In running a small business, the exact same action can be right or wrong depending on when you do it. Market conditions can take a sudden left turn and customer expectations seem to reset themselves overnight. To survive, a company has to stay agile enough to adapt on the fly.
In search of stability, too many small businesses try to scale up operations only to learn that they made a wrong assumption. Maybe sales projections were too optimistic or the processes weren't organized well, or the workers aren't skilled enough or the technology wasn't built to handle new volumes. For whatever reason, what worked flawlessly before shakes apart at high speeds.
No. 1 reason why startups stopped
Nathan Furr, author of Nail It Then Scale It, warned that the No. 1 reason startups fail in his experience is that they tried to scale up before they were ready. He wrote, “Avoid spending money scaling the business before you have really nailed what customers want and how to reach them. As the report points out, it often takes 2-3 times longer than founders expect to really nail the product before scaling the business really becomes appropriate.”
Once a business owner decides that its time to scale, the entire team becomes organizationally and mentally committed to the new plan. Sunk costs and high hopes mix into a dangerous cocktail. Economists and psychologist use the same term for this: "the escalation of commitment." Whether or not the managers consider failure as an option, the business survival statistics are not in their favor.
The impetus for growth
On the other side of this problem is the problem of waiting too long and missing the window of demand that could have propelled the company's growth. After analyzing growth rates at more than 3,000 companies, McKinsey consultants concluded that the slow growth can be a killer for specific types of companies and those within certain industries. They warned, “If a health-care company grew at 20 percent annually, its managers and investors would be happy. If a software company grows at that rate, it has a 92 percent chance of ceasing to exist within a few years.”
When it’s time for a company to scale, either up or down, there’s no time to wrangle with complex, non-user-friendly technology. Not surprisingly, that same technology may be locking up liquidity that the business will need to pivot with very little notice.
Why they failed and why you don't have to
When Quartz evaluated 200 posts by founders about why their startups failed, they found an important fact. For startups that received at least $1 million in funding, “Ran out of cash” was the number one reason cited for closing the business. For those that bootstrapped themselves, “Business model not viable” was the answer.
When customer acquisition costs outweigh customer value, especially in the short run, the company won’t be able to survive in long run. Shutting down is a smarter option than taking out more loans.
One answer that could help both funded and self-funded companies would be to lower customer acquisition costs. Easier said than done, of course, but the process begins with the elimination unnecessary investments that freeze up cash and shifting capital expenditures to operating expenses. That way it’s easier to assign direct customer acquisition costs and understand the limitations of the business model in time to make adjustments. The popularity of SaaS is based on that fact that it allows businesses owners to hold greater liquidity for longer.
The scalability machine
Spoke Phone was built specifically to help small businesses grow at their own rate. You don't have to invest thousands of dollars and lock up your capital just to get a professional phone system.
You can secure all the most important features of a on-premise PBX or a hosted VoIP provider, without spending all of your development funds. Spoke Phone gives you the option to add a host of local numbers anywhere in the world, the freedom to transfer calls to team members, and the data to find out who called when and whether anyone on your team followed up. Your AI assistant will be able to answer the phone when you can't and respond to the caller in their own language or dialect.
You'll sound like an enterprise long before you are ready to scale up into one. Add or delete team members in an instant. While they are part of your company, you'll always have an up-to-date contact at your fingers.
You'll also save the massive costs of hiring a IT team to install and maintain your phones. Download the app onto your mobile and set it up in a matter of minutes. With Spoke Phone, your operation will be ready for the 100% mobile future of work.
Keep all your valuable business data and your private mobile number secure inside the Spoke Phone app. Whoever you call will see your company number with a local area code that you choose.
See how it all works by arranging your own interactive demo. Spoke is ready to scale when you are.