Eric Siu explains why premature scaling kills most startups. Focus on making your core product remarkable enough for word-of-mouth instead. Hit 80-85% annual retention and high NPS scores before you expand, and test new areas with contractors first.
You know what the number one cause of startup deaths are?
What?
Premature scaling. I've made this mistake many times. I still think I might continue to make these mistakes, but it's thinking that you're better than you are already and not going deep enough in that core service to make it super excellent and make it super remarkable where you're getting a ton of word of mouth. The best agencies, maybe 50% of their customers are coming through referrals, word of mouth. That's when you know you have something really good. And then your retention rates may be like 80%, 85% annually because there's going to be churn every now and then. And so if you're doing those 2 things and your net promoter score is very high with customers, okay, then you can maybe consider expanding and their clients will start to ask for stuff.
Hey, what do you think about this? We actually need a lot of help with this over here.
You start to hear that more and more, that becomes a signal. And then maybe you start to test that with other contractors to start. And if it does really well, then you can think about hiring full-time people.
