My journey through the accounting and finance worlds eventually led me to launch an entrepreneurial venture, MuscleSound, which uses ultrasound technology and cloud-based software to optimize athletes’ performance. Like other entrepreneurs, I had to navigate the stages that every startup wades through.
So below, I’ve categorized the startup growth process into three main stages, making it easier to identify the common problems that surface during each phase. Though it’s impossible to avoid the many challenges associated with running a startup, you can certainly prepare for them.
1. Starting out
You have a great idea—now all you need is revenue and market validation. Will your product fly or crash and burn?
Challenges:
The biggest pre-revenue hurdles you face relate to building the bones of your company. You need to make big decisions on aspects like pricing, your go-to-market strategy, and spend-and-burn projections. This stage is deceptively expensive; you’ll see lots of money leaking through your balance sheets while you develop and validate your product.
Solutions:
Prove your idea’s value as quickly as possible. (Easier said than done, I know.) A few years ago, my doctor referred me to two sports medicine doctors who were testing their ability to see muscle glycogen levels via ultrasounds rather than biopsies. As an avid runner, this helped me boost my performance and prevent injuries. But would others find it useful?
Research was needed to determine the idea’s market potential. It was obvious that there was a multibillion-dollar market for sports drinks, energy bars, chews, and gels, all of which use carbohydrates—glycogen producers—as their active ingredient. However, none of these products could tell an athlete how many carbs he needed to prevent injury, improve his performance, or aid his recovery. We determined that many sports enthusiasts—as well as military service members, animal specialists, and health providers—would find this information valuable, so we moved forward.
Give yourself adequate runway in this phase. If you think you’ll need a year’s worth of money, give yourself twice that amount. If you think it will cost $100,000 to develop your product, devote $200,000 to the cause. Everything takes longer and costs more than you think. You have to spend money to make money.
2. Beginning to make money
This is the make-or-break stage. Your product or service is off the ground, but you haven’t quite reached orbit yet. It’s time to turbocharge your sales.
Challenges:
You have limited resources, so your main challenge is staying efficient with expenses without missing smart opportunities. You have to develop uniform pricing, determine how to maximize your footprint in your primary market, and identify when to expand into new markets.
Solutions:
Be ready and willing to make big decisions and on-the-fly adjustments to better serve your market. Spend your money wisely, and watch your burn rate like a hawk—but don’t hold back if the right opportunity arises.
If you’re in an established market and you have a great product, you can understand where pricing should be. If you’re creating something completely new, you’ll constantly adapt your prices. How do you attract the right customers without giving away your product? What are the trade-offs every time you negotiate your price down? Pricing is an ongoing balancing act.
At MuscleSound, this phase was all about developing a delivery system. Many software programs could display ultrasound images, but none were able to read them. Our team created software that enabled us to scan a muscle, send the image to the cloud, and detail a user’s glycogen level and action plan within 15 seconds. This wasn’t an inexpensive endeavor, what with software design, testing, and patent filings, but it gave us a differentiating factor worth paying for.
3. Early profitability
Welcome to orbit. The naysayers are now the first in line for your product or service. But don’t slow down now—the guy tailing you will quickly catch up and snatch your customers and your hard-won market share.
Challenges:
At this stage, entrepreneurs hit a big fork in the road: should you chase profit or revenue growth? If you choose revenue, you could shovel every dollar you earn right back into marketing, sales, and research and development. If you pursue profit, you could slow your company’s growth or miss your chance to rocket into the stratosphere.
Solutions:
Be shrewd. You’re now a bigger, more prominent startup, but don’t lose the scrappy startup mentality that got you this far. Continue focusing on your customers; never stop wondering how you can offer even more bang for their buck.
One strategy that helped us grow during this stage was hiring the right people. At MuscleSound, we constantly evaluated whether each person was still right for his current job as the company underwent changes. Maintain that startup mentality: you need the best and the brightest filling your seats.
Photo credit: Lauren Kallen