Doing things that don’t scale is THE way of scalable businesses.
A lot of first-time founders have this idea of a scalable startup. Their business is, from inception, designed to become a huge company. Zero to a million users using viral marketing and growth hacking, and once the network effect kicks in the numbers will paint a beautiful hockeystick chart. Thus, it’s important that the product can quickly scale to millions of active users.
Grand visions, uninhibited by real world constraints, are turned into grandiose plans, and then fall apart when confronted with the harsh realities of the real world.
What went wrong? While the founders built their business to be scalable, they failed to do build something that’s worth scaling in the first place: a product people want to use.
The only time when you need to think about scaling your startup is once you’ve already got something that people want, once you’ve reached product/market fit. And in order to get there, you need to do things that don’t scale first. In this article, I’ll share examples of unscalable growth initiatives.
Much of this is inspired by an Paul Graham’s essay Do Things That Don’t Scale and 37signals post Why we’re doing things that don’t scale, as well as many of the startups I mention later on.
Here a couple of unscalable startups:
- Uber
- Basecamp (formerly 37signals)
- Craigslist
- Stripe
- Wufoo
- Airbnb
- Close.io
This list could be much longer, but let’s end it here and talk exactly why these startups do things that don’t scale.
Close.io: From sales service to sales software.
I’m most qualified to write about Close.io, since I co-founded it. Close.io actually is a spin-off of our previous startup, Elastic Sales, which was a service company. We helped more than 200 venture backed startups to scale their sales efforts.
Some of them were very early-stage companies who didn’t even had a sales process in place, and some were very well-known and successful companies with large sales teams.
Scratch your own itch.
We needed a way to manage all this. Doing sales for so many different startups is very complex, and we couldn’t find a sales software that really fit our needs. There just was no software that could do what we want in a way that made us wanted to use it. So our engineers created a pain-free CRM. They developed it from scratch in the same room where the sales people were selling, which kept feedback circle tight, and helped us create software that sales people love using.
The product was based on our own needs and experiences. This is a very different approach to what’s popular today among MBAs, who see “China is a huge growth market, let’s capture some of this growing market”.
The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors. Any big market is a bad choice, and a big market already served by competing companies is even worse. This is why it’s always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point or it will be open to competition, so it’s hard to ever reach that 1%. And even if you do succeed in gaining a small foothold, you’ll have to be satisfied with keeping the lights on: cut-throat competition means your profits will be zero.
– Peter Thiel, Zero to One
Unscalable startups begin by asking: “What’s a problem we wish we could solve better?” Develop a better solution. And then look for other people or company who probably have a similar problem, and consult them on how they can solve this problem better.
Why should you advise others to overcome this problem? Not because you want to become a consulting business, but because it helps you to get to product/market fit faster – with the added benefit of getting paid.
Do the grunt work.
“Work on the business, not in the business.” Advice you often hear – but you got to be involved IN your business, especially in the early stages. You have to be willing to get your hands dirty with things like sales and marketing, finding your first customers and actually getting paid.
Selling = Learning
Technical founders often want to outsource sales – but you, the founder, absolutely should be chasing deals yourself. Pitch your idea, see how prospects react, what their objections are, what questions they ask. At this stage selling isn’t about bringing in money so much as it is about learning about your market and validating your idea.
There are three stages of validation:
“I like this idea.”
“I would by this idea.”
“Here, take my credit card, I want to buy this now.”
If you can’t sell your product before you build it, you should seriously question whether it is a product worth building at all.
If you do find people willing to pay for your product, it’s time to move to the next stage.
Avoid premature automation.
At this point most startups go straight into development. They invest hundreds of engineering hours into building the product they think is the perfect solution. Once completed, they often find that they’ve solved a problem not worth solving. What they fixed just doesn’t move the needle.
“If you can find someone with a problem that needs solving and you can solve it manually, go ahead and do that for as long as you can, and then gradually automate the bottlenecks. It would be a little frightening to be solving users’ problems in a way that wasn’t yet automatic, but less frightening than the far more common case of having something automatic that doesn’t yet solve anyone’s problems.” – Paul Graham
The Human Auto-Dialer
When we ran our outsourced sales service, one huge problem was just getting to speak with enough people on the phone. Our sales reps wasted hours every day just listening to dial tones or going to voicemail.
At this point, we could have decided to fix this problem by building an predictive basically a program that dials a lot of numbers and only puts a call through a sales rep once a real human being picks up the phone.
Instead of spending weeks of engineering time building our own predictive dialer, we called a temporary staffing agency and told them to send 5 temps over the next day. We gave each of them a headset and a list of phone numbers, and they started dialing numbers. When someone answered the phone, they would pretend to be the sales rep, and then hand over the headset to the actual sales rep, who would take the sales conversation from there. This way our sales reps were able to speak with many more prospects – and we had actual data that told us how much that was worth to us. Based on this data, we could decide whether building a predictive dialer was worth it or not.
