Fast or Firm Growth Growth Startups Can Be Lemons or Pearls
Fast or Firm Growth: Most of the time founders cannot simply make a choice between a startup’s fast or firm growth, when setting the priorities of new venture development. They get the growth they get. The temptation is always to go for fast growth too early in the life of the startup. The focus needs to be on sales, but it needs also to be focused customers and making sure that you are meeting their needs. Growing too fast may seem attractive, but if the customers are neglected, it will not be sustained.
Also at the early stages of the venture, there are so many other aspects to secure that growing too fast may obscure. Fast or firm growth is an issue on which you need a clear strategy. Do you want to grow lemons or pearls?
Startups Can Be Lemons or Pearls
Unlike other fruit trees, lemons will continue to produce new flowers as long as the weather conditions are right. Of the flowers that do turn into fruit, many will also drop from the tree long before they mature. This natural process prevents the tree from bearing more mature fruit than it can handle. Because lemon trees can set and ripen fruit throughout the year, ripe lemons may be on the tree most of the time.
On the other hand, pearl is built up from thin, thin layers of nacre, the glossy material which the oyster uses to line the inside of his shell. This is a long and slow job, for the material must be extracted from sea water and processed by special cells in the oyster’s body. Sometimes it takes a whole year to add just a few layers to the shell walls and the growing pearl. The pearl forms around a grain of sand. After five to seven years, the nacre is thicker, making the pearl bigger and more valuable. The process can take up to 20 years.
Fast or Firm New Venture Development?
Lemons or pearls serves as a good metaphor for new venture development. We use the term ‘a lemon’ perhaps, because it can leave a bad taste in the mouth, or more probably because it comes from the slang sense of a person who is a loser—given that a sharper person can “suck the juice out of” a lemon.
In new venture development terms, though the lemon may be a business that can get going quickly, it may run out of steam early. About 50 percent of small businesses fail in the first four years (Bureau of Labor Statistics). The apocryphal kids’ lemonade stand is a very apt example, since the kidpreneur’s venture seldom outlasts a week. That’s because it’s a one product business with an ephemeral market and was never designed to last.
Pearls of wisdom in the field of new venture development are critical to survival. The grit that gets the business off the ground is great, but if the succeeding layers fail to form, the business will add no value. Learning as the business unfolds is vital to success. The ability to live with failure and uncertainty will keep the business on a forward trajectory. Let the pearl, not the lemon be your model.
Fast or Firm Measured Growth
If you do decide to let the pearl be your model for growth, it implies a consciousness of what makes for startup success. There is a lot of talk about the desirability of ‘unicorn’ startups (a privately held startup company valued at over $1 billion). It’s also said that angels and venture capitalists are hungry for GBF (Get Big Fast) investments and ones that grow the business fifty percent a year for the first five years.
However, GBF is not for most of us without outside equity, not least because it has inherent dangers. Most VCs are looking to exit early and thus longevity or sustainability is not their top priority. On the other hand the majority of founders are looking to stay around, rather than to make a fast buck.
I say that you need to be stretched a bit and ‘go for it’, but that your big concern from day one should be to strengthen the new venture, since in the early stages it is so fragile. Hence there is no real choice to be made between fast or firm growth. Firm growth is the way to go. I have some tips on how to do that in my post on expansion or extension.
Stages of Startup Growth
Anther interesting way of describing the stages of startup progress is
- Discover—find out what’s really needed;
- Validate—confirm your assumptions are valid;
- Enhance—ensure the viability of what you’re doing;
- Scale—grow the business to weather the ups and downs;
- Sustain—continually check progress and making adjustments;
- Conserve—maintain achievements, while dealing with the threats
If this makes sense to you, then be your own sternest critic and make a habit of undertaking monthly variance analysis of actual costs, sales and profits or loss against forecasts. This does not mean that you will have a clear run, since you’ll still need to confront challenges. A very help way to make sure that you are confronting the challenges is to read my eBook, Founders Stay Afloat: by tracking 25 vital facts and figures.