Good Practices in Two Stages of a Startup’s Life
This article talks about what I think is important and what is bad at the two main stages of a startup’s life.
Which stages are we talking about?
We in the studio distinguish between two – Discovery and Growth. Of course, other terms may be used, but the essence is clear.
- The SEARCH stage of the client+product combination. This is an exploratory stage with a lot of trial and error. A startup successfully passes the first stage if it finds a customer who will pay for the new product.
- The GROWTH stage is revenue scaling. Here the main task is to grow, take over the market, increase the revenue and build the team so that the money does not run out and you do not face stiff penalties, so you need to know how to report employer sponsored health in your W2 form.
Mix practices (about them below) from the two stages – sputtering and pushing results over the horizon. The startup isn’t pursuing a goal, but expending effort on something it can’t do yet.
Working with resources in the two stages is also different.
The SEARCH stage is fast-paced and low-cost. It usually only takes one very energetic entrepreneur-producer from the team with a tremendous speed of researching potential customers. Preferably experienced. Of the resources, it will take three, sometimes five months of work and $30K.
The GROWTH phase depends on the goals. Some people want to break even and make a profit, while others aim to increase revenues by increasing investment.
Costs increase 10-15 times (mostly payroll). In the identified market, the startup needs to increase its share, which means that marketing experts, sales managers, and the account team are needed – the staff can grow by an order of magnitude.
It’s where you have to get results quickly, or admit failure and move on to the next product.
Giving little money.
A big-budget blurs the focus. Less money allocated means a higher probability that only the most necessary and important things will get done.
Give little time.
This limitation often forces you to move “off-target” as early as tomorrow, to do the essentials right now. Approaching a deadline encourages redoing all tasks yesterday, rather than planning for tomorrow.
Give a few people.
The larger the team, the slower the movement. Alone, a person can act without coordination and phone calls. without unnecessary thought. Faster to find the customer and the product.
Searching is the stage of the unknown. It’s often unclear how to break into a topic on the fly. For this reason, a good practice here is to bluntly buy information from those who are into chips. Do not skimp on this.
At the same time, this is the stage of the big building. The startup is going into real work with clients, who not only need to sell well but also qualitative accounts.
Sell only to the “A”-segment.
In the growth stage, there’s a temptation to sell to everyone. After experiencing a bunch of failures in the search phase, the head of the project or small team gets excited about every client. At first, it is only happy!
It starts to get tiring when it suddenly turns out that “A” isn’t so qualified for nothing – it’s the segment of customers who buy fast, pay more, complain the least, and make repeat checks. However, the team has already recruited a pool of customers who don’t appreciate what they’re paying for, take up a lot of time, and make service difficult by expressing dissatisfaction. B and C customers are worsening growth and slowing the company down as their share increases.
Sales performance depends on marketing. B2b salespeople have 70% of the job of getting to the LPR and explaining how your product will bring joy. Proper marketing greatly accelerates the attraction of LPRs who are already aware of your product.
Formulating success metrics for marketing and sales can be helped by a competent analyst studying the unit economics of the project.
Build the team & delegate.
At the Search stage, the seller is working alone and is used to doing everything himself. At first, it is difficult for him to distribute his expertise to the new team members and burden them with responsibilities and goals.
Often young entrepreneurs who used to work in micro-teams are afraid to set goals, but this is a topic for a separate series of articles.
To summarize, the hardest part is keeping yourself on track without falling into bad practice at one stage. For example, starting to put resources into development, trying to polish the product to a perfection that isn’t there. Knowing how to focus and keep your head in the cold is a challenge, but there is no one-size-fits-all advice here.