Five Stages of Startup: Level 4 -- The Grind

Growth, Culture, Change, Trouble, Pivot
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The five stages of startup I'm discussing are not THE five stages of startup. They're just landmarks, broken down and generalized into something that we can all hopefully use as a guide, not gospel.

This is the fourth of five stages that make up a generalized startup timeline. You don't have to read the previous installments, but it will help, especially if you're just starting out. Level 1: The Jump is the period of time when you have a great idea that will become a great product. Level 2: Start is when the company is formed, it figures out how to operate, and launches that great product. Level 3: The Journey is about running and growing your company and selling your product.

So far, everything about startup is straight-up awesome. The early days are the reason most entrepreneurs start their own companies in the first place. It's living the dream, writing your own ticket, creating your own destiny.

But not every day is going to be your favorite day at your startup. Sometimes, it's going to feel like a job. And there will be those rare times when it's going to feel like the worst job you've ever had.

Let's deal with that.

The Grind is the part of startup that is the least glamorous, the most difficult, and probably lasts the longest. Now, nothing about startup is easy. Coming up with a great idea is hard. Turning that idea into a product is hard. Building a company to sell that product is hard. Getting your first few customers and funding is hard.

But once all that machinery is in place, it's time to make it better, faster, stronger, and more efficient. This is the point where the steady state changes, and it changes often. Customers won't be happy, investors will meddle, competition will appear out of nowhere, costs will rise, employees will quit, and everyone around you will, at some point, stop caring about the success of your startup.

Did I talk you out of it? No? Good. Here's how to get through the rest of your startup's life cycle.

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Growth is mandatory from this level on. You can make mistakes and try new strategies all you want, and you should, but if you stop growing, everyone will notice. And growth comes down to one thing, acquiring more customers who are spending more money on your product more often.

Growth does not mean landing more funding, or getting more press, or hiring more people. And it certainly doesn't mean grabbing more customers if those customers aren't spending enough to cover your costs.

There's a term -- cash flow break even -- that you'll start focusing on in Level 3, and by this level you should have reached it. It means you're making more money than you're spending, and it's a very easy question to answer. It's yes or no.

But there are also growth traps. You don't want to grow too far beyond your capacity to produce, which is a good problem to have, but one that needs to be dealt with. You want to make sure your margin -- the percentage of money your customers are paying per product over and above what it costs to get that product into their hands -- is always rising. And you don't want to be building a dead product, in other words, something that people are going to tire of.

Culture is probably the most overlooked concept in startup. Who cares what your company looks and feels like as long as it's making money hand over fist, right?

Like a lot of these concepts, you should start thinking about culture from day one, but when you get to this level it becomes a critical factor.

It starts with the problem you're trying to solve, and making sure everything about your company focuses on solving that problem. If you want to do it right, you'll need to make sure that the place your employees come to work every day is their dream job, and this means adhering to all the values that made the last level, The Journey, so satisfying.

Those values will be tested as you grow. In fact, a lot of the time, Growth and Culture will seem like diametrically opposed goals, like two things that are too big to both fit in the same box. It's difficult to do one without sacrificing the other. But it can be done.

Change is, like a lot of the concepts I've discussed up to now, something that sounds really easy until it happens. Only this time, it isn't something you decide you want to do and tackle it. Change will sneak up on you and punch you in the back of the head. Change isn't friendly, or nice, and it doesn't care about you. At all.

Most people, when asked, will tell you that they're good at dealing with change. But they're usually thinking about it in a scenario with no context and nothing on the line. The truth is, most people are terrible with change and they don't even realize it.

I'm terrible with change, even after decades of dealing with it. But I realize that. You should too.

I like to talk about change with this example. Every time a big change happens, you have this awful feeling in your brain and your gut that wants you to fight against all the new and unfamiliar. This is human nature, and if you're going to get through the change and find equilibrium and use it to your advantage, you have to get over this awful feeling. But sometimes, you have that awful feeling because you've made the wrong decision and you need to turn back.

Learning to figure out the difference between those two scenarios is what makes you good at change.

Trouble usually comes with change. Your customers' needs can change, the competitive landscape can change, your suppliers' prices can change, your employees' priorities can change, rules and regulations can change.

This doesn't always result in trouble. Bad planning or lack of planning can bring trouble, because planning is your best defense against change. But sometimes trouble just comes out of nowhere, and all the planning in the world can't defend against some kinds of trouble.

Trouble can best be defined as risk, which I talked about all the way back in Level 2, that comes with no warning signs. It's those parts of life that you have little control over in the first place. You've had those days, when everything seems to go wrong and none of it was your fault. That's trouble.

It's a big concept because it lies around every corner. It's difficult because you can only deal with it after it has happened. But, like everything else, you can beat it.

Pivot is a single word that means making big, sweeping changes quickly in order to avoid disaster. I try not to throw a lot of startup buzzwords around, but this is one you need to know. You will do this at least once if not a dozen times from the very beginning of your idea, but at this stage, it's harder to do and much more dangerous.

There are going to be times, especially at this stage, when risk, change, and trouble conspire against everything you've built and all the plans you've made in an effort to sink you. When those times happen, there may be times when all the small fixes in the world aren't going to right the ship.

Pivoting is something you do because you have to, because you've identified a huge problem or a series of problems that create walls between you and your goals that you can't knock down with your current operation. It's not something you enter into lightly. It's like fighting fire with fire, and it will seem like tearing everything down and starting over.

Which is something that, sometimes, you will absolutely need to do.

I realize that this is hands-down the darkest chapter in these five stages. I've been through all five stages a number of times, and each startup had its Level 4, and it was always worse than I imagined it would be. But then, isn't that true about everything you do in life? If it wasn't, it wouldn't be worth getting to the end.

And that's where we're going next.

Read the entire Five Stages of Startup series:
Level 1: The Jump
Level 2: Start
Level 3: The Journey
Level 4: The Grind (You Are Here)
Level 5: The End

Read the entire Five Roles of Startup series:
Vision
Build
Sales
Operations
Growth

Read the entire Five Funding Sources for Startup series:
Customers
Self
Friends and Family
Angel
VC

Read the entire Five Kinds of Startup series:
Product
Service
Digital
Retail
Hybrid

Read the entire Five Reasons for Startup series:
Independence
Wealth
Common Good
Personality
Elimination

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