EP. 3: What to do when your growth is stagnant
Growth suddenly going stagnant? Here’s the top 3 strategic questions you need to answer in order to unpack and troubleshoot your stagnant growth.
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TL;DR
Transcript
What’s up founders, and welcome to another episode of the In Demand podcast where we talk all about how to get your very first 100K MRR. I’m your host Asia over at DemandMaven, where we work with early stage founders on reaching those exact growth milestones, those very first milestones, the 100 customers, the 10K MRR, and then of course the 100K MRR.
Today we’re going to talk about one of my absolute favorite topics, which is what to do when growth is stagnant. You have been, it seems like you’ve been really putting in the effort, you guys have been building, launching new features, talking to customers. Maybe some of those, maybe none of those. Maybe you’ve been testing ads, maybe you’ve been testing a bunch of different things or trying a bunch of different things, but for whatever reason, growth itself is just, it’s just not budging.
The MRR is not increasing, the revenue isn’t increasing, and it’s probably one of the most frustrating situations to be in because you’ve probably been putting in a lot of effort, but it’s not netting out into a particular result. The desired result, which is growth.
Well, the first step is really to not panic, which if you have been putting in a ton of effort in terms of growth, and you’re really not seeing the result, it’s very easy to sink into this like, “Oh man, like I’m doing all these things and it’s not generating the desired result.” This could have been for months, this could have been for some of you, years. Either way, it’s sounds obvious, but it’s so important to remember, don’t panic. It’s okay. We’re going to talk all about how to not only troubleshoot this, but what are some of the questions that you need to answer, and what are some tactics that you can actually do to answer these questions?
There’s really just three questions that you need to answer when you’re trying to figure out why your growth is stagnant, and what you can do to overcome that stagnant growth. What I’m going to do today is I’m going to first give you the strategic question, the big overarching question that you ultimately need to answer, and then I’m going to give you a few steps or tactics if you will, to actually take to answer those questions if you don’t already know the answer. So, we’re going to cover three.
The very first one is actually a very, it is both very complex and at the same exact time, there’s beauty in simplicity. The first question is, “Do I understand what is broken?” Typically, whenever we are dealing with a business that is experiencing stagnant growth, usually the number one indicators of that is that something is broken.
There is something in the funnel, there is something in the business that has ultimately broken and not functioning as well as it could be, should be or at all. Basically stagnant growth means that something isn’t working the way that we expected it to. Whether that’s in our control or outside of our control, is really to be determined. And the first step, and this is this the first step that I almost always take, especially when dealing with stagnant growth, is we have to look at the business performance first before we ever dive deep into marketing or growth or customer success or sales or whatever part of go to market that could be suffering. The first step is really to understand well, is the funnel broken overall? And we look at the business performance first.
The reason why we almost always take a step back and we look at the business performance first is because before we assume that it’s a marketing problem, or a customer success problem, or a sales problem, first we have to really take a step back and look at the overall business and look at the overall picture and say, could it actually be spread across many of these different departments, and we just didn’t realize or we didn’t know or it was. It’s been a looming challenge or a looming issue for a long time that we’ve kind of accrued a little bit of a debt, and now we need to pay it off.
What I mean by that is when looking at the business performance, or basically just looking at how many free trials you’re actually generating our signups or whatever that main entry point KPI you actually have, and then we take a look at how that’s converting over time. Do you have a healthy, and I’m putting that in big giant finger quotes, but do you have a healthy free trial to paid conversion rate? Do you have a healthy freemium to paying customer conversion rate based off of just super basic industry standards and also historical measures? So you likely have quite a lot of data that you’re sitting on top of that you just need to actually take a step back and analyze yourself, and then all the way down to churn.
Do we have an unreasonably high churn? And then of course when we look at the top of the funnel, are we getting enough traffic? Are we getting enough introductions? Maybe demos are really your main entry point KPI, and maybe you need to book as many demos in order to close deals. Well, same overall formula. You either need traffic or you need introductions in order to book those demos obviously. So we’re really looking at when we look at from top to bottom, very at the very, very tippy top, are we overall seeing growth at the top of the funnel? Meaning that traffic or maybe it’s the introductions or the referrals and then are enough of those people converting into paying customers?
So is that free trial to paid conversion rate healthy? Is a freemium to paid conversion rate healthy? The demo to close deal conversion rate healthy? And then from there, we get down to return. Are we retaining enough month over month? The reason why we start by looking at the overall business funnel is because it becomes pretty obvious pretty fast that if one of those things is broken, meaning if we don’t have a healthy conversion rate in one particular place, maybe we’re getting tons of traffic, but we’re not getting enough signups. Maybe we’re actually getting tons of demos, but not enough people are becoming customers. Maybe we actually have both of those things off the charts in terms of free trial signup or paying conversion rate, but we have an insane amount of churn.
