Recently I was talking to an entrepreneur that went through a challenging period of trying to force growth that never materialized. The playbook is fairly common: raise outside financing, hire a bunch of people, and expect growth to increase. Only, not only did growth not increase, it actually went down. What gives?
Burn was increased with the expectation that more of the same would increase the growth rate. Only, it merely magnified an existing issue: customer acquisition wasn’t repeatable.
Spending money to grow faster when a repeatable customer acquisition process doesn’t exist actually makes things worse. Much worse.
New sales reps are ramped up but the playbook doesn’t work, and now making quota is more diminished with fewer leads and less help.
New marketing programs are ramped up but the previous ones weren’t scalable, and now attention and expertise is spread over more initiatives.
New roles and responsibilities are created throughout the organization in expectation of increased growth, only these require more management time and attention taking away energy from the critical functions.
More isn’t always more. In cases where the fundamentals of the business aren’t working, more actually is a detriment and reduces the ability of the organization to execute.
Before raising money and increasing burn, insure the repeatability of the model. Trying to accelerate something that isn’t working makes things worse.
David Cummings on Startups 