I’m advising a handful of young companies that have quickly gained traction in the market. On a side note, most are female-founded businesses—something I’m particularly proud of.
These companies’ success in transforming from early-stage startups to real, scalable companies can be attributed to the steps they’ve taken in not only hiring good people, but also in quantifying their current and projected paths.
Let’s examine how these companies have navigated important, foundational steps.
Know Your Weaknesses & Build Your Team Accordingly
I’ve seen many founders falter early on because they are mavericks who see the world through a very skewed lens. Lack of self-awareness tends to create a certain myopia that can be damaging to culture.
It also makes it difficult for founders to keep their hires on board.
In the case of a software company I’ve been helping, the founder is a brilliant engineer and a pioneer in his sector. He made a career of building products and technologies for other founders, and went on to launch his own company. Early on, he excelled in his diligence sessions and proof-of-concept meetings with potential customers and investors. This founder knew his technology cold.
Yet, when he first went out to raise capital, the long, dry product demos put investors to sleep. He couldn’t clearly, concisely outline his business and monetization model to non-technical people. He’d get stuck on the minutiae of his software solution rather than discuss a clear market need.
He himself had a clear need for sales and business development people who could pitch the business and its value proposition in a compelling way. The challenge was that he was determined to remain in the driver’s seat. The founder wanted to grow the business on his own, be the CEO, and accept as little dilution as possible.
In short, he couldn’t accept his weaknesses—at least not right away. Eventually, what really helped him become more cognizant of his personnel needs was the following: I told him he could either own and control 100% of something small, or less than 100% of something potentially much bigger. When he accepted this and let experienced business development people run the pitches, the company raised capital within two weeks.
Similarly, when another eCommerce founder let her experienced salesperson start chasing down hotels and workplaces in her stead, her sales cycle dramatically shortened and the company was regularly able to chase down bigger and better opportunities. Last Friday, she closed six new accounts—a huge shot in the arm for the business.
Keep a Keen Eye on Friction as You Build Sales
One of the main reasons startups fail to become scalable companies is lack of sales or difficulty hitting their revenue goals. In many cases, customer growth tests a team far more than product development.
You can control the product development cycle as a founder. This is simply a matter of allocating and managing time and resources. But getting paying customers—or proving an existing customer acquisition model is equipped to scale—can be quite daunting.
I’m helping an eCommerce founder who really struggled with this in the early days of her business. The company sells uniquely branded food products and now enjoys enormous demand and a backlog of eager investors. Yet, moving from initial development and design, proof-of-concept, or trial with a new partner to full-fledged sales was a tough hurdle to clear.
When the founder wanted to start generating real, recurring revenues, customers pushed back.
Customers in general—particularly early adopters of new products—tend to extend the sales cycle, ask for discounts, and seek good deals. You name it, they’ll try to pull it.
Baking these growing pains into her forecast helped the founder formulate more realistic milestones, and she eventually gained investor support and approached her next capital raise. She broke into these accounts by bending to get new customers on board. But it was only when she became more realistic about her forecasts that her investors gave her the leeway to keep chasing down leads. Until then, she clung to her rosy, high-level projections that looked much better on paper than in practice.
Be Smart About the Reality of Market Traction
A repeat founder stated that young company revenue sales forecasts are usually only about 50% accurate. His last venture was an early-stage SaaS company that was building a product to compete with HubSpot and Hootsuite.
The company’s head of sales and customer acquisition gave him a forecast of very aggressive pricing and growth projections over the first 18 months. The founder soon came to realize the company’s reality: As a “competitive product” to established leaders, he had to offer something completely differentiated.
The startup needed to give key customers the opportunity to test out beta versions of the product at a discounted price. At that point, the market—not an overly aggressive forecast—dictated what customers would pay.
I’ve seen this with many eCommerce companies: They may have a huge subscriber base, publish frequently, and engage their customers with great content and samples, but if they are promising more than a 5% conversion rate—well, then it’s best to take their words with a grain of salt.
To be credible—especially when speaking with your board, partners, or potential investors—it’s important to be skeptical and build your early forecasts on 90% close rates. To these audiences, anything that seems too good to be true probably is—and you can’t build a business on that.
In general, data speaks volumes. Quantifying engagement and traction is much more compelling than providing massive TAMs (total addressable markets) or qualitatively describing the tremendous opportunity your company is tackling. Anything you can do to flesh out your company’s metrics will go a long way in proving there is real demand and growth potential.