“No one disputes it’s easier to scale your business when you have machines doing the work. But automation can also lead to myopia. And premature-automation can lead to blindness. When you take human interaction out of a system, you’re removing key opportunities to see what really happens along the way. You miss stories, experiences, and struggles – and that’s often where the real insights are hiding.”
– Jason Fried, Why we’re doing things that don’t scale
Watch people, not clicks.
Once you’ve built a product with a validated value proposition and you’re signing up your first users, there’s a strong temptation to obsess on metrics. A/B testing, going through analytics, optimizing their funnel and so on.
But the problem with A/B testing at this stage is that you don’t have tens of thousands of daily visitors, so doing A/B testing with statistical significance is almost impossible. And doing A/B testing without statistical significance is pointless.
What you want to do instead is to watch people interact with your product.
Do what Pinterest founder Ben Silbermann did when he built Pinterest. He walked into cafes in Palo Alto and asked random strangers to try out his website.
He went into Apple stores and set Pinterest.com as the homepage on various devices, until the staff noticed what he was up to and kicked him out.
Nobody cared about Pinterest in these days – but he grew his startup into a multi-billion dollar company by doing things that don’t scale.
How do people respond to and interact with your product?
Watch not just what they do on their screen, but also observe their body language, listen to what they say and how they say it.
Look at when people stumble, get confused, what false assumptions they make, and how they act differently from the way you wanted them to act.
These insights are invaluable, and the best way to get them is by watching over they shoulder as they use your site for the first time.
Pick up the phone
I’ve been telling startups to pick up the phone for a long time already. And founders always think that’s antiquated. Cold calling is what annoying companies did in the 90s, not what cool startups do in 2014. And it doesn’t scale.
You know what doesn’t scale?
Building something nobody wants because you failed to interact with the people who you want to win as customers.
For some reason it’s often the most intelligent people who build products based on smart assumptions rather than the what the market wants. They often cite Henry Ford: “If I had asked people what they wanted, they would have said faster horses.” But there’s a difference between doing exactly what people say they want, and asking them what they want in order to better understand their wants and needs.
You’ll get much higher quality insights by talking to people on the phone than you could ever gain from heatmaps, analytics or even surveys.
Call every signup within five minutes.
At Close.io we called every signup within five minutes. Just welcome them and let them know you’re there to help. Ask them what they want to achieve. Ask them how they heard about you. Thank them again and say goodbye.
What kind of impression do you think that makes on new users? When a real human being calls them and is genuinely helpful.
How many companies actually make that effort to connect with people?
We’ve converted a lot of trial signups to paying customers simply because we were the only ones who cared enough to call them.
Uber
Uber is one of Silicon Valley’s most phenomenal recent success stories. Within just a few short years, they became a global company worth billions of dollars. But it all started by simply cold calling limousine drivers.
Unscalable Onboarding
Once a new user signs up for the service – how fast can you deliver an experience that makes him feel excited? How fast can you deliver value?
For some products, like WhatsApp, Twitter or LinkedIn, this moment happens very fast. But for many products a user first has to invest a certain amount of effort before he experiences what Chamath Palihapitiya calls the “Aha moment”.
How do you ensure that you don’t lose them before that moment happens?
Concierge service like GetDrip.com
Drip is a marketing automation company that allows you to send emails to your leads, trial users and customers based on what they do and who they are.
One thing they really focused on was email courses. The problem with email courses is that somebody needs to create them first. If you’ve ever created an email course, you know that it’s a painful process, most people don’t enjoy doing it, and thus indefinitely postpone it. In order to overcome this barrier, Drip offered to do it for their customers. If you had a blog or an ebook, you could simply send Drip the link, and they’d turn that into an email course for you.
This created a ton of value for the customer. But it also helped to build loyalty and a sense of reciprocity.
Done-for-you online stores
“When we approached merchants asking if they wanted to use our software to make online stores, some said no, but they’d let us make one for them. Since we would do anything to get users, we did. We felt pretty lame at the time. Instead of organizing big strategic e-commerce partnerships, we were trying to sell luggage and pens and men’s shirts. But in retrospect it was exactly the right thing to do” – Paul Graham
What opportunities do you have to onboard your new users one-on-one and help them to get the most value out of your product?
Let your whole team do support like Stripe.
Support is typically something companies want to outsource cheaply.
As an unscalable startup, you want to go the opposite way. Do support in-house like Zappos, and deliver an outstanding customer support experience. For Zappos, support is not just a cost-center, but an awesomeness-center, a department that creates awesome, incredible experiences for their customers.
Take it even a step further and do it like Stripe. During their first years, they offered 24/7 access to their founding team via livechat. If a Stripe customer had a support question at 3am in the morning, and nobody was in the chat, the founders phone would ring, and they’d help their customer to solve their problem in the middle of the night.
At Close.io, we’re almost as fanatical about support as Stripe, although we learned that with thousands of customers around the world, our engineers would be sleep-deprived very quickly.
