I read way too many business plans with overly optimistic projections. I'm talking plans showing the entrepreneurs generating tens if not hundreds of millions of dollars in revenues in just a few years.
Unfortunately, such explosive growth rarely materializes. And the angel investors and venture capitalists I speak with are often really turned off by these projections.
But, many entrepreneurs will argue that such explosive growth is in fact possible. Just look at Groupon or Facebook. Clearly these two companies are exceptions to the rule, and both have grown dramatically in terms of customers, revenues and footprint in just a few years.
However, interestingly, each company has followed the same 3-step blueprint. And this same blueprint holds true even for slower growing companies, so I want to share it with you now.
Rule #1: Start Small
Both Facebook and Groupon started small.
Let's start with Facebook. When it originally launched, Facebook was only available to students at Harvard. Then, it was only available to students at Ivy League schools. Then, it was only available to college students. And then it opened up to everyone.
In fact, there was a time when I had employees who were graduates of Harvard and were using Facebook, and I wasn't able to use it myself.
Groupon, on the other hand, used the more traditional geographic expansion plan. The company started in Chicago where it is based. It then expanded to serving New York City, Boston, Washington DC, Los Angeles, and San Francisco.
Next it launched in cities including Atlanta, Denver, Dallas, San Diego, Phoenix and Seattle. And by the end of 2009, Groupon was still in only about 20 cities (today Groupon serves over 200 cities).
In both the Facebook and Groupon cases, the companies started small. They launched their offering to a relatively small group of customers. They got customer feedback and they improved their offerings.
Rule 2: Grow By Design
Once Facebook and Groupon improved their offerings, they didn't start going after every possible customer. Rather, both had a controlled game plan. As mentioned above, Groupon expanded into a few more cities. And Facebook expanded into the Ivy League.
Some key reasons for this controlled growth:
A. It allows you to further refine your offering and cater, as appropriate, to new needs exhibited in the new markets.
B. Operationally, it allows you to create better systems so that you can support the current customer base and larger customer base you hope to attract in the future. Likewise, it gives you time to hire and train the staff you'll need to satisfy your customers.
Rule 3: Make the Product/Service Great
Seth Godin hammered this point home in his great book Purple Cow. The point of the book is that you need to create a remarkable business. And that when your business is remarkable, you don't have to rely on multi-million dollar ad budgets to promote your product; the market will do that for you. For example, as you might imagine, seeing a purple cow would be a remarkable sight that you'd tell all your friends about.
So, the key is to offer remarkable products and/or services. Both Facebook and Groupon created and offer remarkable services. They solve a unique need in a highly elegant way. Groupon gives customers savings that previously were unavailable, and Facebook allows for social interaction that was previously unavailable.
Becoming the next Groupon or Facebook is a mammoth and extremely challenging task. But launching companies that experience significant growth and success is much less challenging and very doable. It can be achieved by each of you reading this today. So follow the 3 steps outlined above, and build a remarkable business.