Why Startups Fail to Create a Go To Market Plan
While some may say that meaningful trips and vacations are made up all the things that go wrong - the flat tire, the lost luggage, the unexpected stomach bug - the same can’t be said for the journey that digital health startups take from launching to scaling.
Sure, the unexpected may happen along the way, and you’ll have to adjust accordingly. However, statistically, around 70-80% of startups fail during very specific phases of their development.
Since it’s not normally a fluke, the good news is that these breakdowns are often preventable. With that in mind, let’s take a closer look at startups’ journeys from infancy to maturity, discovering how to keep the motor purring for a smooth ride to greater revenue.
Phases of growth
There are plenty of growth models that have multiple inflection points. And while in depth viewpoints can be helpful, for the sake of simplicity, I’m going to break down the startup journey into 3 easy-to-remember phases:
Think of these like mile-markers. They tell you where you are so you can plan for where you’re going.
As a startup, time and capital are your most important assets, but they’re easily wasted if you haven’t prepared for the future. That’s why you need a market plan to keep you from making wrong turns or squandering time in the least valuable places.
At this point, we all probably agree that growth frameworks are valuable and necessary. But what if you (like many other startups) find yourself with one foot in the startup phase and the other in ramp up? Without a market plan, this gap can easily widen causing one foot to eventually slip.
However, it doesn’t have to be that way.
Why inflection points can make...or break your startup
Often breakdowns emerge with fundraising, but many times there were cues and hints along the way that could’ve prevented these frustrating crises.
Case study 1:
One of the ways this shows up can be in the hiring process. If you don’t know your inflection point, you can hire the wrong people at the wrong time, leading to stunted growth during the most vital periods of growth.
For instance, during IPR (Initial Product Release), you shouldn’t be hiring a VP of sales, and here’s why. Since around 50% of their compensation is based on sales, startups rarely, if ever, have enough of a sales foundation to support this position at this growth point.
Case study 2:
Another way startups can have one foot in startup and the other in ramp up is with market segmentation. When companies skip this step in the startup phase, they have very little documentation to hold their staff accountable when implementing new sales and marketing strategies.
For instance, how can you build a sales playbook or content tree if you don’t know what segment of the market you’re trying to reach? Beyond that, how do you nail down discovery questions if you don’t know your avatar?
All this to say, building a great product is only a small part of what you need to be doing in the startup phase. In reality, you need to be preparing for the next inflection point so your growth doesn’t stall out during those initial 18 months of startup life.
Baselining: Market analysis that drives revenue
If you want to prove that your tech solution can drive revenue in the long run, then market analysis is the ticket to get you there.
Specifically, you need to know what your base line market is. Say, for instance, that your Total Available Market (TAM) could generate $10 billion each year. The reality is that you probably won’t be able to reach all of these potential buyers right away.
That’s why you also need to pinpoint your Serviceable Available Market (SAM) - the potential buyers who are in a specific geographic area or who fit other specific criteria.
To really hone in on your market, however, you need to go one step further and find your SOM (Serviceable Obtainable Market). This smaller vein of buyers has the highest probability of becoming a customer and can guide your marketing strategy so you amplify your time and investments.
Forecasting the future of your startup
Inflection points, market analysis, strategic growth - all of these affect two very important parts of the future of your company - investors and future customers.
Persuading your investors
If you know the attributes and revenue of your SOM, then you can show investors that your financial forecast is tied back to specific attributes of your current clients. These measurables are what stakeholders want to see if they’re going to continue investing in your tech solution.
Determining your SOM also removes some of the risk for investors, making them more likely to jump at funding opportunities. On the other side, TAM can convince them of the immense potential for growth and ROI. All of this makes it easier for investors to commit to backing your startup.
Landing more buyers
Plus, say you have 3-4 clients during the startup phase. Your startup SOM can help you pinpoint the attributes of your ramp up SOM, giving you traction BEFORE you ever get to the next inflection point.
All of this ties directly back into revenue stream and ROI - key factors that can make or break a startup in the first year of its existence. That’s why you need a market plan to strategically guide how you spend your time and resources, avoiding waste and preventing breakdown in revenue and funding.
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WHO IS WHITNEY?
Whitney is a consultant, speaker, and writer on a mission to help life-saving, life-changing technology break through the noise and achieve mass user adoption. Learn more about her here.