Think about all the horrible customer support experiences you’ve had – it’s so easy to stand out by just being a genuinely helpful human being, and making yourself available, rather than having some unskilled support agent copy paste an answer from a database that may or may not answer the question you have.
But aren’t founders too important to do support?
If the CEO of a billion dollar company isn’t too important to do support day in and day out… you probably aren’t too important to do support either.
Who am I talking about? Craig Newmark from Craigslist.
Think your time is too valuable to deal with customer issues? Well, Craig’s net worth is estimated to be $400 million, so if he can do customer support… my guess is, so can you!
Do what others don’t.
It would have been easy for Craig to decide: Well, dealing with customers was really helpful when we started out, but now it’s time to begin a new chapter. Let’s outsource all that stuff.
But even when your business is making millions of dollars… keep doing unscalable things.
It will become harder and more painful, because you’re dealing with more complexity, larger numbers, more people. Keep doing unscalable things anyway. Don’t become a faceless corporation where nobody cares about the customers, and where no customer cares about the company.
Visit your customers.
Physically visit your customers where they use your product. Stop by their offices and see how they’re working with your software.
Is it time-intensive? Yes. Is it stressful? Yes, it is stressful to get in a car, or even a plane, and spend your whole day visiting customers, when you could also work on getting things off your to-do list. Is it worth it? You bet it is. Apart from various tangible benefits, it’s also incredibly inspiring and motivating to actually see with your own eyes how your product makes other people’s lives better.
Say thank you.
Express your gratitude to the people who pay to keep your operation running: your customers. Not just as a byline on your monthly invoice like many corporations do, but in a sincere way.
WineLibrary’s Thank You Department
When People ordered wine a Gary Vaynerchuk’s online store, they’d often get a thank you in one way or another. Maybe a piece of chocolate in the box, a handwritten note, or a friendly call from the team. This wasn’t just something they did for special occasions, he had a dedicated team for coming up with and executing cool ideas to say thanks to their customers.
Wufoo’s Postcards
When was the last time that you actually received a real hand-written personal letter or postcard… from a company?
If you were a customer of Wufoo, you’d have gotten one from them.
Everyone on the Wufoo team used to sit down once a month and write postcards to their paying customers. They’d also put silly, funny little stickers on the postcards and letters, which fit in well with their brand and personalities.
Not only was this a great way of showing appreciation for their customers, it also helped to create some extra-buzz since lots of people shared pictures of these postcards on social media or even blogged about it. That’s how you can scale the unscalable.
Give office hours.
Spend one-on-one time with your customers and share your advice and expertise. Use your industry insights to help them become more successful. Provide as much value as you can.
If you’re selling a software product, what business are you really in? You’re not selling your software. You’re not offering your customers a solution to their problem. Ylou’re in the business of making your customers more successful.
Close.io’s Sales Office Hours
Every single person on the Close.io team knows a lot about sales. We’ve done sales for more than 200 venture backed startups and closed deals many millions of dollars. Our sales software is used by thousands of people all over the world. There are very few people who can match our expertise in the area of entrepreneurial and startup sales.
That’s why we decided to put this expertise to use for our customers. Every Close.io customer can book a free sales office hour with me and tap my brains about ways to improve their sales game.
Our mission has always been: “Never again should a great company fail because of a lack of sales.”
Our software is simply what provides us the financial firepower to pursue this mission. It’s an extension of this purpose. Our sales office hours and the insights we share on our blog, in our videos and books are other ways that help founders to make more sales and close more deals.
What is it that you’re helping your customers to become more successful at? How can you help them in other ways than with the product you’re offering?
Set simple goals. Then hustle!
The most powerful single piece of entrepreneurial advice I ever got in my entire career came from Paul Graham in form of a question: “What do you think is the one most important indicator of success for you? Signups, users, traffic, revenue…?”
Once you’ve identified your most important (quantifiable) indicator, use that are your core metric, the yardstick against which you will measure your success.
Focus on this core metric. It will make all your decisions a lot easier, you will be able to prioritize tasks and opportunities better, and it creates clarity.
Founders who want to build scalable startups often do the opposite – they create complex calculations of various numbers and indicators to determine success. Don’t do that. Keep your plans simple – executing them will add more than enough complexity.
Say no.
It’s just as much about deciding what not to do as it is about deciding what do. Being unscalable means saying no to many things you could be doing, and instead focusing on the few things you absolutely should be doing.
Create something some people love, not something that a lot of people like. Yes, you can create something that’s scalable, with all the processes in place, and leveraged outside resources. But all that means nothing if it doesn’t catch fire because nobody cares. All the clever scalable systems don’t mean anything as long as nobody buys.
These are just some examples of unscalable growth initiatives. I hope they will inspire you think up your own ways of growing your startup. Don’t discount ideas just because they won’t scale – what matters is: will they work for your startup at it’s current stage? Most of todays successfully scaled large corporations only got there by doing things that didn’t scale.