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In the world of startups, anyone can have the next potentially great idea. But not everyone has what it takes to realize it and bring it to the masses. We’re all familiar with the most infamous startup statistics related to how few startups survive their first five years. In 2021, no one is going to tell you that creating and building a startup is an easy feat.
The hardest thing about achieving success in the startup world is being able to put your business on a path that increases its chances of not just surviving, but growing rapidly. What this means is that you need to have a very good growth strategy in place.
Thankfully, there have been enough startup success stories over the years and we’ve seen enough unicorns to know and understand what the elements of a good startup strategy are and how they can be implemented successfully.
So let’s take a deeper look at what entrepreneurs need to do in order to put together a startup growth strategy that is going to enable their startup to experience sustained success and growth.
Confirm There’s a Market for Your Idea
This might seem like a very obvious first step for any business, but you’d be surprised to see how many would-be business owners tried to build a successful business without first making sure that there were enough people out there willing to pay for their products or services to justify the companies existence.
Obviously, you should do the legwork to find out whether or not your product or service will sell before you start taking any bigger steps. This means that you are going to have to do research to find out if a market exists for your idea. Survey the related business landscape to see if there are already businesses doing something similar, find out how successful they are, and determine whether there are ways that you could improve upon or reinvent the products or services they are offering in order to justify entering the race.
This initial research phase is all about deciding whether or not your business idea stands a chance of succeeding. And that doesn’t mean that it has to be a revolutionary idea that the world has never seen before. It simply means that there must be enough people willing to pay you money for your product or service in order to make it profitable.
For example, if your town has tons of pizza places that are all doing very well, opening a pizza place of your own might still be a really good idea. Why? Because the market has proven that there is no shortage of people in your area who really like pizza, so why not take your slice of the action?
Make Your Value Propositions Clear
It’s incredibly important to understand what your business offers to customers. More importantly, you need to be able to clearly explain to your potential clients why they need you and why they should be giving you their money.
A value proposition is a service, or feature of your product or service, that makes your company attractive to potential customers. What problems are you solving for your customers? What pain points of theirs can you remedy and help them overcome? What do you offer that your competitors do not?
When you can answer these questions clearly and effectively, then you are ready to begin the process of pitching your products or services to the public.
If you begin building out your business without a solidified and tested value proposition, you might have a hard time attracting clients. Think about it; how can they be sure they need you if you’re not entirely sure why people need your company?
Having a strong, carefully formulated and clear value proposition is also massively important if your small business or startup is interested in attracting venture capital funding. Because, once again, why would someone invest in your company if they are unsure of what your business has to offer? For all these reasons, putting in the time to perform a careful, detailed analysis or your business characteristics, customer needs that can be met, and early customer reactions, assumptions, and preferences related to your business, is paramount.
Nail Down Your Target Audience
Once you’re certain of your business’s value proposition and what should make you appealing to potential customers, it’s now time to confirm the exact demographic that you should be targeting as you begin to promote and market your business to the public.
Knowing exactly who you are pitching to makes the pitching process much smoother and decreases the chances of making errors in the process. When you are certain who your target audience should be, you will inevitably make smarter decisions when it comes to growing and enhancing your product or service. You will also be able to create clearer and more focused marketing messaging when you’ve pinpointed the audience.
One of the most effective ways to go about doing this is by surveying your customers. For example, say you are running a software development startup. You can do a soft launch of your product. Allow a small group of people (that you believe to be a part of the demographic that you should be aiming to attract) try out what you’re offering and ask them questions along the way to get real feedback from them.
You can also do this through newsletters and email blasts, asking questions and getting back relevant results from people who have taken an interest in your business enough to give you their contact information. There’s a good chance that the results will be able to guide you in the right direction because the people who do take the time to answer your questions are, more often than not, members of your target audience.
Another good way of researching your audience is by analyzing the market, identifying your competitors, and getting to know them very well.
