Businesses are a lot like children. Really, it’s true.
Like children, businesses start off small and, as they grow, develop teething problems.
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The metamorphosis from small to medium sized company – and the associated problems – is arguably the best analogy for those early years of development. Essentially, it takes a lot of time to get young businesses to a place where they are mature and capable of functioning well.
As with children, businesses in their infancy and their owners need to build a steady foundation from which to grow.
This can only be achieved with a bedrock of solid education, learned in the early stages of a business. Startups in particular need to absorb all they can in order to survive and grow into flourishing enterprises.
However, in many cases, startup founders focus too much on the future and not the prudent actions they need to take in the present in order to succeed one step at a time.
Running before you can crawl will land you flat on your face
Premature scaling is the number one reason for business failure. Instead of building a strong and stable base of happy customers, premature scaling is when businesses focus on expansion too quickly and the results can be crippling.
According to Bloomberg, a massive eight of 10 businesses fail within their first 18 months of existence. Similarly, a project in 2011 that looked into the genome of startup businesses found that 70 percent of startups exhibited some form of premature scaling.
With such high percentages in both studies, it stands to reason that premature scaling is playing some part in the death of swathes of businesses in their infancy.
That same study also estimated that 74 percent of high growth internet startups crash and burn because of premature scaling. The evidence for why businesses need solid foundational development is staring us in the face.
As the saying goes, “let children be children” – don’t force your startup to be something it’s not.
Chasing venture capital funding, for example, will only help startups to scale prematurely – which is evidently detrimental. Furthermore, the chance of actually getting VC funding is incredibly small, and not necessarily worth chasing.
Instead, startups should concentrate their efforts on how best to acquire paying customers, and hence prove that there is a market for their product.
Founders and CEOs cannot know for sure that they have a marketable product until they have successfully sold it. Raising money for product development, expensive advertisements, and other premature projects can prove to be incredibly wasteful if, at the end of the day, your project does not help you acquire new customers.
Toddlers learn through experimentation and so should you
If the focus of a young startup is acquiring new customers, then the most important lessons concern sales. Businesses need to learn who to sell to, how to sell and, above all, just how crucial sales are to their success.
Many startups now spend too much time focusing on financing, rather than trying to sell their products, even worse, waste vast amounts of money marketing or advertising a product for which there is no confirmed market need.
Far too many entrepreneurs lack any sort of understanding of the skills needed to successfully bring a product to market. In the same way that toddlers and preschool children should learn through play – testing and experimenting – new businesses should do the same.
All too often these businesses are running before they can walk, or even crawl, and focus too heavily on product development or marketing rather than getting their first customers. Businesses need to apply emergent learning – learning through doing – to build and develop their sales capabilities to acquire customers before moving on to highly scalable practices.
Routine and structure develops self-discipline in young children, and businesses too
To build sales capabilities, businesses need to focus on developing routine and structure through sales processes.
In particular, the following are all key building blocks for setting a strong foundation:
- Hiring the right people
- Documenting sales processes
- Strictly upholding those processes
Early stage businesses should be as rigorous in their due diligence when bringing on new hires as parents are when investigating preschool programs for their child. Determining cultural fit by getting to the crux of what motivates candidates is a key element to building a united team with your first five to 10 employees.
A sales “playbook” is another key ingredient in a strong foundation.
By documenting everything they do, businesses can take advantage of emergent learning as mentioned above, using trial and error testing to establish the best sales methods and approaches. As with learning and developmental observations in a child care program, documentation is required to reflect on learnings and make necessary adjustments that will increase success rates.
People and processes form the core of a company culture – another building block to a strong foundation.
Individual and team awards for sales successes can go a long way towards encouraging team members to channel their best efforts into making your sales processes work.
It’s also important, however, to understand implications beyond sales. For example, if a sales rep is overselling, this could cause problems for the customer success team as it will be difficult for them to meet customer expectations.
Early stage startups should look to businesses like Shutterstock – which is now worth $2 billion – that succeeded by focusing on their business without chasing VC funding.
By setting in place a strong foundation, early stage businesses will be positioning themselves for success when they’re ready to scale… and not before.