It could also be that it’s actually really expensive for us to acquire a customer, and it could also be that every time we do acquire a customer, one customer doesn’t create another customer, meaning they recommend the product, or they refer it to someone else, which means that every single customer that we acquire is actually really expensive because they don’t generate any others.
When we take a step back and we actually look at how the business is performing, that’s when these things become much more clear and they become much more obvious. And it actually also becomes much more clear and obvious, where do we need to dig deeper? Because if we see that we have a retention problem, is that because we’re attracting the wrong kinds of people, or is that because we’re attracting the right kinds of people, but we haven’t achieved the level of product market fit that we expected to achieve? That tells me, okay, well we either need to look at how we’re acquiring customers and closing them, or we need to be looking at the product or both. It’s the same thing for top of the funnel activity. If we’re not converting enough of our free trials or our signups or our demos, that tells me also we’re either attracting the wrong kinds of people or we’re not positioning the product in the best way that we can be.
It could also be that we’re doing the wrong activities. Maybe we’re acquiring people from the wrong kinds of channels, and we should actually be focusing on different parts of the funnel instead. This is where we start to dig deeper into not just the overall different functions of the business, meaning like marketing, product, sales, et cetera, but now we’re kind of drilling down into, okay, well what about our acquisition strategies are inadequate? What about our activation strategies aren’t adequate? This is where we start to really understand and begin to answer that very first strategic question. Do I really know what’s broken?
Now if taking a dive into, do I understand what’s actually broken business wise, funnel wise, if that gives you a little bit of a heartburn, and you’re super overwhelmed by the analytics, or you don’t have any analytics installed, I would say this is the time. Because if you’ve noticed in some kind of way that your growth has been stagnant, I’m assuming you’re measuring something. And if you’re not, it’s definitely time to start.
It’s time to start paying off your analytics debt. Just like you can accrue technical debt, you can accrue analytics debt. And believe me, when you are trying to grow, analytics debt, paying that off is not fun. It’s not, but you’re going to have to. Because if you don’t, if you can’t actually look at your business and really point to parts that are broken, you’re likely not measuring the right things in the first place or you’re not measuring at all. Both of those situations, one of those is definitely worse than the other, but if you are not measuring anything at all, it’s time to pay off the analytics debt so that way you can actually point to a different part of the business and say, “Oh, it’s really this. It’s here. Here’s the problem,” or it’s spread across the different functions of the business. That’s also very likely.
All right. Question number two. This is the second strategic question that you need to answer before you start digging into how to fix your stagnant growth. And that second question is, do I understand what got us here? This one is a little bit different than understanding my present. This is really understanding the past. Do I know or understand what things in the business and in the market that were happening that led us here? Stagnant growth is not one of those things that necessarily happens overnight, unless a big market change actually happens. So meaning something outside, totally outside of your control. Maybe an integration partner changes the way that they measure something, or maybe they release an API or maybe a competitor does something that dramatically changes the way that people view your product or convert or become paying customers. Either way, do I really understand what has actually got me here? Whether that was market wise or whether that was internal or both.
So the activity to take here, and this is where it really does depend on what ultimately is broken in the business. And I say broken, I don’t mean that super negatively. It sounds super negative, but it’s true. Usually stagnant growth is because something just isn’t working very well, or isn’t working at all. But based off of what you find, you also might find that there are very clear tactics that align with what wasn’t ultimately functioning very well. What was misaligned or what was actually broken, and then of course there’s also things in the market that are happening that you might be aware of and might also not be aware of. But one activity that I almost always recommend for people answering this second question, it’s really all about getting back in touch with the customer. You will hear me talk about customer research pretty much forever because it is the one activity that pretty much always tells us exactly where we need to go, and who we need to be focused on, and what activities we need to be doing.
And I also just firmly believe that very few problems are actually solved by not talking to the customer. Find that nine times out of 10, especially in that journey to a 100K MRR, being extremely dialed in with your customer, what their wants, needs, fears, dreams, goals, understanding those things, like where they hang out, where they go. Those are the kinds of things that I’d like to understand and know about our customers so I can make the appropriate judgment based off of how we want to grow. I find that whenever growth is stagnant, especially with a business trying to get that first 100K MRR, typically whenever growth is stagnant, it’s usually a combination of two things. There’s something in a particular function of the business, or several different parts of the business or departments, functions, practices, whatever you want to call it. Could be marketing, sales, product, could also be acquisition, activation, retention.
