“Business Ignition Series”, Volume 4 How to successfully make your business grow
Everybody is looking to grow their business, after all, it’s their pride and joy, their baby and they want to see it grow into a strapping young man with biceps the size of Birmingham. But this is a long game and you shouldn’t be seduced by the short term wins. Don’t get me wrong, quick wins are more tempting than watching supermodels wrestling in chocolate and someone handing you a spoon.
But this is a marathon. Most people are focused on pushing the rock to the top of the mountain, I just love pushing the rock. We want to set you up in the right way so you can grow in a way that is sustainable and eventually, very scalable. It’s the only way to do things. I’ll keep banging this drum until I get it taken off me and I’m told to sit at the back.
Growing in the right way
Early stage companies, particularly those seeking investment (or looking for their next round of investment) often value growth over every other metric. After all, if you’re not growing at least 5-10% a week, you are never going to garner the interest of a top investor.
Even if you’re not looking to grow to those heights, you do need an appreciation of the fact that there is two kinds of growth, good and bad. Good is obviously happy days. You are growing sustainably, perhaps even exponentially and you are basing your marketing off strong metrics and making yourselves accountable to metrics, testing and refining.
But on the other hand, there is bad growth. This is growth that is not sustainable and if unchallenged and compounded over a long enough period of time, will destroy your business. The early growth which was sheer heaven , but now feels like having an angiogram.
Good growth is the holy grail and what you should be striving for. Some examples of good growth metrics are:
- Customer Acquisition Cost (CAC) versus Customer Lifetime Value (CLTV)
- Referral rates
- Low churn rates
- High Net Promoter Score
On the other hand, the more commonly seen animal is bad growth. This is often because companies try to grow at all costs, or short-term gain is given in exchange for the long term. Common denominators of this approach are that they are not accountable to strong, scalable metrics, there is not rigorous enough testing involved in validating the strength of the marketing channel and they don’t understand their customers well enough and the value their business delivers to them.
Common mistakes here are:
- Products have a poor gross margin and are having to cut increasingly into their margins to achieve growth.
- Users acquired are not an accurate representation of their actual customers. For example, if you are incentivising someone with a giveaway or prize, they may well have been coerced into signing up with you and it shouldn’t be taken as an objective marker that you have validated your customer segment.
- High churn rates, low Net Promoter Score and poor engagement with your product.
Now, when this happens, it can make you consider faking your own death to get out of it or building a den and setting up a new life off the coast of Aberdeen eating interesting flora and fungae. But even this situation is easily solvable as long as you have an appreciation of what bad growth looks like and quickly flip into ‘good growth’ metrics before the ills of bad growth compound over time.
So many people in entrepreneurship, particularly in the early days are seduced by vanity metrics. Take the people that smugly tell you that their company is valued at £5m, but all they have is a PowerPoint presentation, no product, no revenue and none of their assumptions are validated with objected market research. This makes me more annoyed than having to spend £10 for a pastry and a coffee that looks like hot water and rabbit droppings and still having to say thank you for the privilege.
Whilst these people are often absolutely insufferable yet soon to be suffering from boot related teeth loss, even this difficult situation can be transmuted into gold with self-awareness and a rapid focus shift to objective metrics.
Make good growth and rigorous testing your ‘north star’
So now we’ve identified what good and bad growth is. Now we need to put it into action, test it and then give it the rocket fuel that will exponentially grow your company by adding an appropriate growth marketing strategy.
As I’ve said before, you don’t decide an outcome, the market decides. You create hypotheses, which the market then proves or disproves, then you iterate accordingly. With this kind of approach, you can never fail as even failure itself is a learning exercise that allows you to build a better business.
Think of your marketing through the following lens:
So, as you can see, your hypotheses come first. Then you need lashings of focus. Remember, entrepreneurs don’t starve, they drown. It is not too few ideas, but too many. You need to be ruthlessly focused and be able to execute.
Having discipline early on and being driven by data is the only way you can be sure that you have good unit economics. Anything else are vanity metrics and massaging your ego. The long-term payoff of approaching things in these manner will be more than worth it, I promise you. Not only this, but being data driven and being accountable to metrics makes you far more investible to investors and far more impressive in meetings with potential channel / strategic partners.
The gold standard should be that you ask the right questions and formulate good hypotheses that you then go and test with your market. I highly recommend that you have at least one question and hypothesis that has the ability to completely destroy your previously conceived business and business model. Hearing this may means.
Things couldn’t look more grim if a nuclear warhead landing in your front room and then realising there is an eviction notice tied to it. But , even a negative result is still a positive one because you can build and learn from it. The alternative is that you tiptoe around it and build a business and product that you think there is a market for, when in fact there isn’t.
For brownie points, you should even be in the habit of asking questions about things your business may face in the future (eg, a further lengthening of the pandemic, no effective vaccine or what you would do if a far superior company comes and tries to steal your company’s lunch money.
Every time you created a new product feature or service, you need to have reliable metrics you can test against so you can reliably say whether it made a difference or not. I am a scientist first and foremost and you should approach all of these arenas with a ruthless scientific focus and see every single marketing attempt or launch of a new feature as a scientific experiment, which you yourself have no say in the result. The data decides.
A good framework for this is
- Create a hypothesis
- Find a suitable method to test it
- Identify the results and metrics that will allow you to confidently prove or
disprove your hypothesis
- Were my assumptions proved correct or not.
- What are you doing to do about this conclusion? Is it back to the drawing board or it this a finding that now carries weight and therefore you can build out (while continuing to test, of course.
This process never ends. But I promise you, the compound interest of this approach into your business will overflow as capital into your business.
Remember that our brain is a wonderful yet evil genius. It can handle millions of bits of data per second, about the same as a 10 million computers using Windows Vista. Confirmation bias, ego gratification and vanity metrics will come in to distort your perception if you let it.
I know the ills of having an overthinking and overanalysing mind. When I was 24, I had achieved everything I thought would make me happy. Yet I was still utterly miserable. I realised it wasn’t my ability to think that was the problem. It was my ability to not think and that powerful mind I had used to achieve success in my life was unpicking my very soul. Sleep would bring welcome relief. But then on waking the self-criticism would start, back refreshed after its slumber. Well I’m glad someone was. I would take more of a beating than the dough of a recently dumped baker. The only difference was that unlike those doughy treats, I was never going to rise. At least that’s what I thought at the time.
But over the period of years I was able to unpick those thought and habit loops that had been running for years and stared nakedly at my inadequacies and took ownership of my responsibility to change the perceptions, belief systems, views of the world, views of myself that had blighted my life. It has without question been the best investment I ever made, and I now have a peace and contentment that I thought would always be locked to me.
That degree of self- reflection, whilst painful is absolutely essential if you want to achieve the heights of success as an entrepreneur you’re looking for. Most of us stay constantly busy because we don’t want to sit alone without our thoughts or face the things that truly scare us. Want that pain, want that hardship, because in that, the blend of self- awareness and ripping out that years of emotional baggage will allow you to bring your passion to the world. You’re only as good as what you give to others and to do things that other people see as magic, you have to be pursuing self improvement with a relentlessness. It baffles me that everyone is getting every upgrade. Every new iPhone, you get it, every new clothing line you get it, but you’ve never upgraded yourself. You’re using a cognitive operating system from 1985. Be accountable to metrics, welcome failure and pain like an old friend and keep your focus relentlessly on improving your customers’ experience and continue to solve their problems in an increasingly elegant way.
“Committed to your success.”
Dr Jack Darby