How to Scale an Early-Stage Company Beyond the MVP Development Phase Follow these three simple tips on scaling a company beyond the Minimum Viable Product development phase.
By Fredrick D. Scott, FMVA Edited by Chelsea Brown
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I find that time and time again, when I speak to early-stage founders, they struggle to understand the key to scaling a business beyond their Minimum Viable Product (MVP). For those who are new to the term "MVP," let me explain what that is.
An MVP is the most basic version of a product that you can go to market with to gauge whether or not you have developed something that will actually grab a prospective customer's attention well enough so that they consume (buy) the product.
When founders begin the process of developing their MVP, they do so based on an idea they have, and that idea is (generally) based on a feeling they have or an experience they have encountered personally, where they felt something could be done better if only a certain thing was in place. Based on that belief, they begin the development process based on their idea for how the product should be developed and what they believe will be something the customer wants. Rarely do founders at this stage do the research necessary to understand their market or assess what their target customer profile looks like in that market, what their target customer's consumption patterns are, etc. This is actually the first mistake and often begins the long, arduous, stressful journey towards failure.
It doesn't really matter how much money a company raises from VC firms and/or angel investors. If you can't gain product traction, you can't generate revenue — and if you can't generate revenue, in time, you fail. It's that simple. So, what are the keys to scaling a company beyond MVP? Let me tell you what I've learned:
Build the company backward
It's great to have an idea and to develop a product based on that idea, but an idea is only as good as the customers who will spend money to buy it consistently and repeatedly. Before you invest your money (or other people's money) into developing a product based on your idea, invest money into understanding the market, and more importantly, the general customer types in that market, for example:
Learn their buying habits (how they spend their money, how they make purchasing decisions).
What their average annual income is
What they like
What they follow on social media
What social media platforms they use most
The easiest way to convert prospective customers into paying customers is to meet them where they are with a conversation that resonates with who they are. In short, find and understand your company's exit (the customers) before you enter (invest capital).
Related: Your MVP Isn't Really Viable Until Your Potential Customers Say So
Use your customers to achieve product-market fit
A lot of founders seem to think that product-market fit is a static thing, but it's not! Worse, some founders think they can create product-market fit internally with their team — WRONG! Product-market fit is a colorful way of saying "build the product your prospective customers actually want." The easiest way to build a product your prospective customers want is to TALK TO YOUR CUSTOMERS! From the first customer, you should be in regular communication with customers. You do this with surveys, polls, 1:1 follow-up calls, etc. You reward your customers for providing valuable feedback, because without them, you can't understand clearly what's right with the product and what needs to change.
Granted, over time, as you gain more customers, you won't be able to please every single one of them on every single thing, but what you can do is build customer consensus and roadmap product developments based on that consensus. It is important for founders to view product-market fit as a fluid process. Why? As a company grows and scales, its target customer profile expands, new subsects of the same customer profile and/or new customer profiles altogether will come for the baseline product offering that is available at the time they purchase.
However, being able to build loyalty and retention to the product (and by extension, the company) will require growth and development in the product to achieve the right product-market fit based on overall customer consensus. By making sure your product is always in tune and aligned with the customer base, you will extend your customer lifetime value (CLV). NEVER develop the product in an internal silo. Remember, it's not about what you and your team likes, it's about what your customers like, because at the end of the day, they are the ones consuming the product.
Related: How to Find the Holy Grail of Product-Market Fit
Gain as much customer data as you can
I cannot stress how important customer data is. The more you know about the people who take an interest in and purchase your products, the better you, as a founder, will be able to align your company's product to their needs and wants. There are two types of customer data, and both are equally important: direct data and indirect data. Direct data is the data you gather from the customer through their purchases, lead magnet captures, surveys, etc. Indirect data is the data you collect from observing your customer's interactions with your company's website.
We use a piece of software called FullStory on all of our family-owned companies for this. It allows us to watch how website visitors engage with our websites and other digital platforms that we've developed natively to get a gauge on how well we are doing in creating interest, getting them to make a decision and take action (purchase). This data is vital, because if the conversion point (oftentimes, a website) is flawed, no matter how great the product itself is, your company'' ability to scale will be severely hampered. Think of it like having a Lamborghini engine inside of an old, dusty Hyundai with flat tires … most people will pass the car by without a second look.
Gaining customer data is key in another area as well; Most founders start companies and build products with an ideal customer profile in mind — the customer they want to buy their product. Gathering customer data will tell you exactly who your actual customer profile is and allow you to pivot your marketing efforts to better align with the people who are actually consuming your product. You'd be surprised how many times I've looked at an early-stage company, heard them describe who their customer profile is and then implemented data gathering tools, helped them see that their true customer profile is vastly different, helped them implement strategies that align with who their customer profile is and watched them scale in ways they didn't think possible.
Following these three simple steps will put your company and its product in a far better position to scale and mitigate the possibility of failure considerably. A failure in these areas will drastically increase your odds of becoming one of the 99% of companies that fail every year. You don't have to be the smartest person in the world, in your industry or even in your company, to scale your business. You just have to be strategic and intentional with the actions you take at each step of developing your business and your product. Now, go and be great!
Related: The Five Stages Of Your Business Lifecycle: Which Phase Are You In?
