As a start-up, you know your first few years will either make or break your business.
And achieving the enviable hockey stick growth that every startup chases is no accident. It takes persistence, planning, and all the right moves.
A lot of startups fail for the same reasons. They run out of money, they hire the wrong team or they’re simply trying to sell something that nobody wants.
The good news is that most mistakes startups make are entirely avoidable.
Let’s dive into what drives hockey stick growth, and how you can nurture your startup into a success.
Why we’re talking about hockey stick growth
Hockey stick growth is a term used to describe a revenue growth pattern that many successful startups have achieved.
It typically outlines where the startup begins, their first couple of years hustling, and then a turning point. The turning point is where the company starts to grow, and when there’s no turning back.
Entrepreneur and author Bobby Martin claims in the first two years of business, most startups record similar revenue streams, no matter if they went on to become huge companies or maintained a moderate revenue stream.
Martin says there are four crucial points for any startup. These are:
- Tinkering: where startups look at their business idea more seriously. This phase ends when you take a leap of faith and fully commit to developing the idea into a business.
- The blade years: The first 3-4 years of hustling, where you’re committing full-time to the startup. You aren’t noticing an increase in revenue (if you’re even making any revenue at all).
- The growth inflection point: This is where something in your startup “clicks”. Your business model is honed, your revenue jumps and you’re able to scale your company.
- Surging growth: The final stage where your company’s revenue continues to climb and your business starts to scale.
The most important part of your startup is your blade years. This is the time where your startup will either sink or swim. And while not everyone is aiming for the next Amazon, there are a few critical components you can focus on in your blade years to keep your startup on the track to success.
Let’s look at how you can make the most of your blade years and avoid your company joining a long list of failures.
1. Have a plan… from the start.
Once the euphoria of an initial business idea has worn off, a lot of startups fail to have a solid plan in place to bring it to fruition.
That’s why it's important to create systems and processes for how things are going to get done. Right from the start.
Whether this means employing a project manager or keeping everything in line yourself, making sure everyone knows what’s expected and what timelines are to be met is crucial to staying on track.
This will mean you have more time to focus on building the company to where it needs to be, instead of going over the same things again… and again.
2. Don’t change your focus.
A lot of startups panic and change the focus of their business too early. By desperately trying to find a way to boost revenue too early, you can actually hurt the potential growth of your startup.
Part of making a plan should also include outlining a strong, clear picture of what you want the company to be. And if it doesn’t work immediately, you shouldn’t stray from your original vision.
Altering the vision of where you want the company to go isn’t only confusing for yourself, but it’s confusing for your employees and investors too.
But don’t confuse changing your vision with a pivot in your strategy.
Listening to customer feedback and taking part in product experiments could mean you pivot in your strategy, but your overall vision remains the same.
Case in point: Netflix.
The $70b streaming giant started off as a mail order DVD service. It was only when streaming really took off that the company decided to pivot, without losing its overall vision, into downloadable films.
But Netflix’s slam-dunk was when it decided to side-step strict film licensing laws and just create their own content.
Where do you think Netflix would be now if refused to pivot and stuck with mail order DVDs?
A pivot will let you make short-term wins to lead you closer to your end-goal. Don’t confuse the two.
3. Have an income plan.
If you’ve only planned to bootstrap for six months before you start bringing in the big bucks, you should rethink your income plan.
Before you even begin to work on your project, you should have a clear plan on how you’re going to pay for your startup work and maintain an income.
If you don’t, there’s a big chance you’ll join the 29% of failed startups who went bust because they ran out of cash.
A lot of founders plan to use their savings to bootstrap their startups. This is fine, as long as you have enough money to cover regular income along with personal and unexpected costs. Keeping your regular job and hustling your startup on the side is a way to take the pressure off, as you’ll maintain an income stream.
Don’t even think about covering the cost of your start-up with a credit card. If your product takes longer to get off the ground than anticipated, you’ll be hammered by monthly payments and it’ll suck the much-needed cash flow from your business.
In any case, you should plan to bootstrap for longer than you originally planned. That way your costs will be covered, even if you start getting revenue earlier than expected.
If you think you’ll be earning revenue in two years, plan to have enough income to go beyond that. Be safe, not sorry.
4. Spend money where you need to.
A lot of startups have problems spending money in the wrong places.
While some startups don’t flinch at taking a potential client out for lunch, they hesitate for weeks over buying a $20 monthly software subscription that’ll save them hours of time.
Here’s where you need to stop being cheap and spend money in the right places.