It really depends on your situation and what’s actually going on, but I find that when one of those things is contributing to stagnant growth, at the end of the day, there’s something about that function or practice that isn’t aligned with the customer. Because what we’re ultimately measuring is really customer behavior. At the end of the day, all of the MRR, the activation, the free trial to paid conversion rate, free trials in general, those are directly correlated to actual real customer behavior. When we take a step back to analyze the business, and then take the next step of interviewing the customer based off of what we find, we can usually unlock what actually got us to where we are today, and what we need to do to fix it.
One of the best examples of this was actually a client that I had where, as we started working together, we did a bunch of customer interviews as per usual, because that’s always one of the very first places that we start. But as we were looking at what was leading to the business’s stagnant growth, we realized that we had these amazing customers who had been with us for like two years, sometimes a year, and they were raving fans. They were so excited about what we were doing and what we had to offer. And there was a moment where we thought maybe we need to attract customers exactly like this and it’s not wrong thinking. In fact, I think it’s absolutely part of this particular business’s future. But one thing that we learned as we did more and more and more of these interviews was they’re raving fans now, but when they first started their profile, their makeup, the kinds of customers that they were back then two years ago, a year ago, they were in a different part of their journey.
So we were attracting property management companies that had what, 100 to 200 properties, but when they joined this particular, when they became customers of this particular product, my client, they were actually much smaller. They only had like maybe 10 or 20 or so properties, and they grew with the client’s product over time. We realized that a lot of our messaging was really catering towards, well, it wasn’t really specific to anyone except for people in this overall industry. People in this particular nation, this like property management kind of company world. And it became very clear that we really have two main segments that we go after. There’s the property management company that’s just starting out in their journey and needing a tool to help them automate their listings and properties. And then there’s this other vertical or this other segment of the market, much more mature, they definitely don’t need as much handholding. They generally know what it is that they want, and how they want to be helped, and they just don’t need as much guidance, but they need confidence.
It became very clear that our stagnant growth was largely contributing to, well, we’re getting the signups, but we’re not doing a whole lot to cater to this other segment, to the younger one, to the earlier one. So, now we can start to brainstorm and plan for not just acquisition activities, but activation too. So what are the resources that these shorter, or excuse me, smaller companies need? The other very big indicator that we needed to offer more support to this other segment was that the sales team was spending a lot of time and effort trying to convert basically these smaller deals. And that’s not to say that that was our fault. That was just the nature of what was also happening. It was a wake up call, if you will, that “Oh man, like our marketing is doing the best job right now of converting these smaller companies. Sales has to do it.”
So we were really seeing this problem manifest in not just the acquisition side but the activation side as well. So, we were spending extra resources getting these smaller businesses and smaller deal sizes to convert. And that’s not to say that that’s a bad thing. It just, it became very obvious that, “Oh, part of our stagnant growth is because of this. It’s because we’re not doing the best job of converting these smaller customers passively.” And not to say that passively is the best way, it’s just it wasn’t as efficient, and our marketing wasn’t exactly doing the best job. So from a tactical perspective, at least in this case, we decided to invest more on better onboarding, and also creating marketing content that speaks to those smaller businesses who need a lot more handholding. But we can do that as automated and as optimized as possible now.
In addition of course to brainstorming and designing campaigns that will attract those smaller property management companies. With that example, it became pretty clear also what got us here into the situation that we’re in, and by doing that customer research and by really looking at the overall business and how it was performing at the time, it became pretty clear that what’s really brought us here was an underinvestment in two different segments, and also potentially I want to say an over-investment but maybe a little bit too much focus on a different segment when really the first one was the one that we should have been doubling down on.
All right, the very last strategic question that you need to answer now. This is the clincher. This is the one that will bring it all together, especially if you took your time and you really answered the first strategic question, and you also understand generally speaking, what the activities were or bets were that you made that got you into the situation that you’re in now. And this last one brings it altogether into something that you can actually execute.
And that is what experiments or tests, what I need to execute in order to learn as fast as possible. This question is one that does depend on just your understanding of what’s impacted the overall business funnel, and also what opportunities are currently available to you. It also really depends on how well you currently understand how marketing, sales, product, customer success, the overall go to market functions work together, and also if, depending on if you’re struggling with acquisition or activation or retention, what are the strategies that ultimately help you impact each of those parts of the business?
Your understanding though doesn’t have to be perfect. At the end of the day, after doing the two question analysis if you will, you aren’t going to come up with some pretty strong ideas of what you need to execute. The goal of course though, is to think about them in terms of experiments, and your ultimate goal is to learn as much as possible.
