Zero to IPO: The blueprint for fast, profitable growth

By Anuradha Chandrasekaran
26 August, 2022

Why do new businesses fail? The most frequently stated factors are timing, money, poor market intelligence, and, in certain situations, a lack of focus, resources, or expertise. The more crucial question is: Why don’t startups grow into successful businesses? Lack of growth is one of the main reasons for failure, and this holds both literally and physically for companies and people.

According to our research, one of the most frequently disregarded reasons for business failure is relying too heavily on common sense. Any conventional strategy used by intelligent, educated individuals is guaranteed to fail.

In other words, the conventional view lacks predictability, interpretation, and control because it is not scientific. The present is too complex and dynamic to be handled by previous heuristics, which is why many family-run businesses fail.

Here is a structure that, whether you’re just getting started or growing, we believe guides your business decision-making.

The SBO Framework

Before you can optimize, you must first begin.

Start, build, and optimize are the three stages of company operation maturity. As implied by the name, it describes three phases in which brands first develop an area of interest, then build upon it utilizing growth mechanisms, before optimizing it for rapid expansion. Throughout the stages, these three stages of maturity apply to the brand’s most important aspects. While the brand’s three top focus areas are

Business executives must focus on these areas to varying degrees depending on the stage of a brand’s growth path. They, therefore, require various degrees of maturity in their company processes. Let’s examine how you can fit into these three areas of importance.

Customer Experience

Every new company with the idea that tackles customer pain points puts the customer experience first. The customer experience must be prioritized when developing a workable product with consumers as your primary focus. See how breaking it down into three developmental stages will help you better understand your focus areas.

Start
Make sure you’re making something that people need at this point to ensure that you’re acting correctly. Create a strong foundation for your product before you start, including product testing, packaging design, prototyping, logistics, and more. You must begin segmenting your customers once you have a sellable product. Concentrate on identifying the ideal client. Customer identification and audience segmentation become crucial. Who is your ideal client? Who is your ideal client, someone who will benefit greatly from your product, and who needs it? Expand on these ideas.

Build
The most crucial thing you can do as an early-stage business is present your concept to as many potential customers as possible to determine whether they will use what you are doing. You might start by getting in touch with friends and acquaintances in your network and asking them for recommendations. Inform them when the product will be available and offer to assist them in obtaining a sample. Send them a link so they can share the product with people who would benefit from it. This enables you to immediately get in touch with the correct people. Please contact your customer and solicit their feedback after distributing a free trial or sample. If three of the five clients you speak with perceive the product to be perplexing, you should work to remove that friction.

For instance, the creators of Airbnb first offered to take “professional” images of the homes and apartments of its first clients to get additional tenants to their listings. They went and took the photos themselves after that. They had wonderful customer dialogues, and their website listings and conversion rates improved. Even if it can’t be scaled, it was crucial to comprehend how to build a thriving community.

Optimize
The necessity of regular consumer communication cannot be overstated at this point. This enables you to evaluate whether your product satisfies their needs, take criticism, and iterate. It is an endless circle. After testing your product with beta users and making the required iterations, this is the time to ensure it’s ready for the general public. Agile development creates products in brief, iterative cycles as opposed to traditional product development, which takes months to complete each phase in a linear order. High-performing products will always be in this phase of improvement.

Customer Acquisition 

Startups struggle for two reasons: either they can’t gain customers quickly enough, or they can’t sustainably gain customers. Industry experts predict that startups will spend roughly 30% of the money they have raised on advertising to bring in clients. A company without clients is nothing more than a “pipe dream.” Every firm depends on its customers, which is why a business concept is never successful without a strategy for acquiring customers. Use the SBO framework to understand your acquisition priorities at various stages of development rather than just deciding whether to use paid or organic techniques.

Start
The initial 10 customers will almost always come via your network, recommendations, or low-cost paid marketing on platforms where your target market is active. Four of the people in your target market should be keen to sign up immediately if you chat with ten. (And the key to success is pinpointing your target market. Cast a wide net to prevent wasting time. (Go where love is felt.) A consistent 40% conversion rate is astonishing. At first, you could give anything away for free, but pricing for your product proved its worth. Let them focus solely on obtaining your product; don’t let them think about anything else. Talk to them after that. Since it is your best source of guidance, do not be afraid of criticism. Be tough, then move forward.

