By Rieva Lesonsky
What makes some startups thrive while others fail? The Startup Genome Project went looking for the answer, studying more than 3,200 startups over an extended period to figure out what behaviors lead to success or failure. In The Startup Genome Report, they found that there is one big reason most new businesses fail. They try to grow too big, too fast.
Technically, it’s called “premature scaling.” How can it kill your business? Well…
- You might waste lots of money on marketing, without taking the time to find out if your target customers really want what you’re selling, or how you might modify it to make them want it even more.
- You might add features that are “nice to have,” but not essential to your product or service, without taking the time to really understand your customers and find out if they actually need these features.
- You might hire too many employees too soon, ramping up costs beyond what you can support.
- You might get stuck in tunnel vision, focusing solely on scaling your business and not noticing other opportunities that could prove more profitable in the long run.
So what’s the opposite of scaling too soon? Taking your time to “discover” was an essential characteristic of successful companies studied by The Startup Genome Report. The authors note that successful startups spent most of their time “discovering who their customers are, whereas … startups [that were unsuccessful] focused on validating that customers want their product.”
“Don’t underestimate how long things take,” the report’s authors warn. The study found that most startup entrepreneurs dramatically underestimated the time it would take to validate their market (that is, to get the product into customers’ hands to confirm whether they actually wanted it). On average, this step took two to three times longer than startup founders expected.
Time is something that few startups feel they have enough of. But in this case, it seems, taking a little more time to get it right before you try to grow your company can make all the difference between success and failure.