I think it’s really easy to fall into the trap of, I need to execute these things and expect a growth result, when in reality they’re really more like experiments. If you put too much pressure on achieving a very specific growth result off of an activity that you’re really not certain if it will actually contribute to growth, what will end up happening is you’ll try it, it’ll fail, and you start wondering if it’s possible to grow at all. Or, maybe if you had done something different, you would see a different result. At the end of the day, I just want to emphasize how important it is to, if you can afford to at least, think about your tactics as experiments. There is never a promise of growth at the end of the day. But if we can design really smart experiments and if we can think of them as experiments in hopes of learning something, then that’s actually what brings us faster to our result than executing a few different things, not treating them as experiments or tests, not learning anything.
And then of course never actually achieving the desired result because we really didn’t think about our experiments or our tests in the best way. And in addition to that, maybe we didn’t prioritize them as well as we could have. And also maybe we didn’t have enough information in the first place. Are there best practices and do those best practices likely bring us a desired result? Of course. But I think that the most important thing to remember is of course that they are truly experiments. Nothing is promised in this world, in this space, especially this space, where a startup life is so volatile, which is why I always encourage founders if they can afford to, delay the expectation of the outcome to really approach things as scientifically as possible. But also keep an open mind, because you would be surprised at what generates a result versus not.
I think the second thing about this third strategic question, so when you’re thinking about those experiments or tests that you need to execute in order to learn, something to remember is that it is extremely rare, have it been my experience of working with, at this point, dozens of startups and founders at an early stage. It’s so important to remember that there are no silver bullets. There just isn’t one. I’ve never worked with a founder, I’ve never worked in a business, whether it was B to B, B to C, early stage, late stage, mid stage, funded, non-funded. Doesn’t really matter. When growth is stagnant or when there’s issues with growth. It’s never just one thing that we need to execute in order to see the growth. It’s so very rare. It’s just extremely rare. I’m pretty confident in saying that 10 times out of 10, a hundred percent of the time, it’s actually a combination of several different things.
You likely took action, not just an acquisition but an activation or maybe you took action in marketing and sales and product. It’s very likely just one thing that unblocks the growth and that’s just purely because businesses are complex, but so are our markets and our customers. It’s very rarely ever just one headline change or one specific activity that we took that generated or resulted in massive growth. Usually, it’s several things.
Back to the property management example, this particular product was experiencing stagnant growth, and we conducted several different experiments. We designed several different experiments in all parts of the business. It wasn’t just, “Oh, we just need to maybe change a headline or change a campaign.” It was, “Oh my gosh, like we’re missing case studies. Our website messaging could be a lot better. We need different pages. We also need to be thinking about onboarding changes and the emails that we’re sending out whenever people sign up aren’t up to date. Oh, and also customer support has not scaled as effectively as it could have. We need to scale our customer support and our customer success efforts.” One of the best ways to do that is through knowledge base. “Oh man. We’re missing a few features.”
It was across the board, and usually whenever growth is stagnant, that’s exactly what’s happening. It’s usually across the board. And we can take a look at specific marketing activities and specific product activities and specific sales strategies to impact that. But it’s very rarely ever just one. So keep that in mind. There are no silver bullets. We want to believe that there is one. But I always encourage founders, if you’re ever struggling with stagnant growth, don’t come to the table with just one idea. Come to the table with several. We need many different experiments. We need to learn as much as possible at once. And the only way to do that is to, of course, design conduct and actually do them. And to learn from them. We prioritize them as best as we can, and we always double it back with research and we double it back with what we know. And then we try to backfill our knowledge of what we don’t know. But that’s how we approach it.
All right. Time to around this out. So, if you were able to answer those three questions, the first question was, do I understand what is broken? The second question is, do I understand what brought me here? And the third, what experiments or tests do I need to execute in order to learn as much as possible? If you’re able to answer those three questions, not only are you light years ahead, but you’re already on the path to figuring out what’s creating the stagnant growth and what do we need to do to fix it.
As always, thank you so much for listening. I really hope that helps. I hope you learn something. I hope that this helped unblock you in some kind of way, and also as always, I want to hear from you. What are some of the questions that you’ve asked yourself about unblocking stagnant growth, or what questions have you asked others to help them unblock their growth and to figure out what was contributing to that stagnant growth.
And of course, I always want to hear stories. I love stories. I also love telling them. So, if you have a story about what you did to unblock that stagnant growth, I would love to hear it. Thank you so much again for listening. I hope this was helpful. Again, my name is Asia. I hope to catch you next time. Awesome. Thanks so much guys. Bye.
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