Know Your Competitors
Performing a very thorough analysis of your competition and the most successful companies operating in the space that you want to join can offer a huge amount of powerful insight. As we just mentioned, you’ll be able to see who their customers are, which will help you come up with a strategy for putting together your target audience. Do you want to attract the same customers? If so, what can you offer them to make them leave your competitor?
Oftentimes, competitor analysis can reveal to you that you actually shouldn’t be targeting the same exact demographic and guide you on the path to truly defining your niche.
Another great thing about competitor analysis is that it keeps you grounded. It shows you how far you need to go and how much work you are going to have to put in if you want to beat your competition. It can also reveal your own shortcomings in a way that you would never have figured out had you not checked in on how the competition is addressing these issues.
Don’t be afraid of discovering your business’s shortcomings. Knowing your competition and understanding why they have been successful can both humble you and provide you with the inspiration and drive needed to kick your business into the next gear and succeed.
Make Sure You’re Ready to Convert
You should now have a good understanding of who your target audience is and what makes them click. You should also be pretty confident in what your business offers and have a fairly good idea of how you are going to market your business to your target audience.
The next step is to make sure that your website or store is ready to convert visitors into customers. Since we’ve been talking about startups, for the most part, let’s stay in that mindset and imagine that the business in question is an eCommerce website. What do you need to do to make sure that your business is ready and able to convert visitors into customers?
- Make sure that your website is well-designed and responsive so that the people who come to your site (from any device) will be able to find what they want.
- Make sure that your messaging works for your target audience and clearly lets people know what it is you are selling.
- Make it easy for people who are interested in buying your service or product to actually obtain it with as much ease and in as few steps as possible.
Your business needs to be sure that it has the ability to successfully turn prospects into customers in order to make sure you are implementing the next step of your startup growth strategy properly – deciding what key performance indicators (KPIs) to measure.
Define Your Key Performance Indicators
How will you be able to know that your growth strategy is working if you don’t know what data you’re supposed to be looking at? That’s where key performance indicators (KPIs) come into your business’s growth strategy.
KPIs provide you with measurables that let you know in what direction your business is trending. When you know which areas of business are key to the growth and success of your business, then you will be able to dedicate the proper resources to these areas. Being able to measure KPIs also enables you to tweak strategies and business processes. It also makes it easier for you to clearly see whether or not the things you are doing are making an impact, positive or negative.
These are some of the most common KPIs that most modern businesses use to measure the success of their growth strategies and the way in which they are being implemented:
- Customer Acquisition Cost: How much money you need to spend in order to acquire a new customer.
- Customer Lifetime Value: How much money you’re going to make for the duration of your relationship with a customer.
- Conversion Rate: The number of people who have visited your website or had contact with your business that you were able to convert into customers.
- Gross Profit Margin: How much money you earned when taking into consideration the money that was spent in order to create and sell the product or service.
- Burn Rate: How quickly or slowly your company is spending capital.
Keeping track of these KPIs should be able to give you a very good idea of how your business is performing and whether or not your startup growth strategy is working.
To Scale or Not to Scale?
For most startups, growth strategies serve as a means of getting to the point at which you are going to have to worry about scaling your business. When you are scaling your business, this means that you are enabling your business to grow without having many setbacks. It’s all about looking towards the future, analyzing your current capacities and future needs, and developing a plan that is going to enable you to grow your company comfortably and naturally.
Scaling is probably the most important part of your startup growth strategy. It’s a process that should not be rushed into; one in which you must evaluate your business and your future plans from absolutely every angle. In the fast-paced and highly competitive world of startups, businesses will often rush their scaling efforts and approach the process recklessly. Others will be too slow to scale and will end up watching the competition leave them in the dust.
One thing about scaling and scalability is the question of whether or not your business needs to scale at all. Is there an unbelievable amount of untapped potential in your product or service or is your business operating in a very specific or small niche? If it’s the latter, there’s absolutely nothing wrong with deciding against scaling and choosing to remain a lean, small, but profitable business.
