The Cost and Time of Scaling

How much does scaling cost and how long is it going to take? The answer is, it depends. Depending on your company and your industry, the timeline for scaling could be vastly different. The key is to understand which timeline matches your company’s profile, and to adhere your goals and metrics to meet this.

Transcript

So how much is this going to cost and how much time does it take? The answer is it depends. I’m going to give you examples of companies that are wildly different in terms of what it cost up front, and what it takes to scale over time. Pharmasset was founded in 1998. They have a drug called Sovaldi. It cures hepatitis C, and until this was approved in 2014, the only alternative were drugs that had huge toxicity associated with them, made you really sick, or you had a liver transplant. Not appealing choices. So we knew that if they could solve this problem, there would be a whole lot of demand. It took them 15 years and $500 million to go from the very first idea all the way to FDA approval. A significant investment in scaling, and obviously a very, very binary risk. It became the fastest selling drug in US history. Five percent of the US population was treated in the first 30 weeks and they had tens of billions of dollars in revenue their first full year post shipping, a real phenomenal success story from a commercialization point of view. So that’s a good example of expensive scaling, high risk, a very binary risk, but really efficient scaling process. They didn’t even have to worry about product market fit. Another example was eBay. It was founded in 1995 by Pierre Omidyar as a hobby, as legend has it, and it’s a pretty amazing example though of the kind of growth. There’s that demand out there that once there was a common place to trade was really being met. So they went from no sales in 1995 to 250,000 auctions in 1996, to two million auctions in 1997. Clearly meteoric. They took only a million dollars to get to that first scaling process for the first two years, and they were able to propel that for another ten years until they began really then moving into being a mature company. So really optimal example of quickly getting feedback about that scaling phase, and then growing so quickly and with not a lot of capital that they could commercialize and scale almost infinitely for a decade. And as you’ve heard, since there’s no one right path, do your homework, and choose the path that’s best for you.

Suggested Readings

Founders School || Scaling Your Company || The Cost and Time of Scaling || Impact Guide (PDF).

Achieving Economies of Scale: Understanding Why Bigger Can Be Better.” Mind Tools. Blog post.

Chuck Cohn. “Before You Decide to Scale Your Business, Answer These Four Questions.” Entrepreneur.com. Article. October 4, 2014.

Questions for You

What is the timeline for scaling that is similar to my economic model and within my industry?

What company is a good example of this scaling timeline?

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