Startup growth facing a roadblock? Here's what to do next
Thursday August 17, 2017,
4 min Read
In the fast-paced, ultra-competitive startup ecosystem, growth is no longer just about thriving; it's about surviving. Capturing a greater market share, acquiring more customers, and ultimately increasing revenues and profits are somethings all startups strive to achieve. But sometimes the growth just fails to materialise, with operations stagnating and the company seems to be trapped in an endless cycle. When startup growth hits a roadblock such as this, you as an entrepreneur still have a few options to increase your venture’s size and operations.
Here are four things entrepreneurs can do when their startup stops growing:
There are two types of expansion a company can pursue: vertical and horizontal. Vertical expansion is when a company scales its product/service within its existing line of business. It can involve adding more features and services to your existing product or taking control of operations which you entrusted a third-party (distributor or seller) to perform. This allows a startup to gain a larger market share and acquire additional streams of revenue in an ecosystem which it already understands. Ola adding the options to book autos and outstation cabs is a good example of vertical growth.
Horizontal growth is when a company expands its business operations by entering new markets. This is done either by establishing a presence in a new business sector or a new geographical location. If, for example, your business model worked out well in one market, you can try identifying other markets where the same strategy can be replicated with success. Amazon best exemplifies horizontal growth done right. The e-commerce giant's cloud computing arm, Amazon Web Services, has proven to be an outstanding venture and today accounts for 8 per cent of its parent company's quarterly revenue ($3.53 billion of Amazon's $44.68 billion in Q4 2016).
When the going gets tough, it's sometimes a good idea to find a partner. Developing a strategic partnership — that is, entering into an agreement with another business with the aim of gaining mutual success — is a well-known strategy for overcoming a startup's growth roadblock. Alliances of this nature offer several advantages: access to new customers, increase in available resources, improved brand recognition and expanded market reach.
Such strategic partnerships can be in the form of joint ventures, distribution partnerships or licensing opportunities; anything, in short, that allows your company and its new partner to benefit equally from the sharing of physical and intellectual resources. Ola and Zomato’s recent tie-up to offer their customers integrated services is a good example of an effective strategic partnership.
Create a detailed plan
There are cases when the only reason holding back a startup's growth is poor execution of plans. The founder(s) may have a viable vision for the company's future but are unable to ensure its accomplishment. In such scenarios, a detailed strategy can help tackle all the nuances of its growth plan.
This involves setting short-term and long-term targets, identifying key metrics to be tracked and analysed, and assigning duties to every member of the organisation — right from the CEO to the junior-most employee. Creating such a plan gives the company's employees a clear idea of what they need to do and why their contributions matter. In short, it gives them a renewed sense of purpose.
Sell the company
The last, and not necessarily the worst, option when you're struggling to scale your startup is to sell it. If your company has established a firm market presence, is operating smoothly but is, at the same time, struggling to identify a clear path for the future, selling it to a larger corporation is a quick-fire way of reaping the rewards of all your hard work. This tactic works especially well for a startup when it has minimal competition and a high current value.
Siri's sale to Apple and Whatsapp's sale to Facebook are two good examples of smart exits by startups when they hit a growth roadblock. If you are an entrepreneur who doesn't want to cede control of his/her company to someone else, you can always negotiate a deal that allows you to remain on board. When Flipkart acquired Myntra, for example, the latter's founder and CEO Mukesh Bansal gained a place on the former's Board of Directors and was made head of the fashion division of the e-commerce conglomerate.
Before you pursue any of these options, it is vital that you take the time to identify the main reason behind your startup’s stagnation. Only then can you pursue the solution that’s ideal for improving your company’s situation.