Starting a business is one thing, seeing it through the first phase of development is something else. Luckily, there are some universal rules for creating enduring growth.
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What makes a successful business? Many believe it’s all in the growing power, the ability to dominate your market quickly and get as many customers as possible. But what happens after that initial growth spurt?
Long-term, sustainable growth can prove to be a real challenge for entrepreneurs. It’s all too easy to get caught up in the heady temptation to grow big, fast, only to slip up further down the line when you can no longer meet your growth targets.
We’ve seen it happen to even the most brilliant business leaders, where great ideas explode and then fizzle out to join the bonfire heap of lost businesses. Groupon, for example, went from Wall Street darling to black sheep very quickly, and it was all down to an inability to maintain steady revenue figures. So how do we ensure we don’t fall into the same trap?
Focus on revenue
In the early days of a business, it’s always advisable to focus on creating a strong revenue machine, led by a solid management team who are all invested in the success of the business. Companies that focus on growth scaling over revenue can come unstuck when they look to develop their business further.
"Hire based on passion and core values rather than solely on experience"
The Freemium model is a good example of an approach that focusses on initial growth over revenue. This could seriously jeopardize your ability to develop your product and you could be faced with a situation, like Mailchimp, where legal costs and abuse management become quickly out of control.
Since Mailchimp went Freemium, their user base grew 240% but their abuse-related issues grew 354%, requiring an increase of 200% in staff trained to deal with it. This is a common issue with the Freemium model - you create so much noise that it becomes deafening.
Map your cashflow
The old adage goes: Turnover is vanity, profit is sanity but cash is reality - and indeed managing your cashflow is what makes that reality happen.
Analyse the impact your growth could have on your cash needs and use this to judge whether you will run out of money. Don’t make any decisions without consulting your cashflow first - your turnover means nothing if you don’t have the cash at the end of it to keep the whole operation ticking over.
Understand your customer acquisition costs
What does it cost to acquire a customer? Can you really afford to be offering discounts, even if they are attracting more customers? And are the customers you’re acquiring the “right” kind of customer? These are all important questions you should be asking yourself throughout your growth plan.
How much can you reasonably spend to make him pick your brand?
To give an example, we used to invest a lot of money in print advertising until we realised our cost per acquisition was becoming ludicrous. Like many companies these days, we then stopped all print advertising and move that budget online into Pay Per Click (PPC).
Sustainable growth will be aided by a fantastic workplace ethos and a culture lead from the front. I work on the floor, close to the sales team and in and amongst the account managers and accountants, and this is the best way I know to really understand how the business is developing, be approachable to my staff and play a key role in day-to-day operations. In both my businesses - Crunch and Pure 360 - I've found this approach key to my growth strategy.
We also encourage our stuff to be free-thinking in order to work smarter and share their knowledge. This results in internal entrepreneurialism and we’ve seen many instances where staff members have taken the initiative, identified areas for improvement and have created a role for themselves in these areas.
You will need to invest in your staff, but equally should expect an investment from them. With any startup, it’s all hands on deck and you’ll need a great team by your side. At Crunch our focus has always been on creating a strong revenue machine, lead by a solid management team who are all invested in the success of the business. For a startup, this level of staff commitment and old fashioned hard work is essential for growth.
To ensure you have the right staff to really make your business a success, hire based on passion and core values rather than solely on experience. At the same time, invest in talent for your business - it’s better to have fewer employees but make them feel valued than to have lots of unhappy staff, and customers.
Plan for the future
Set definitive growth goals and ensure all members of the team are on the same page and know what they have to do to reach their target. It’s important to reward staff for meeting these targets and your reward system should be transparent and obtainable.
If you include your talent when planning for future growth, you will ensure a further investment from them in the success of the company. This is vital for sustainable growth and could be what differentiates you from the competition.
Growth is fantastic, as long as you’re growing in the right direction. Make sure you’re aware of the risks that growing big, fast can create in your business and mitigate them. Taking a slow, steady pace may seem counter-productive, but you could well find it’s the best way to create a successful, sustainable business with staying power.