If you are working on a technology project (or any business project for that matter), know your scale! How much does each customer cost (both time and money) per purchase and how many of those do you need to make a profit. Then figure out if the number of users you need to make a profit is even possible. This seems simple, but Google just made a half billion mistake on a technology that does not scale. So if can happen to them, it can happen to you.
Most web and software businesses should be able to handle thousands of visitors without an enormous investment. Getting above that number does require a significant investment of technology time and money, but is still well within reach using CDNs and services like Amazon’s CloudFront and EC2. Know what your costs are if you want to scale to a larger customer base or what the costs are if your customer base shrinks.
Don’t forget about customer service, maintenance, book keeping, tax preparation, legal hiccups and all of the other miscellaneous items that will consume your time and money. Your idea for a web business might seem like an amazing idea, but make sure you enjoy your business enough that the time and financial investment in your web or mobile app has intrinsic value to you as a person, i.e. if your business flops make sure you will not regret having opened it! Don’t be afraid to charge enough for your service or product to meet your scale level. If you don’t think you can charge the amount you calculated that you need to operate comfortably… well don’t start the business or find a different approach or customer base for your services/products.
Competing on price is tempting because it seems like an easy sell. Competing on experience, quality or uniqueness is hard because it requires self-confidence and dedication to be persistent to learn how to do things better. But low price rarely scales efficiently without massive investments. Walmarts and Targets don’t just happen – they require a lot of money to build that level of scale.
To scale on a dimension other than price, make sure you focus on customers who can afford your services. Find out where they can be found; they will most likely not be in the same places as the poorer quality customers and if they are your approach to them will likely be much different. On that note: beware the hustle. If you have to hustle and bustle to find your customers, you’re likely competing on prices. If you enjoy this, have at it. If not, find out how to be more unique. Avoiding hustle doesn’t mean not working hard, it just means not being frantic. Also beware negotiating your vendors into obscurity. If you’re negotiating the best price on the planet, your vendors probably are not very good or experienced and/or they will resent you. But also beware of paying too much. If you cannot afford the best vendor in town, find a good but cheaper alternative and adjust your expectations of the end product (don’t be afraid of DIY).
Finally, make sure you enjoy your atomic level of scale or figure out what has to change to get to a different level to make you more profitable/happier.
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