WHAT TO DO WHEN SUCCESS KILLS YOUR START-UP
Imagine it: your start-up launches and starts to blow up. Sales were projected to see a growth rate of 10% month over month but instead, sales started to spike, month over month. Cash was flowing in which allowed the company to pour fuel on their marketing budget. And they were just entering the holiday season. Their success story was being written in real time.
But sadly, this storybook tale doesn’t end with a happy ever after, as it was success that killed the golden goose. The evil character was played by the credit card companies which are cautious and skeptical by nature. All credit card processing companies hold back a small percentage of charges, to protect themselves. But when sales spiked so much faster than expected, they got to thinking that the sky might be falling and started holding back just when the company needed access to their capital to fulfill their orders. Learn how to avoid a credit issue here.
The next chapter is predictable and in hindsight, avoidable. Cash became tighter and tighter which made it harder and harder to place orders to fulfill goods sold. Deliveries got backed up, customers started to cancel orders, customer service employees were overwhelmed, chargebacks increased which made their credit card companies even jitterier.
Remember that gasoline fueled marketing initiatives? Sadly, it was brilliant. More orders came in since the website was still promising that the goods would be delivered before the holidays. The owners started borrowing on their personal credit cards to pay the bills while sales kept exploding. The success they had dreamed of was killing their business.
I don’t need to finish reading the rest of the story; the ending is apparent.
HOW STARTUPS CAN CHANGE THE ENDING OF THEIR STORY
What could the company have done to change the outcome? Slow down fast. Stop marketing; temporarily remove items; alert customers after Thanksgiving that orders will not be delivered by year’s end and most of all, conserve cash.
But this alternate ending didn’t happen because the founders didn’t have the experience nor the right set of advisers to guide them. Finding mentors or building Advisory Boards can provide a start-up, or any business, with a wealth of information, experience and contacts.
The CEO at ReadyForZero wrote:
“As an aspiring company-builder, you always find yourself in situations where you “don’t know what you don’t know” but you have to stay in motion and make decisions regardless. Without a savvy guide, in the form of a mentor, you may wind up making crucial early mistakes that would have otherwise been avoidable. The smaller your company, the faster you need to move, often without enough information to make perfect choices.”
But happily, these entrepreneurs wrote a new story that has a happy ending. These 1st time entrepreneurs lost their company but gained wisdom. They retrenched, opened a new venture and, with the help of friends (and advisers) are on the path to achieving their dreams.
“Failures, repeated failures, are finger posts on the road to achievement. One fails forward toward success”.
C. S. Lewis
Note: this article first appeared on Don't Bang Your Head.