Getting started on a business or in the early stages, this is a list of the 10 Steps companies go through on their path to success. So while this may see simple, but these are important focus points for every company if you want to succeed. It's like eating your vegetables before desert. Every great company goes through these steps in the same rough order, here is my own Rated R version.
"There are a million ways to die and only a few ways to succeed."
1. Test Business Hypothesis: You have an idea....so what. I have a hundred ideas before going to the bathroom in the morning. What are you going to do to test it out? This could be talking to friends and family, but really the best test is complete strangers and the potential target market for your product/service. I recommend at least talking to 20 potential customers (non friends or family) and get feedback before investing $1 on anything else.
2. Prove the value to Customer: Value is in the eye of the beholder. Some people like your idea, great. Some people don't, why? Value can also be difficult to communicate, so you need to think about what make your product/service better than the status quo. It could be geographic availability, features, delivery model, look, feel, etc. Just make sure you understand why someone would buy from you versus the more established competitor. (PS...you don't need 20 things....1 or 2 are plenty).
3. Prove it can be sold multiple times: So you convinced your grandmother or your best friend to buy from you...now what? Unless you have hundreds of grandmothers or friends that love you, eventually you will need real customers. This is the first critical inflection point on getting a business off the ground. Many start-up die at this stage because they don't have the drive to build and follow Sales 101. That is to say, do whatever you need to do to get customers. If that means cold calling, standing on a street corner with a sign, email spamming, whatever. Is it tough? Yes. Will you waste time on things that don't work? Yes. Is it part of the learning curve? Absolutely. Every founder, I don't care if you have a Ph.D or 10th grade education....needs to be the Chief Sales Officer at the start. Starting or going bankrupt because you were to proud or lazy to get customers happens more than you think. The guys who are prepared to hustle and grind get through this phase.
4. Find Repeatable Sales Process: Profit is in repeatability. So random acts of selling seems to have got a few customers so you are alive with some revenue. Good work. Now you are starting to figure out what works better, maybe not best, but certainly better. At this stage it's starting to look like a business and you will want to start thinking about how you develop a focused offering and a demand generation and sales process. This will allow you to make the act of nurturing and closing sales easier. This could mean better messaging, better website, automated reach-out campaigns, etc.
5. Prove others can sell: After the founder(s), for your business to take the next step you will eventually need to onboard sales people or sales partners. If you have a sales process that's working, hiring should be easy as you can arm that person/partner with your playbook, templates & knowledge. If not....don't hire before you have a sales process. Many founders are eager to give up the sales job before they have a process but hiring a sales person without the process means you will have to pay someone to build a process for you, that's ok if you are hiring your VP Sales, but for the average rep, they will sit on your payroll, not sell, giving you every excuse in the book why the website, messaging, process, weather, etc are not 1000% perfect before they can make contact with a customer.
6. Make it Scalable: Now the fun starts....you have a few people selling, supporting and operating the day-to-day company and you are starting to have the growing pains of a small successful company. Congratulations. Processes, systems, delivery, office start to be breaking as you grow. The "cheap & cheerful" tools you put in place are starting to break and creating problems. At this stage, don't panic. Remember, eventually all your processes will no longer work and you will need to figure out how to prioritize and re-invest in the company. This could mean moving from excel to a SaaS tool, changing your accounting or billing system, getting a larger office, etc. Don't worry about finding the perfect solution either. Depending on the growth curve, the solution may only be good for 6 months or a year. Somethings you will patch, other will get replaced. Ask yourself how much time you have before you need to make the change again. You need to take the growth mindset that things need to evolve constantly, so will the systems, people and processes.
7. Ensure Customer Success and Avoid Churn: You spend most of the time growing customers, but keeping them is more critical. Are you keeping customers happy or are are there cracks or flaws that need to be fixed? Did you put in the measures of customer satisfaction (CSAT) and Net Promoter Score (NPS)? Interviewing customers is one part, but often you find out more from talking to former customers by doing an exit interview or by talking to customers who did not buy at all. All these data points can be used in refining your business. Whatever you do, don't fall into the trap of 'knowing what people want'. Get out and make sure you hear it from them.
8. Make it Profitable: You may have been break-even or profitable already, but at certain point, it's time to get serious about the numbers like gross and net profit. In the last decade, the SaaS world used the Rule of 40 (Grow % + EBITDA % <= 40%) to model if a company was healthy given many companies with extremely high growth were bleeding money. This was just a rule of thumb, as a recession, like COVID-19, is about to upset that model. In any economy, cash is king, so the more money you have, the less business cycles will hurt you. "Run by the Numbers" was a theme I used and encourage all companies to make sure in the rush to grow, you are still making money. COVID-19 shut down the world, but the discipline to run by the numbers will help you survive and optimize for the future.
9. Accelerate Growth: Keeping the growth curve pointing up year over year can be difficult. Companies at this stage look at a variety of strategies to keep going. These involve doubling down on sales & marketing people, raising money to go really really big for M&A activity, or adding new markets or products to your bag of tricks. Whatever the path, only the largest of companies can afford to do them all so pick wisely. If you've got a repeatable process and are profitable the choices become easier. The companies who are not growing or are losing money find fewer options.
10. Scale & Hire Expertise: If you've grown, you most likely hired people. People are important for every company, but you need different skills at the 3 stages. Most often the people who are great working in a team of 5 are not cut out to manage 100. That's not their fault, but it is a reality. Understand you and your friends might be great at going from $0-$10M, but $10M-$100M and $100M to $1B in sales are very different. There are lots of examples of people who got lightning in a bottle and rode a wave of success, but they had help at every stage. You need to think about what's best for the business and that might mean hiring new people, or even taking a step aside. If you are smart, you hire smarter people and you show the example. A players hire A+s, Bs hire Cs.
Bonus Step: Repeat. The Shampoo Algorithm. Lather, Rinse, Repeat. Running a large business can get repetitive, but the best and biggest find the flywheel that works for them, and keep doing it. There is nothing wrong with having one company that dominates a category or industry. In fact I would take this over have 10 companies that struggle to compete. Business takes time, dedication, persistence and a focus on repeatability. Google has dominated internet search and the billions of dollars a year in adword spending is proof that you can so 1 thing that can fuel many other ideas.
About Rated R Group (www.RatedRGroup.com)
Rated R Group was founded with the goal to help early stage and growing SaaS companies with all the things needed to become a sustainable business. Start-ups and early stage revenue companies need many things however cannot always afford to pay for top advisors, consultants or executives to grow their company. This is where Rated R Group can help