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Executing a Startup Growth Strategy That Works

Only 50 percent of startups survive more than five years, Unfortunately, many startups fail to achieve product-market fit. Without a smart growth strategy in place, startups have no clear roadmap towards long-term success.


When an entrepreneur takes an idea and turns it into a profitable business, it’s a cause for celebration. But it’s not enough to keep doing the same thing -- continued success is going to depend on different and evolving strategies. In order to scale up and grow in a big way, business owners have to prioritize a growth to-do list.

Position your startup for sustained success and build a growth strategy that actually works by following these simple steps:


Know Your Value Proposition

The first step towards building a smart growth strategy is understanding your startup’s value proposition. The value proposition should explain how your startup is uniquely qualified to meet or exceed customers’ expectations.

“Many entrepreneurs lost out, due to never truly articulating a compelling value proposition,” says Michael Skok, VC and Forbes contributor. “Establishing a substantive value proposition is critical if you want to start the journey from your ‘idea’ to building a successful company.”

Startups that fail to solidify a unique value proposition have trouble engaging with potential investors, generating a positive cash flow, and becoming market leaders. The best startup value propositions demand a careful analysis of audience behaviors, preferences, and more. Aim to limit the value proposition to a headline, sub-headline, and three bullet points.

Identify Your Target Audience

The second step towards building a realistic growth strategy is identifying your target audience. Without a clear understanding of your audience, you are more likely to iterate on the wrong product enhancements, build the wrong marketing messages, and more. These miscalculations can cost your startup thousands of dollars.

Fortunately, there are a number of ways to identify your target market:

· Gather Survey Data: Start by issuing surveys via email blasts or newsletters. In many instances, startups will partner with established market research firms.

· Analyze Market Data: Look to your competitors for information and insights related to target markets. Who do your competitors market? Why do they choose to buy there? Which products are the most popular?

· Review Personal Networks: Ask your personal network -- friends, family, colleagues, funders, mentors -- to examine your product or service. Use their feedback to craft some assumptions about your target users.

You can organize your findings by creating buyer personas. A buyer persona is a fictional representation of your ideal customers, their unique qualities, and more.


Establish Key Performance Indicators

It is difficult to measure startup success without first defining a few key performance indicators. The savviest startup founders will focus on the key performance indicators that most affect the growth of their startups and dedicate resources to those areas.

“Founders cannot hope to grow a company in any meaningful way without an almost obsessive focus on its KPIs,” says Phil Nadel, co-founder and managing director at Barbara Corcoran Venture Partners. “This focus must not be limited to the KPIs themselves, for they are merely measurements of outcomes. We look for founders to have an understanding of what levers can be pulled and what tweaks can be made to improve the business, which will then be reflected in its KPIs.”

The most popular growth metrics include:

· Customer Acquisition Cost (CAC): The price you pay to acquire a new customer. Calculate CAC by dividing the total costs associated with acquisition by the total number of new users over a period.

· Customer Lifetime Value (LV): The total net profit attributed to a customer during his or her relationship with the company. Calculate LV by dividing average order divided by one minus the repeat purchase rate. Subtract that number by CAC.

· Burn Rate: The rate at which a company spends capital. Calculate burn rate by defining an observed data period. How much money did you start with at the beginning of the quarter? How much money did you "burn" during the quarter? Divide by the number of months in the observed data period.

· Gross Profit Margin: Measures revenues after paying the cost of goods sold. Calculate gross profit margin by dividing revenue minus the cost of goods sold.

· Conversion Rate: Measures the desired action that consumers take. Calculate the conversion rate by dividing the number of conversions by the number of total visits.

Remember, identify the KPIs that have the biggest impact on your definition of success.


Monitor Your Competition

Keeping an eye on the competition is useful for a few reasons. First, your competitors may have already solved the challenges that you are currently facing. In essence, by monitoring your competition, you might find a shortcut towards success.

"One of the reasons why people do not analyze the competition is, in my opinion, the fear of discovering that their product is not as good as their competitors' product," says Gilles Bertrand, global commercial lead at Shire. "But you cannot hide from reality — it's better to face it and improve quickly or pivot your plan if required. Another reason is that they simply do not know how to analyze the competitive landscape."

Fail to monitor the competition and you might become another Wesabe. Wesabe, a personal finance startup, did not monitor the competition and failed. Even though the startup was first to market, Mint offered a more seamless user experience and innovated its way to the top.


Make Smart Hires

Finding the right people to work for your startup is not easy, but it is extremely important. According to the U.S. Department of Labor, the price of a bad hire is at least 30 percent of the employee's first year earnings. For early-stage startups, a five-figure investment in the wrong employee can cause a significant loss of traction, momentum, and profits.

If you are located in Silicon Valley, you will find plenty of qualified candidates at nearby universities like Stanford, Berkeley, and California Institute of Technology. The Bay Area also boasts several coworking spaces that attract top tech talent. The most successful tech companies in the world got where they are today by hiring for culture.

It is no accident that Airbnb boasts one of the most admired and studied company cultures in the world. Co-founder and CEO Brian Chesky prioritized culture from day one by infusing the company's core values of home, adventure, and entrepreneurship into every aspect of the employee experience.

"The culture is what creates the foundation for all future innovation,” CEO Brian Chesky said in a 2013 company memo. “If you break the culture, you break the machine that creates your products.”


Scale Responsibly

Finally, avoid premature scaling by monitoring spending habits, avoiding debt, and limiting overheads. As previously mentioned, spending too much money before establishing product-market fit is the number one reason for premature failure. One of the easiest ways to maintain a low burn rate is renting coworking space.

Startups who choose coworking space over traditional office space typically save tens of thousands of dollars per year. They can also quickly scale up or down without having to pay astronomical fees or break expensive lease agreements.

Startup teams working in tech-centric coworking spaces also enjoy warm introductions to VC, targeted educational programming, and access to resources designed to help them scale faster.


Ready to Build Your Growth Plan?

Every startup needs a solid growth plan, and every plan must include:

· A unique value proposition

· A clearly defined target market

· An outline of the right KPIs

· Smart hiring systems

· Competitor analyses

· Careful financial planning

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