5 Barriers to Business Growth That New Ventures Rarely Anticipate
You may be convinced that your product is so great that it will be unstoppable. Here are market challenges you never anticipated
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Even when your new product or solution fills a real customer need, and has a positive value proposition, many new venture founders are surprised and frustrated to find that excited customers are hard to find and growth is slow.
Thus, as an advisor to many startups, without being negative, I often spend hours with them brainstorming on all the possible barriers that may slow adoption rates, and how to plan or modify the business model to work around these obstacles.
For example, the software-as-a-service (SAAS) subscription model was created many years ago to offset the high one-time purchase cost obstacle that killed many early software products.
Since then, the monthly subscription model has become the norm for a wide range of products and services, from web applications, to hardware, and services of all types.
Other obstacles to product adoption are equally onerous, but not so obvious, and in some cases, there are no easy solutions. Still it's better to be forewarned than to be caught off guard, with no Plan B or resources to pivot.
Here is my prioritized list of the top challenges I see today, with some recommendations on how to offset them:
1. Customers don't know your product exists.
In today's crush of over 140,000 new websites per day worldwide, it's easy to be overlooked, no matter how compelling your offering. My answer is that innovative marketing is always required, to stand out above the crowd.
Word-of-mouth is great, but I look for a real marketing budget and action plan.
As a starting point, I would expect to see a marketing budget in the first year of 15 to 30 percent of projected revenues. The plan better include some specifics on how this will be spread across multiple digital and traditional marketing channels, and metrics to measure which are providing the best return on investment.
2. They know you exist, but any change is painful.
Your challenge here is first to convince potential customers that your solution alleviates a higher level of existing pain, via quantified cost reduction, improved productivity, or other value.
Fuzzy marketing terms like "easier to use," "nice to have," and "less expensive" won't help your case.
I recommend realistic examples of cost savings and return-on-investment testimonials from early users. In my experience, single digit cost reductions are usually not enough to incent users to change tools or vendors. In all cases, make the change simple and fun.
3. Product is "disruptive technology" or a "paradigm shift."
These are terms often used by technical entrepreneurs to convince investors and customers that their solution is so innovative that it will disrupt the market or define a new category.
My advice is to use these terms very sparingly, since they invoke more fear than value to normal people.
The best strategy with real customers is to focus on the simplicity and value of your offerings, rather than the technical complexities. Steve Jobs was a master at this, and was able to establish a whole new market for smartphones by keeping his focus on positive human factors.
4. Requires infrastructure or regulatory changes.
Your product may have tremendous customer value, but the market may be stymied by forces that move slowly, and are somewhat outside your control.
For example, the move to self-driving vehicles raises many issues about liability, new laws required, and infrastructure changes.
Here, you first have to face the fact that more time and money will likely be required, for exhaustive public education and demonstrations, lobbying for regulatory changes, and incenting infrastructure growth. Identify interim growth steps to mitigate the cost and risk.
5. Customer buying decision process is multi-level or complex.
Selling products to education organizations, or the government, is never simple. Decisions are impacted by budget cycles, multiple approvals required, and political issues, no matter how strong the value proposition. Here I look for a plan that shows marketing at all the required levels.
Sometimes the solution is to change the target customer. For example, several education product providers I know have switched to selling to parents, rather than school boards. Others, selling scheduled home maintenance, have shifted away from less-caring homeowners to insurance companies, who see the savings in reduced claims.
Based on my experience, inadequate attention to acceptance obstacles and the realities of customer motivation are the primary reasons that startups fail, even with a great idea and a great product.
Innovative solutions alone won't make a business. You have to find and convince the right customers - they won't automatically find you just because you have a great solution.