When you reach 100, make sure to pause and consider each achievement before starting to charge them the total amount. Identify your clients, their reasons for joining, what kept them there, and whether or not they left each location. Discover the genuine value, then place a lot of reliance on it. Your operational structure will be altered at each milestone. Be a slow-moving train. Make a strategy after evaluating. Don’t forget to devise an appropriate system for CAC monitoring.

Do not worry about CAC at this time. The objective is to establish acquisition channels and comprehend the dynamics and possibilities of each track.

Build
To find the most successful acquisition channels, you should experiment at this stage with social media, affiliate marketing, influencer campaigns, and paid commercials. Any costs related to sponsored search, digital advertising, channel-specific campaigns, etc., would be included in marketing expenses. To ensure that CACs do not exceed CLTV, D2C eCommerce enterprises must constantly compare this metric to customer lifetime value (CLTV).

The founders should develop an acquisition strategy that fits the ideal consumer profile and the product’s value. For instance, consider getting them through marketplaces if your target group consists of bargain hunters or people looking for the best value (e.g., Boat). Influencers and sincere content-driven marketing are perhaps the best options if your target audience is more selective and advocacy is a key trust-building lever (e.g., Nykaa). By the time this phase is over, your CAC should be stable, and you should be certain of the best distribution channel for your product.

Optimize
It would help if you used a variety of channels and different consumer acquisition strategies at this time. Your CAC should start to drop and stabilize at levels where it is profitable to acquire new consumers at scale after you better understand your customers and distribution networks. Additionally, cross-selling is a successful strategy for keeping your most valuable customers. Cross-selling also aids in the development of a strong rapport with your client, which increases client lifetime value and customer loyalty.

Client Retention

Seven times less money is spent on customer acquisition than on customer retention. It is easier to keep an engaged customer than to find, engage, and convert a new one. By keeping users from Day 1, D2C eCommerce firms can lower customer acquisition costs. This can be accomplished swiftly by rewarding devoted consumers, engaging them with targeted content and messaging, utilizing smart automation, and utilizing AI-led insights. What are the tactics for each stage? Here is an explanation.

Start
You must understand what appeals to various client segments if you invest in retention campaigns. Price is one factor that may influence some clients, while exclusivity or service quality may influence others. You may build a loyalty strategy that works for your customer base instead of a generic one by conducting in-depth customer research to learn what motivates loyalty in various groups.

Consider offering incentives to your current clients. Although it’s an old sales gimmick, it still works. You must reciprocate if you want someone to do anything for you. It’s quite simple to accomplish with e-commerce, and most significant businesses employ it. Customer loyalty and mobile applications are increasingly linked to one another. Start developing your platforms, such as mobile applications. Customers may browse items, read reviews, and make purchases more quickly using mobile applications because of the growing global usage of mobile technology.

Build
Consumer brands will seek to maintain connections with current clients and keep interacting with them via new touchpoints. You may offer percentage discounts, coupons, or extra points to persuade consumers to open a membership account or subscribe to a newsletter. To increase client retention, utilize your own channels, such as communities and mobile applications. Use strategies like push alerts and loyalty programs to regularly engage with consumers.

A positive DTC experience often results in a “lock-in” effect that boosts savings. For instance, L’Oréal invites clients to join the online loyalty program Worth It Rewards, and subscribers get greater benefits the more information they provide.

Nike is aware that exercise and sport are team activities and that individuals are more inclined to exercise in groups than alone. The Nike Running Club, for example, encourages solitary runners to pair up with other runners online, spreading the feeling of community and rivalry that many people crave. As a result, they built applications and partnerships to foster a sense of community.

Optimize
At this point, you know your consumers well enough to start developing membership programs for them and making tailored suggestions for them. This phase aims to make every repeat client into a brand evangelist who spreads the word about your company to acquaintances, loved ones, and even strangers. The goal is to make these customers adore your brand and goods. Consider the audiences for Apple and Disney!

For instance, Crocs sought to address poor consumer engagement, retention, and lifetime value levels. Solution? Using automated campaigns to communicate with consumers across several channels and installing an AI engine to recognize customers in real-time and provide tailored recommendations. Result? 42x marketing ROI, 33% of overall income from customer interaction, and 11.3% of total revenue from product sales come from personalization.

Conclusion
Remember that each stage is distinct, and the tactics you use for each focal area must be appropriate for your stage. It’s time to learn more about phase-wise strategy now that we’ve shown how to utilize the SBO model to examine each focal area in each step. Not in this article.

You may depend on us to keep track of your orders up until then!

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