Will pumping a bit of your budget into an earlier launch mean you’ll get a step ahead of your competition? Then spend the cash.
Will putting money into a software that will save you hours every week be worth the money? The short answer is, absolutely. Just think about how that time could be spent doing crucial networking and marketing for your business instead.
Don’t be cheap and spend money where you need to.
In fact, there are now lots of tools available to startups that are worth investing in.
Take Product Hunt as an example. It’s become the go-to platform for startups looking to launch or test a new product or software before they invest too heavily in it.
Product Hunt has a community of people who test products and give their honest opinion. If you’re given the green light from users, you can even launch your idea on Product Hunt’s sister site, Ship.
And because building relationships in your blade years is crucial to success, it’s also wise to invest in a CRM, even in the earliest stages of your business.
Using a CRM is one of the easiest ways to focus on your relationships with your customers. It gives you the tools to make sure they’re being looked after from end-to-end, which is one of the most crucial parts of ensuring customer satisfaction.
Following up with prospects becomes easier. Your team will have a birds-eye view of everything that’s happening with a prospect from your CRM dashboard, and the tool will ultimately improve your chances of growing your business.
And according to the 2018 State of Startup Spend Report by Brex, startups are loving Copper.
The report says Copper is now preferred over industry veterans like Paychex and Salesforce. It can be used as a one-stop shop for you to house all your marketing, sales and service efforts.
5. Have a team that’s invested.
Having the right team in place can make a massive impact on the success of your startup.
And the success of your team starts at the hiring phase.
Make sure you’re hiring people that are motivated and willing to work together. Work to create a team that will rally when stuff gets hard.
And here’s the crux. If you want top-quality people, you’re going to need to pay for them. This goes back to our earlier point of not being cheap. If someone is worth investing in, then do it. But be prepared to act fast if someone isn’t a right fit for your team, too.
And if you aren’t good at hiring, then pass the job onto someone who is.
Keep your team tight, keep expectations clear and check-in with your team regularly to make sure they’re on track.
Keep in mind that, although you’re a startup, you shouldn’t be looking for all of your team members to be wearing multiple hats. It’s okay to expect your team to multitask, but they all have a unique skill set, so don’t ask them to do everything.
6. Don't waste time doing useless work.
We aren’t talking about procrastinating, either.
Have you spent two days building a feature for your product that wasn’t in your plan? Or a day messing about with proposal templates that won’t be needed for another six months?
Stop. What. You. Are. Doing.
Wasting time on projects that aren’t in the immediate need for your startup is almost as bad as procrastinating. Look at what you’re doing with your week and honestly ask yourself, is this the best use of my time? Is this the absolute most important thing I can be doing for my company right now?
If it’s not, then stop doing it.
The momentum of a startup can be game-changing. Either you race ahead of your competition, or you spend all your time drowning in your own disorganization.
Invest your time wisely, and don’t waste it. After all, time is money.
7. Do whatever you can to keep your customers happy.
Ask any successful startup founder what they did in their blade years and we bet their answer is keeping their customers happy.
Investing in your customers’ success can not only be great for their success in your blade years, but it can also be the inflection point where you figure out how to inject growth into your company.
Don’t spend every last minute of your day hunting for new customers. Instead, invest your time in the customers you already have. Ask them questions, ask for their advice. Ask them what they think you need to do to take your product to the next level.
Case in point: AirBnB.
Just like any startup company, AirBnB hustled for years when they first launched their business. But instead of trying to get as many property owners on board as possible, the company instead spent a lot of time listening to what their current customers wanted.
In 2010, the company noticed that their brand wasn’t taking off in New York. So, they jumped on a plane and knocked on a few of their customers' doors. It turns out, a lot of the issues came with how their listings were being presented; mostly their poor quality photographs.
The company decided to invest in a high-quality camera and take professional pictures of their customer’s listings.
This is what happened when AirBnB started taking quality photographs, and later, hiring photographers:
This approach led to two to three times as many bookings on New York listings and signaled the company’s inflection point into rapid growth.
Listen to your customers. Chances are, they want your company to succeed, too.
Make the right moves early and don’t stress about success.
A lot of startups get caught up in the notion that they need to be making revenue right out of the blocks.
This just isn’t the case. A lot of the most successful startups in history took years to get off the ground, and had their fair share of failures along the way.
But the secret to surviving these failures is having a plan in place and a steady income stream to keep you going.
Spend money on tools that’ll help you succeed as well… you’ll be surprised at how other startups’ products can help to boost your own.