How to grow a startup in 3 simple steps
We all want a silver bullet. ”If you just follow this marketing strategy, you’ll get a million users in 30 days.” ”If you just use these words in your headline, you’ll get a 100% CTR on your ads.” “If you just sign up for this work from home program, you’ll make $20,000 per month.” But the reality is there are no silver bullets. A free trial might make your company, or it could drive up your acquisition costs. Guest posting on other blogs might get you the attention you want, or it might just be a massive time sink. Getting your company on social media might drive business results, or it might just leave you with a few Twitter followers. All of these can be fine strategies, but whether they will work for you depends on so many variables around your product and the type of audience you’re trying to reach. But while no single marketing strategy will work for every product, there is one process that has been time-tested. Allow me to present… the three step process to growing and marketing a product[1. Of course, this is somewhat facetious as ”three steps” dramatically over-simplifies the massive amount of work and complexity behind a company’s success. Still, this framework will get you a long way.].
#1 Product-Market Fit
A few years ago, I was job hunting in San Francisco, and I was shocked how many companies were trying to hire a marketer (me) when their product was clearly broken. The idea of product-market fit (PMF) essentially says to look at whether users naturally like your existing product (here’s the technical way to measure PMF). If people would be sad to lose your product or service, you’re on the right track. If people don’t really care one way or the other, you need to fix your product before you start marketing.
Before you use marketing to reach more eyeballs, assess whether your product is worthy. (tweet this)
When Danielle Morrill left her day job to start a company, her initial idea was to help normal people make a little pocket change by integrating affiliate links with their social media postings. Refer.ly was successful enough to get into the prestigious YC startup incubator, but after a few years of effort it became clear that the idea just wasn’t catching on. So Danielle and her team pivoted. One of the more successful sides of Refer.ly was the blog, so they naturally decided to explore becoming a media company along the lines of a TheNextWeb or TechCrunch. Within the first month of pursuing tech journalism, she began to notice a lot of interest from venture capitalists in the data behind her articles - she’d been building a massive spreadsheet tracking hundreds startups. After conducting user interviews with her investors, she decided to pivot a second time and become a startup data company. Within four months, her new company - Mattermark - had reached $4k per month in subscription revenue, and just a year and a half after the initial pivot she was bringing in $1.4M in annual recurring revenue[1. How a 27-Year-Old College Dropout Went From Failed Startup to $18.5 Million in Funding]. As of early 2016, they’re a $42M company[2. Mattermark raises $7.3M at a $42M valuation to expand its B2B search and analytics tools]. Dig into the history of successful startups and you fill find similar stories of repeated pivots before finally finding success. Most products will never make it past step one. Finding a real need that your company can fill requires constant hunting[1. The Ultimate Guide for Becoming an Idea Machine], openness to honestly assess, and persistence to pivot until it clicks.
#2 Marketing experimentation system
You never know which marketing strategy will work best for your product/audience… until you try it. So you need a good system for testing strategies at the lowest possible cost (both time and money). Noah Kagan has shared the spreadsheet he uses to rank ideas based on their potential impact and testing difficulty. The goal isn’t to accurately forecast the impact of each technique (that’s impossible) but to give you a somewhat logical prioritization to so you can move through strategies as quickly as possible until you find the 2-3 that work best for you. Here’s how it works:
- Brainstorm every marketing idea you can think of (and look for things that worked for similar products)
- Add a rough estimation of impact (# of users, sales of product, etc) and cost (time + money)
- Start moving down the list quickly
The key metric here is “number of ideas disproven per month”. There’s a popular anecdote once shared by Thomas Edison’s associate, Walter S. Mallory. Finding Edison in the lab looking at thousands of failed nickel-iron battery test cells, Mallory expressed sympathy with the frustration he must be feeling. Mallory recalls, “Edison turned on me like a flash, and with a smile replied: ‘Results! Why, man, I have gotten a lot of results! I know several thousand things that won’t work.’”[2. I Have Gotten a Lot of Results! I Know Several Thousand Things That Won’t Work] We tend to use that story as inspiration for persistence. “Despite thousands of failures, Edison kept pushing forward.” That’s nice, but it completely misses the point Edison was making. Those thousands of “failures”? They weren’t failures - each one was an experiment designed to disprove one of many possible ways to make a nickel-iron battery. Each disproven hypothesis informed Edison’s approach and got him one step closer to the final solution.
Failure should only be celebrated if you learned something from it. (tweet this)
Similar to Edison, our goal with this experiment system is to disprove as many possible marketing ideas as possible until we find the 2-3 that work best for our product. For each experiment, you’ll want to go through a simple checklist:
- Establish your hypothesis (e.g., “A free trial will improve my conversion rate to paid subscribers”)
- Outline your associated actions (e.g., if true, make trial ubiquitous; if false, remove trial completely)
- Identify the simplest way to make that hypothesis look crazy (e.g., in a proper A/B experiment at 95% statistical significance, people without a free trial were more likely to become paid subscribers)
- Design an experiment along those lines (something like Optimizely)
- Take the associated action (e.g., keep or remove free trial option)
Your goal is to proceed in an orderly and fast fashion through the list of ideas, adding new as you find them and adjusting your approach with each new experiment result. Most businesses fail in this stage by either not having the right ideas on the list or by running faulty experiments that give misleading results. Even professional scientists frequently botch experiment results[2. Why Most Published Research Findings Are False], so take due care in designing your experiments for statistical accuracy.
Once you’re taking the right approach to product and marketing, your biggest constraint will be time. Specifically, what the startup world likes to call runway: if you didn’t make any more money, how long do you have before your business runs out of cash? To solve the time problem, you’ll want to attack from two angles: First, focus on tightening the feedback loops in finding product-market fit and then in finding the right marketing strategies. Second, look for ways to maximize your runway and minimize your “nut”. What’s your “nut”? It’s another jargon term - this one refers to your fixed expenses each month. If you didn’t sell anything this month, how much would you still spend on salaries, buying inventory, renting office space, etc. You’ll want to approach this from three angles:
- Cash - This is the hardest to change quickly - even if you raise VC money, you’ll likely spend months negotiating the investment and waiting for the money to transfer. Plan way ahead in this area and look for innovative solutions (like when AirBnB sold comedic cereal at political conventions to keep afloat[2. Brian Chesky: I lived on Cap’n McCain’s and Obama O’s got AirBnB out of debt]).
- Expenses - Cut away the frills until you have reliable cashflow.
- Backup plan - Entrepreneurship isn’t about taking risk - it’s about managing risk. So you should plan ahead of time what you will do if cash runs out. When will you start pitching an acquisition[2. How We Sold Our Startup in 30 Days], hunting for more investment, or looking for a new job?
You have all the time in the world to try new things… until you run out of money. So manage your approach carefully, move as fast as possible, and have your Plan B ready if time runs out.