Entire careers have been built around growth hacking over the last few years. It has become a major fad, because so many entrepreneurs are eager to watch their businesses gain traction and potentially become a hit with users. However, for many entrepreneurs, growth isn’t their problem – sustainability is.
Shockingly, two thirds of the fastest growing businesses fail, because they don’t have a stable cash flow, or they make other long-term mistakes. Since the dotcom bust and global credit crunch of 2008, investors are becoming more risk averse and turning away from companies without solid business plans and health financial ratios.
It doesn’t matter how fast your business grows if it isn’t sustainable. Here are some tips to ensure the sustainability of your venture.
Never Build a Business Off of a Fad
Fads come and go. Businesses that are built on fads will disappear just as quickly.
I recently spoke with an entrepreneur who tried starting a business around Pokémon Go. He was going to charge a fee for people on Meetup.com to participate in his group that was dedicated to catching Pokémon. Needless to say, his venture was short-lived.
He built a business around a very niche trend and knew it may disappear. However, many business owners invest hundreds of thousands of dollars in startups built on fads that are likely to die. Deckers Outdoor is one of them. Seeking Alpha wrote an article on the faltering fashion brand in 2013, because it was built around sheep-skinned products, a fad that would ultimately pass.
The lesson from these brands is simple. Build businesses around long-term customer needs, rather than fads.
Offer Solutions Your Competitors Have Overlooked
You don’t have to reinvent the wheel, but you need to offer something your competitors did not. Last year, the Institute of Labor Economics published a report on the importance of innovation. The authors stated that innovation is one of the most important factors in a company’s success, but too many brands have deviated from that model.
This doesn’t mean brands need a new product. They just need to provide solutions their competitors have overlooked.
Take a look at Michael Dell. In 1984, Dell created a personal computer at the age of 19. The functionality of his computers weren’t any different from IBM models. However, he had a unique production and distribution model, which enabled him to sell his products at a massive discount. He disrupted the PC industry by pushing more affordable products and drove Big Blue out of the PC sector entirely.
Provide an Excellent User Experience
Too many brands focus too heavily on expanding their customer base instead of maintaining existing customers. This doesn’t make sense, because it costs 7 times as much to reach new customers and existing customers spend 67% more.
You can quadruple your customer base over the next year. It won’t do you any good if you can’t keep your customers happy by providing an excellent user experience by creating great content and deploying your digital assets over a reliable content delivery network.
Tara Lifland wrote an excellent piece on Social Media Today about the importance of user experience. You must provide an excellent user experience on every channel to maximize customer retention.
Ensure a Future-Proof Product and Infrastructure
Protecting your startup from obsolescence is also vital. You may have invested in cutting edge technology, but it may be obsolete a few years from now. You will be even worse off if you are investing in capital that is already trailing new equipment.
Many businesses also invest in expensive capital expenditures that they don’t even need. This can be very expensive in the long-run, especially if they become too accustomed to using them and don’t know how to transition to a leaner infrastructural model.
Take a close look at your company’s infrastructure. There are a couple of things you must do:
- Make sure your equipment can be easily replaced
- Consider outsourcing many of your key tasks to minimize your maintenance and capital expenditure costs
- Don’t create a massive infrastructure that you won’t be able to overhaul
- Understand the implications of long-term trends and invest in resources accordingly
You want to be able to easily acclimate to new changes. This means you need a lean infrastructure.
It’s easy for new businesses to fall into the trap of growth hacking just for the sake of gaining the next million users or so. However, even millions of uses will not be any good if your business does not have solid fundamentals, and if it is not profitable from the get-go. The startup ecosystem is a very competitive environment, and it will be important to ensure profitability and sustainability even before you start thinking about explosive growth.