Prioritising Growth in Startups
Growth is a priority for most businesses. They want to expand their markets. Solve more problems. Build out product portfolios. Serve more people.
But growth is especially important for early stage companies. Startups specifically, because startups that don’t grow aren’t likely to succeed.
“If you assume your startup is inevitable - it’s going to work, whatever it is - then it’s a race until someone else does it.
“It's not a race to do it first, but a race to do it right. A race to solve a puzzle. So growth becomes the most important thing.”
But what does it actually mean to prioritise growth?
We wanted to find out more, so we sat down with Matt Lerner to get his expert growth insights.
Making growth your priority
Just to preface, there will be other stages in the process of a startup that need some attention. For example, if you don’t have a product yet, then you’re going to need to prioritise that.
And if you don’t have any funding, well a funding round might need to be your priority.
But all startups will get to a stage when growth is crucial.
The ones who are likely to succeed are the ones:
- Testing ideas
- Speaking to customers
- Looking at data
- Paying attention to the details
Because what's going to make your startup successful is still unknown. How quickly you can learn and make adaptations is what will dictate your path.
And while you do, there’s a potential 100 other startups trying to make the same idea work.
“Assume the growth of your startup is the hardest challenge you're going to face.
“Are your smartest people working on growth? And will those people get first priority for resources?”
Prioritising growth is a mindset. It’s knowing and understanding the importance of putting it first, making sure all the necessary minds are focused on the task at hand.
This mindset has to come from the top down, during the hiring process and beyond.
“I think a lot of people think ‘Oh I know how to grow this, I’ll hire other people who know what they’re doing, like a head of marketing and so on, and they’ll know what to do’.
“But no, if it were that easy, someone else would have done it. If it’s a business worth building.
“Growth is the hardest challenge. You need to figure it out. And that means figuring out a million little details.”
What does prioritising growth look like?
So let’s say you’re in a startup, you’ve got a product you think could be really successful, and you’re in the phase where you want to start making waves.
What do you do?
Matt says you should make growth everyone’s job.
“You won’t just need marketing and sales. At some points, you’re going to need to make product changes, so you’ll need product involvement and so on.
“It’s everyone's goal to try to increase the number of monthly active users. That’s your north star.
“That means you need to be able to show them how they’re contributing towards this goal too.”
And ultimately, this is a cultural thing. Something that starts with the CEO or founder.
For example, if you need to pull some resources from engineering or finance, a Head of Marketing isn’t going to have the pull in order to make that happen - because those functions don’t report to them.
“The CEO or founder really needs to believe growth is a priority. They have the authority to direct the resources where they need to go in order to facilitate growth plans. And they themselves really need to be free’d up to focus on growth.”
They also need to be the strategic driving force behind decision making for growth. For example, Matt explains that 90% of startup success comes from 10% of the ideas they try.
CEOs and founders need to be ruthless when reviewing the opportunities to find the list of activities that could make a big difference. Meaning the kinds of activities that can double the business, versus the ones that could grow it by 1%.
“That also means saying ‘we’re not going to waste time on all this other stuff, we’re not going to do PR. Because no unicorn was ever built off the back of PR’.
“It’s really about having the discipline to not do all of these activities resulting in 7/10’s so you have the time and resources to focus on the 9’s and 10’s.”
Testing and experimentation
If you’re on the cutting edge of something new that hasn’t been done in this way before - there’s no blueprint.
You’re going to have to try some stuff out to find out what works. And then there’s going to be a process of continuous testing to see how that can be improved.
But there’s an art to this science. You need to get the balance right between carrying momentum when you’re experimenting, but not changing too many variables at once so you’re able to discern what works and what doesn’t.
Matt recommends you follow a process every time you run an experiment, no matter how small:
- Write down your hypothesis
- Make a prediction for what you think the outcome will be
- Document your experiment and the outcomes
If it works, then great. But if it doesn’t, then review your notes. Why do you think it didn’t work? What variables could be changed to test again?
“Most experiments are going to fail, but the key is knowing why so you’re always learning. It’s about solving the puzzle. You’re always trying to get one step closer.
“Most people initially don’t think experimentally, but once they get into it, it’s fun and engaging. People want to know the results. It can be really motivating and addictive.
“People can debate why things worked or not, and can decide on what experiments they can run themselves. When it takes root in a company with the right culture, it can really be a force for positive change.”
The enemy in the race for growth
One of the common problems that startups run into is the dichotomy between doing this perfectly, and doing things fast.
Growth is about learning as quickly as possible to discern next steps with the highest likelihood of success. But it’s a hard thing to get your head around.
Because most people have learned to try to do things perfectly. You’re normally rewarded for doing things ‘right’. And that can be an adjustment for people who aren’t used to working in startups.
Rather than having a basic landing page where you can test H1s, often things are slowed down because the team wants to have a, b and c set up before the test goes live.
But your customers might not care about those things.
“You can spend a lot of time optimising for things that don’t actually make a difference.
“Time in a startup is so valuable. You might only have 12, 6 or maybe only 3 months of runway before the company runs out of money. So if you’re taking 2 weeks when it could only take 1 then you’re doing half the number of experiments.
“In reality, what’s going to determine your success is the number of experiments you run.”
The sooner you can start making mistakes and learning, the faster you can create something better.
That’s not to say every experiment should be sloppy and messy, but you need to be clear from the beginning what the important things to get right are (for example, data security!), and what can wait.
In other words, what would the minimal viable test be in order to find out if your hypothesis is right or wrong.
Leadership in startups
It’s probably safe to assume that people who are willing to start their own business are probably willing to take risks. That's quite a risky decision in itself.
So in theory, the people running startups are going to be a little more tolerant of risk taking than the other people in their company - after all, you’re going to drive a little more carefully in someone else's car, versus one you own.
“If it's not your company, then you’re not going to want to do anything risky. But that's where it's important for leadership to make space for people to make mistakes.”
How can business leaders make space for mistakes?
“Communicate the mistakes you’ve made as the CEO or founder. Talk about your failed experiments as well as the wins. And don’t react negatively to someone who’s telling you about their mistakes.
“For me, I’d much rather someone made a mistake than they were getting nothing done because they were scared of doing it wrong.
“The biggest mistake is not trying anything. Not being bold. Moving too slowly.
“As a leader you’ve got to reinforce that everyday because it goes against all our instincts as employees.”
Now of course, with that comes the caveat that there are some areas of a business where mistakes are not encouraged. Matt gives an example from when he worked at PayPal:
“Things like fraud management or network security.
“There are places where you can be bold and risky, and other places where you can’t.
“It’s up to the CEO or founder to make sure those lines are clearly drawn. Have explicit conversations about the expectations for the level of care.
“Is this mission critical, or is this mission ‘hold my beer’.”
It’s also up to the CEO or founder to make sure that the entrepreneurial minds are taking on the more risky, entrepreneurial projects.
“The CEO is more likely to have contact with everyone in the startup, generally because it's smaller.”
“But they should also want to, because then they can see who tends to be more scrappy, who’s more risk averse, who’s better with quick decision making and who’s more of a perfectionist.
“And then you can more easily direct the resources you need into the projects you prioritise.
“But even still, with those more entrepreneurial minds - you still need to be reinforcing that done is better than perfect. Be bold. Take risks. Experiment quickly.
“And more importantly, learn.”
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