Not every startup needs investors to be successful and there’s absolutely nothing wrong with staying small if that’s the best thing for your business. But if your startup does need to scale in order to succeed, here are some things to think about before launching into the process:
Protect Your Business
It’s no secret that running a startup is risky, which is why it’s incredibly important to purchase startup insurance. If you’ve been running your business for some time, then you probably already have basic policies such as general liability, workers compensation, and commercial property insurance. However, startups that are scaling face new, more serious threats, which means that there is a new set of policies that need to be purchased. Here’s a short video walkthrough of the policies all growing startups should have:
Like it or not, just about every young company is one disastrous claim away from financial disaster. Because of this, every startup should (at least) purchase the following policies:
- Directors & Officers Insurance: D&O policies protect company leadership and board members from claims related to breach of fiduciary duty, non-compliance, lack of corporate governance, and more. If your startup is looking for funding, a D&O policy is a must, since venture capital representatives won’t want to join your board if they are not properly protected. Get your D&O insurance quote with Embroker by signing up to our risk-free platform in just a few minutes.
- Cyber Liability Insurance: Almost every startup is heavily reliant on technology and the Internet and is, therefore, susceptible to a variety of cybersecurity threats. A cyber liability policy will protect you in the event of a cyber attack or data breach, covering cases of data loss and recovery, computer fraud, and cyber extortion. A good cyber insurance policy will pay the costs of notifying users affected by the cyber attack, civil damages resulting from class-action lawsuits, business interruption loss of revenue, computer forensics costs, and more.
- Employment Practices Liability Insurance: Another trend we are seeing in startups is an increase in claims and allegations of wrongful acts brought by employees against the company. A good employment practices liability insurance policy will cover claims related to sexual harassment, negligent evaluation, wrongful termination, wrongful demotion, failure to promote, defamation, and just about any type of discrimination.
- Technology Errors & Omissions Insurance: If your startup fails to meet its contractual obligations to a customer or partner in any way, your company could face litigation. A good tech E&O insurance policy will protect your startup from unintentional errors and product failures that can cost your clients money, such as giving bad advice, failing to deliver a product or service on time, not delivering the product or service as it was advertised and agreed upon, or any other failure to perform professional services.
Automate Whatever You Can
Another key to scaling is doing the most with less and making an effort to streamline all of your processes in order to save time and money. It’s very hard to scale when there are aspects of your startup that are incredibly labor-intensive. Thankfully, the world of business technology is constantly growing and expanding, meaning that there’s basically an app for everything.
Make sure to use technology to your advantage whenever you can in order to automate tedious business processes such as payroll, staff scheduling, billing, employee onboarding, and more. When scaling, it’s incredibly important to make sure that your core business efforts are working at scale, which means that you should be trying to automate or even outsource just about every ancillary role and process while you’re growing.
If you end up become a hugely successful company, there’s no rule against bringing those roles back in-house once you’ve scaled and have achieved the growth in revenue that’s needed to do so.
Even though the point of scaling is to grow your business exponentially, restraint is also a very big part of a successful startup growth strategy. As mentioned in the previous section, your business needs to grow, but that doesn’t mean that you need to go crazy trying to build your team.
Sometimes less is more and that certainly holds true when it comes to hiring. Most of the time, having a tight-knit team of two or three developers who know the project and each other very well will end working out much better than hiring 10 new developers. Having more people on the team doesn’t always mean that things will get done faster, sometimes the exact opposite occurs.
While you do need to spend money in order to earn it in today’s startup culture, you should still be smart with your money. Yes, spending money on a nice office and investing in a good employee benefits program will help you to attract better talent, but maybe you don’t need the in-office bartender and monthly team buildings at fancy restaurants. Keep the business spending focused on growth and try to resist spending money on things that don’t appear to have a clear and certain return on investment.
Remember, no growth strategy is 100% percent infallible. There are always going to be bumps in the road. No startup growth strategy is set in stone and all are subject to change if you are not seeing the results you want to see. Above all, on the very difficult road to success as a modern startup, it’s important to be flexible and willing to admit mistakes, quickly learn from them, and move on to new strategies and ideas without dwelling on past missteps.
Take a look at our comprehensive overview of what you can expect (and look out for) when fundraising from Series A to Series C venture capital.