A common pain of startups after an exhilarating first surge of early adopters is a long and frustrating plateau of slow growth, where it seems like nothing will get your business to profitability. Too many entrepreneurs do not know what to do at this point, largely accounting for that disappointing 50 percent of startups that fail in the first 5 years, according to Gallup.
Some make big mistakes, such as Webvan expanding too fast with a huge infrastructure, and Pets.com trying to grow the business with a negative margin, under the mistaken assumption that winning customers is more important than making a profit. Others do far too little, assuming the viral effect and word-of-mouth will soon kick in, and sales will suddenly grow exponentially.
In any case, it is no fun to be stuck in this stage, struggling to make payroll and dealing with impatient creditors and unhappy investors. First you need to take consolation from the fact that you are not alone, and more importantly you need to implement an active growth and marketing plan to include the following initiatives:
1. Ramp-up visibility and strategic alliances. It is easy to get so pre-occupied with handling the business rollout that you forget to maintain and increase your social media interactions, search engine optimization efforts and highlight positive customer reviews on your website. Continually add new marketing and distribution partners.
2. Real growth always requires real marketing. Word-of-mouth and social media may get you started, but there is no substitute these days for special promotions, webinars, presence at trade shows and actively calling on decision makers. There is no magic lever for growth, so several initiatives are required, with metrics to assess value returned.
3. Ask every employee to focus on sales. This starts with multiple messages from the top that growth is now the highest job priority, and key to survival. Openly reward employees who make the extra effort, champion cost-cutting issues and enhance the sales process. Ask everyone to be an advocate of the business to his or her friends and connections.
4. Personally optimize every cash flow transaction. Resist the urge to delegate accounting decisions, under the assumption that incoming revenue takes the pressure off. Now is the time to take advantage of volume discounts and deferred payment plans. Many entrepreneurs forget that the growth phase may be your tightest squeeze on cash.
5. Increase the pipeline and the conversion rate. Now is the time to formalize lead-generation efforts, and initiate efforts to maximize the conversion rate to sales closure. Real growth requires new and innovative ways to find customers, as well as old-fashioned advertising and email blasts. Shorten the close cycle to grow faster.
6. Introduce automation consistent with growth rates. Manual processes and people are always the most expensive to scale, so every process needs metrics to determine when automation is appropriate. Some startups hire more people to delay automation, or spend money wildly on new tools for the future. Both are strategies for business failure.
7. Introduce new products and enhancements every month. One of your best sources of growth is existing customers who are always looking for more opportunities to buy, and new offerings. Capitalize on competitor weaknesses that you can fill with minimal new investment. Actively listen to customer feedback, and avoid being a one-trick pony.
8. Aggressively enter new markets and sales channels. If your local market does not provide you the growth you expected, it may be time to expedite your expansion to new major cities or export opportunities. If your website does not supply the growth you need, expand to Amazon and other channels. Growth requires market innovation as well as product.
An entrepreneur who has struggled to fund and build a dream solution may think they can relax when the first wave of customers come in. Unfortunately, the challenges of scaling a business, and making it profitable, often last longer than the product development phase. The good news is these challenges are not rocket science, so anyone can do it. Do not give up your dream too early.
Image credit: CC by Chris_Potter