In the competitive world of startups, we tend to pay a lot of attention to flashy success stories.
We like to romanticise about being the next Facebook, Uber or Dollar Shave Club. And while it’s great to set your sights high, banking on the type of growth simply isn’t a good idea.
Not only is it difficult to come up with a business that will be able to so dramatically disrupt the market—the sheer destructive power of such ideas makes them rare — but most of the business that are able to quickly scale are funded by teams of wealthy investors who want to see a fast return.
Yet the majority of startup owners don’t have this, and this can often be a rather discouraging fact.
However, while investment is a necessary cause for growth, a large investment is not. You can still scale your business using the modest revenue the business is generating, and this is often a much better approach than trying to scale quickly.
Here’s a little bit more about why this is the case.
Why Is Big Budget Growth Important?
The whole point of this article is to highlight why you don’t need a huge budget to grow, but if this is true, then why are startup owners all over the world running around trying to get millions of pounds, dollars, euros, etc. to fund their ventures? Surely they can’t all be crazy, can they?
They’re not, but they also don’t represent the typical approach. In general, there are two reasons why you would want to invest a lot in growth:
- You’re unaware of other ways of growing, i.e. you’ve maxed out all of your current markets and therefore need additional investment to branch out and keep the business moving forward. This shouldn’t happen with startups, as this is an indication that there is not as much of a need for your product or service as you may have once thought.
- You’ve got an idea that you know works and you want to grow quickly. Big budget growth can work if you’re spending your money in the right way. But if you’re not, then it’s a good way to lose a fortune.
Because you’re sitting here reading, your interest in big budget growth is likely because you’re trying to grow your business as fast as you can. But is this the right way to go?
The Value in Waiting
Big-budget growth is not only unnecessary, but for most businesses it’s often not even the best approach.
Increased volume means additional expenses. You’ll need to invest in things to help you deal with this expanded volume, and without that team of wealthy investors, you likely won’t have the funds to keep up, which can ruin your business.
For example, if you’re running an apparel company, and all of a sudden you see a 60 percent increase in sales, this means you are going to need to take on at least a 60 percent increase in inventory.
Initially, this might seem just fine, but where will you put all of this new inventory? If your current facility can’t manage, then you may need to invest in a warehouse, which could upset your cost structure just enough to harm profits.
However, if you implement a more gradual growth strategy, one that made sure costs remained stable, then you might be able to put money aside for said warehouse, which would help ease the cost and make this decision a part of a sound strategy instead of a necessary stop-gap.
Focus on What Works
If you’re not crystal clear about how you can recruit new customers, then big budget growth is both unnecessary and doomed for failure.
This is because you’re going to end up spending a bunch of money on trial and error, and while this is a great way to learn, you do not need to blow your whole investment fund doing it.
In the beginning, your focus should be on recruiting a loyal base of customers. These should be the individuals who would use your product or service almost no matter how much it costs because it provides real value to their lives.
Essentially, these are the people for whom you started your business, and once you connect with them, then it’s time to start expanding outwards.
Beyond identifying and recruiting those who stand to benefit most from what you offer, the beginning stages of growth are also your time to figure out which marketing strategies produce the best returns, as this will help guide your investment moving forward.
The best way to do this is to look to the data. Set a goal or objective for each tactic you’re employing, and then look to see how well it’s doing at helping you achieve that goal.
For example, if you’re running social media advertisements to recruit followers, drive engagement, and expand your newsletter audience, then you need to measure how well you’re doing this. How many people who see your ads take one of the actions you want them to? In other words, how many like, share, follow, sign-up, etc?
However, you need to go one step further to figure out what value this adds to the business. You need to ask how much money can you hope to get from having additional followers or subscribers. It’s nice to build up an audience, but if you don’t do anything with that audience, then what’s the point?
But the important thing to remember here is that you do not need to spend a fortune to do this, especially if you carefully track data to help you learn what produces the right action.
If you do this, then you can slowly shift your funds to the activities that are successfully growing the business so that they can continue to function. This may take longer than if you had a huge budget, but as we mentioned before, because of the ballooning costs associated with growth, this might not be such a bad thing.
A Competitive B2B Market
Another reason growth doesn’t need to cost a fortune is because you have lots of people out there willing to help.
In today’s robust economy, new companies are popping up all over the place, and they are eager to help other businesses succeed in what they do.
This, plus their own desire to grow, usually means they are willing to offer their services for a reduced price. Many are even willing to give you a lifetime subscription for practically nothing because they want to recruit users and get their name out there.
However, to make the most of this, be sure to go after things that will actually help your business grow.
Customer service software that makes it easier for you to track and address issues, CRM platforms that help you collect valuable data about your customers, and any other analytics programs that will help you better understand where you should be focusing your efforts are all good places to invest in and where good deals can be had rather easily.
But also make sure you’re doing a thorough comparison of everything being offered. Most companies are required by the FCC to disclose all of their pricing, so you can use this as a jumping off point.
Then, categorise your different options based on what they offer to the business; does it help streamline a process? Does it help you track website data? Does it help you understand customers?
After doing this, run a cost-benefit analysis that shows you how much you stand to gain as compared to the costs you will need to incur. This will make sure you’re comparing apples to apples, and that you’re getting the maximum return on each one of your investments.
Overall, taking an approach such as this one will take you a little longer than if you just threw a bunch of money at the problem, but it will still help you grow, even if your budget is a bit less than you want it to be.
Growth For the Long Run
Ideally, your business will never stop growing, and this is part of the reason why it’s often better to take things slow.
If you grow too quickly thanks to a hefty investment, then you’ll struggle to keep up, and this could result in a period of contraction after a period of growth, which is no good for anyone.
In conclusion, growth doesn’t need to happen overnight, and that it’s probably best if it doesn’t.
About the Author: Kevin founded and runs Broadband Search, which is an online platform that helps people find the best value internet service provider in their area. As an entrepreneur, Kevin is always looking for ways to help others succeed when launching and growing a business.