Here’s how to fail-proof your start-up
It’s easy for founders to get carried away with the .01% of stories about how a company took off overnight and everything went to plan. In reality, scaling up is a little more considered, especially when building a profitable and sustainable business.
There are over 2,770 active startups and scaleups across different stages of development in Victoria alone, each requiring support and resources – be them human or financial – to get to the next level.
Impossible Foods, Glossier and local startup Airwallex this year joined the ranks of other unicorn legends and household names such as Uber and Didi.
In the wake of successes like these, it’s easy for founders to get carried away with the .01% of stories about how a company took off overnight and everything went to plan. In reality, scaling up is a little more considered, especially when building a profitable and sustainable business. In fact, new research shows that most startups fail – and a key contributor to this is the failure to scale.
Every phase is as crucial as the next. First, there are pre-revenue ideas that are yet to be proven. Then, startups gain traction by selling their product to actual paying customers (who are not friends and family). And from there are the scaleups who are figuring out the optimum scalable go-to-market strategy.
According to Startup Genome, 74% of these scaleups fail due to premature scaling. With that in mind, you need to enter this stage with the aim to achieve efficiency and establish a channel to market.
Having founded local startup IntelligenceBank, a marketing operations platform that combines martech and regtech in 2009 and proudly working with a team of amazing individuals to propel its rapid expansion – 65% YOY growth – there have been a few things I have learnt along the way as we went from startup to scaleup:
How to go from zero to $1million
It seems obvious, but when you have a billion-dollar idea, it’s daunting to go from zero to even $1 million, then $1 million to $10 million. A lot of founders find this funding aspect very overwhelming, but the secret is to think about your business in terms of smaller milestones, and plan your staff, sales, product, funding and general operations one quarter at a time.
If you start your company with minimal funding, that’s ideal, but the amount of funding you’re looking to get should be dependent on the type of business or industry you’re operating in.
For example, biotech businesses need lots of early funding to meet expensive clinical trial stage milestones while for tech start-ups, you can get a proof of concept up and running relatively inexpensively.
Find your product market fit before you scale
You can’t truly progress if you don’t have a product that repeat customers love, are willing to pay for and will provide references for.
A lot of companies fall into the trap by raising $30 million before they have found product-market fit, burning through cash with expensive and ineffectual sales people when the product isn’t fully ready yet. Remember that as a founder, you’re often the best sales person there is in the early stages.
For us, hiring hundreds of sales people was not necessarily the most cost-effective way to sell B2B software product in to marketing departments. So, we are continually building out partner networks to help us sell faster and more cost effectively, as well as measuring our revenue per staff member so we can justify growing our headcount when needed.
Wear your best fit to market
Great products can’t always sell themselves and as a scale up, you will need to shift your focus to sales, customer success and marketing machines. Using my experience at IntelligenceBank as an example, we have been honing in on getting in front of as many prospects as possible. This not only required revamping our entire customer journey but also putting in efficiencies for marketing, prospecting, sales, onboarding and creating customer value.
Deepening our management bench across all business units and hiring great people whose attitudes, values and work ethics match our culture is key to actually getting a product to market.
Keeping this in mind, here are three important tips from a people and skills perspective:
As the CEO, I have had to learn the art of delegation. Specialising and hiring great line managers who can run their own departments. I’ve had to bring in experts and let go so I can work on the future of the business as well as optimising operations.
- Use other people’s experience
I have also brought in people who have ‘been there and run that’ – that is, our next milestone needs people with experience in companies that scaled from $30 million – $100 million, so I’m conscious of bringing in people who have that experience and want to do it again.
- Make people your focus
While many people on our team have enjoyed the journey from seed to startup to scaleup and have professionally grown with the company, a $2 million business with six people is a lot different from a $25 million business with 40 people. It is all about getting the right people for the right stage.
Overall, the main takeaway should be take calculated risks.
One of my first scaleup hires two years ago was our VP of growth who came from another startup and he was part of the journey taking his former company from $4 million to $50 million. At the time, I didn’t have a job for him nor budget, but I hired him anyway as I knew I needed his expertise. He taught us to think big and he has been instrumental in scaling our sales team and teaching us how to win big deals.
With a few of these brave (but considered) decisions, you can track at enviable growth rates, and progress your business from an idea to a household name.
Those .01% stories? While they didn’t come from thin air, they also didn’t come from years of waiting and hesitating.
This post was written by Tessa Court, the CEO and founder of IntelligenceBank, a Melbourne-based marketing operations platform.
It originally appeared on Start Up Daily.