

2. Raising capital

As entrepreneurs scale their businesses, they're often going to face periods of illiquidity and unprofitability. As a result, they need to raise capital—but what kind of capital should they target? Shivakumar says that’s just the first question founders need to confront as they consider how to finance their attempts to scale. They also need to decide how much capital they need—do they want to risk “death by indigestion,” or hope to signal market dominance by raising as much capital as possible?

3. Molding the organization

Among the adjustments founders need to make as they attempt to scale their start-ups, many are internal. Shivakumar says that while start-ups tend to have informal cultures and flat structures, scaling up often requires formalizing various layers of authority and more rigorously assessing competencies. The organizational changes that take place during scaling can be difficult for early employees, who often cherish their memories of the start-up phase, so Shivakumar also says that reinforcing company values, telling stories, and celebrating personal milestones and accomplishments is important to maintaining a positive culture.

4. Learning how to learn

Entrepreneurs who hope to scale their start-ups need to also be adept learners, says Shivakumar. That means drawing lessons from experience, but also developing an experimental culture that accepts the possibility of failure. A company that learns quickly and effectively can better distinguish good opportunities from poor ones, and establish a lasting competitive advantage in its market.

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