Matt's Investments Blog

Scaling an online business

Chris Winstanley - 06.07.2011

It is important to remember that the journey from idea to start up to venture backing is just the first part of the adventure.  The key issue is then scaling the business and really growing shareholder value.  In his guest blog, Chris Winstanley the VP Marketing at Basekit talks about that challenge.

After all the business plans, forecasts, and pitching - a business that shows great promise can receive significant investment. And at that point it needs to scale - usually across a range of metrics including headcount, spend and, crucially, sales.

But scaling an online business, to generate more sales or subscriptions, isn't always just about spending more money doing the same as you've done before. Often you'll need to look at alternative channels, broadening the appeal of your product and how you can expand internationally.

BaseKit received $6.5m of additional funding in March 2011, and since then has been scaling the business across both channels and geographies.

To start with, it's usually possible to stretch the channels that you already operate in, so we spent more money on Pay Per Click marketing and Search Engine Optimisation (SEO).

Additional channels can be added to the mix too, perhaps ones that have an overall impact on your brand but don't always have an immediate return on investment that's acceptable. Here I'm thinking about display advertising and PR; both valuable in driving up awareness and contributing to an increased click through rate on your search activity - but equally, these are channels that might be a luxury pre-funding.

There can also be opportunities to attend trade shows or sponsor events that have an audience closely related to your target market. This enables you to meet the people who you are selling to, sense check your messaging and develop a relationship that you can't achieve with purely digital channels. One of BaseKit's core audiences is web designers, and we have found that attending and sponsoring events in their space is both rewarding and commercially viable.

With the channels expanded in your home market, you need to consider internationalisation. For language and market-maturity reasons, in the UK we tend to look to the US as the obvious next market to enter. This isn't necessarily the best route, as unless you have a truly pioneering product you're likely to be entering a market with well funded and established competitors. That makes buying traffic and developing your SEO challenging - as the costs and competition will likely be high. The sheer size of the US also means that you'll generally need to commit a significant budget to attempting a market entry, which can mean risking a significant amount of your investment.

It may be better to look at developing markets; they're likely to have a lower cost of entry and allow plenty of scope to grow with you as the market matures. BaseKit is a software service that enables anybody to create a website, and we identified Latin America as an attractive region to expand into; people there are entrepreneurial, there are lots of small businesses and the competition is low when compared to the UK and US. Additionally, some markets we operate in only have 40 per cent internet penetration, so we can gain market position now and benefit as the market expands through wider adoption of the internet.

However you scale your business, the key is to plan carefully and don't always be tempted to follow the crowd. There's probably more interesting opportunities in the places you, and your competitors, haven't looked yet.