I remember reading years ago about a young entrepreneur named Jim Picariello who told the story of a small business he started called Wise Acre Frozen Treats. Under Picariello’s leadership, the organic dessert startup shot out of the gates quickly — and in just two years, it grew to a $2 million-a-year company with 14 employees and a massive 3,000-square-foot kitchen facility.
This should have been a wild success story. But beneath the facade of Wise Acre’s rapid rise lived serious structural problems in its overall business strategy, including a heavy reliance on investments that failed to materialize. Picariello, like a lot of founders, was either ignoring or unaware of the warning signs that all was not well. In the winter of 2008, Wise Acre Frozen Treats went bankrupt.
Unfortunately, stories like this are not unique. Every year, scores of small businesses and startups grow too fast, raise too much money and struggle to find a way forward. Eventually, the problems that go unnoticed as business booms start to catch up with them. At best, these problems can delay a business’s progress; at worst, they cause its collapse.
It doesn’t have to be this way. To build inherently strong businesses that can sustain growth over the long-term, founders should keep these three indicators of performance top of mind.
Build a safe and sure foundation
Building a company that scales thoughtfully starts with creating a foundational company vision early-on that employees can use as a guiding light through every phase of growth.
To establish this vision when starting a business, leaders should ask themselves the following questions:
What should it feel like to work in the company?
How would you want your former employees to talk about their experience?
What should your customer feel when they walk into your store or browse your website? And if you bumped into them on the street, how would they describe your company?
Creating a compelling narrative at the start ensures you can spread this mission to all new employees as your company scales. As the business goes through periods of change and transitions, you can ensure the vision remains at your core. That being said, you should also seek advice from and encourage board members, investors, employees and especially new hires to speak up and weigh in on the vision. In a business’s early days, CEOs often see themselves as the flag-carriers of the vision, but it’s critical to ask for feedback from employees at every stage. This can come in the form of seeking feedback during all-hands meetings, encouraging it in 1:1 manager direct report meetings and giving employees other easy avenues to share it.
A shared point of view at the start is critical to ensuring you grow sustainably and create a culture that is aligned under a common goal. Every team member can defend, stand by and take this vision with them when making day-to-day decisions and longer-term strategic ones.
Develop a process. Then, repeat it
Growth is rarely linear or consistent — businesses don’t just grow smoothly from one stage to the next. During spikes in growth especially, it’s critical to acknowledge the need for repeatable processes.
One stage that frequently breeds growth problems is taking a product to market after establishing product-market fit. This is where temptation is greatest to overspend and over-scale. Often, business owners will get their product in place and start shipping it to people at any cost without thinking about creating a repeatable and profitable process. This leads to growth camouflaging serious business problems.
In reality, hitting growth targets will rarely tell you the whole story. What’s more important is to ask yourself: you hit your growth targets this month, can you repeat it the next month? What if the two people who helped build your product or process left your business tomorrow? Could you repeat it then? If you needed to accelerate growth, are your structures in place to do so? Achieving double-digit monthly growth is good, but it ignores all of these concerns and many more.
There is no “trick” to building a sustainable business — you must simply look behind the growth and be practical and willing to acknowledge whether this is a sustainable growth method that will deliver lasting results.
Obsess over inputs instead of outputs
As business owners raise money and pitch investors, they tend to focus squarely on outputs — boosting sales, reducing churn, generating more leads. This obsession is the main reason people become fixated on metrics like growth or revenue. They spend too much time on the end result: what they want their output to look like. While counter-intuitive, most businesses need to spend more time and resources thinking about and investing in inputs instead.
For example, many businesses worry about their Net Promoter Score (NPS), a score that showcases what customers think about the services and products they offer. While this score provides useful information and feedback, too many businesses focus just on the number and ignore, to their peril, the actual concerns that customers voice in the comments. These comments hold extremely valuable information. Customers have taken the time to relay their frustrations in order to tell you what they may not like about your business and product. You can, in turn, use this information to discover pain points and detect themes in their frustrations. And addressing these frustrations before they become bigger frustrations is how you reduce churn (the output that businesses tend to obsess over).
Ultimately, businesses live or die on the performance of their inputs. If you get your inputs right, your outputs will take care of themselves. If Jim Picariello had looked beyond his burst of short-term growth and worked to identify and address the underlying weaknesses in his business, Wise Acre Frozen Treats could very possibly be around today. For all entrepreneurs looking to build something big: remember, the true indicators of growth often lie beneath those most obvious.
Dennis Fois is the CEO of Copper.
Business stock photo by REDPIXEL.PL/Shutterstock