Options to scale up your business (beside organic growth):

• Sell more of the same to new markets - entering new markets or countries - internationalization
• Get more share of wallet of your customers - extend your portfolio to address more business to upsell
• Adapt your offer to address new customer segments e.g. industries, customer size

Let's have a look at the options as people and product businesses are very different. The people business such as consulting or software development requires people on the ground, no matter if they are onsite, remote, local, nearshore or offshore. So revenue scales with two main contributors:

• Order Entry
  
• Delivery Skills

Typically people business has a direct sales model to acquire deals and deliver resources against the order. Even if your customer is a system integrator, you have a sales team to acquire deal by deal.

Some resources are typically local such as sales, project management, product owners, architects or consultants, some may be near- or offshore e.g. back office, software development, marketing, tele sales. 

So you need a presence and delivery force to scale which is close to the customer. That can be achieved by hiring new people in tight labor markets or acquiring a company to leverage an existing team. Investments on hiring a new team may take time, ROI is more than a year if you enter a complete new market where you start from scratch. Adding people to an existing team is easier and has a shorter ROI but is more an organic growth topic rather than a scale up strategy.

Buying a company is giving you order entry and delivery capacity from day one, if you buy the right business. Top skilled teams are quite expensive to buy and they are fully utilized right now hence the owners may not be up for selling their company. As labor markets are tight in the Tech Industry, your integration of such a business and the company culture are key success factors as top skilled employees can move pretty fast but Buy and Build is a good option for a people business.

Both options Hiring and Acquiring can serve the three scale up options mentioned above. You have economies of scale in marketing and G&A but not as many as a product business.

A product business in Tech Markets is different game, let's take a software company as an example. You can scale your business with the same product much more easily by increasing your marketing & sales efforts and adding some resources on the technical side. The main growth driver is

• Order Entry

Some topics need to be evaluated. Is your software ready for internationalization? That does require multi-language support in most cases. Depending on your solution and market segment it can require massive changes to the software as e.g. payroll systems are very different based on legislation in different markets while infrastructure software, marketing automation solution or a CRM system needs very little adoption to address new markets. Selling more of the same needs an evaluation of the addressable market and product readiness.

The internationalization of a product business can be done by direct and indirect sales. It may be less risky, costly and faster to extend your network of business partners to address new markets. Finding good potential business partners by country can be done more quickly and requires less investment. It may reduce your margin on the long run but the partner normally has an existing customer base to address with your product quickly. If you want to build a real international brand and scale up further, you need to be clear on your strategy and communication to your partner network that you may want to add more partner in same market and a direct sales force later on. You may even consider to do digital marketing in all markets to generate leads which can be handed over to the partner network. A good partner strategy is required and needs to adress the long term company direction.

Take away: Think beyond step one how you address a new market long term.

Implementing a team on the ground and establishing your own subsidiary in a new market takes quite some investment. You need to build up all functions which are required and it will take time to create pipeline and turn your business profitable. Crossing 1 M€ in revenues is a good milestone with critical mass and you can estimate how long this will take in number of deals. Buying a potential partner business may be a valid option that can be implemented faster but it requires training and transformation efforts to make them become part of the company.

A product business especially a subscription business will scale fast after the first success as the recurring revenues will add up quickly over time while a people business typically has little recurring revenues.

Buying a software company that addresses the same market like yours is tricky and heavily underestimated. On the revenue side it adds nicely up and your market share will do leap step. But how do you leverage the new company through an integration. These are the pitfalls:

• Having two code bases and two products need a strategy on how to migrate the two to one on long run otherwise you will keep two development teams, double support, training and consulting efforts. Your economies of scale may suffer.
• If you force a commercial migration strategy to your new customers by offering a migration path to one product at a good price point, you trigger a decision at your customer which may increase your churn rate quite significantly as they may evaluate all products at the market.
• If you decide to sunset one product line, you need a challenge for this development team if you want to keep them long term as it its their invention you decide to discontinue that may cause real cultural issues and drive attrition.

Extending your portfolio is either a quite significant investment in new features, services or products to be developed which requires time, money and most likely additional resources. The ROI may be at least a year or more. Or you acquire a software company with a complementry solution that is easy to integrate with your existing solution, extends the scope of your solution and adds value to your exiting or potential customers. A good technical dues diligence is key. The cultural aspect applies here as well - top talents get a lot of job offers - pay attention on the integration of the team.

The adoption of your product for other industries may be something which is less risky and costly but requires beside a good solution, a sound go to market approach. Do not underestimate the sales & marketing efforts in new markets or industries. You may need additional resources with good insights.

Scaling a product business is different

You need far less resources to scale a product business but your key success factors are different compared to a people business. Your investment can scale faster in revenues as you are not depending on as many resources on the ground if you make your product ready for the new markets. You have quite some options to scale with reasonable investments either through a direct or indirect go to market model. Think long term and do not make too many compromises for short term success. A product buy and build approach needs a deeper evaluation, clear goals and is more than adding up revenues as you need a product roadmap for what you acquire that should create value for your customers.

Hiring, Partnering will bring typically faster ROIs than Acquiring.