Growth is often a positive sign for startups and frankly any business. This is a prime indicator that your marketplace is heading in the right direction and what you are doing is working. What if you are growing at a rate faster than your team can handle? It’s not an uncommon issue to come across and can be very disastrous if not handled properly. As you continue to manage your marketplace, it’s important to keep these 4 factors in mind. Let’s get started!
1. Know Your Objectives
If you don’t know where you are going, how will you get there? This must be the first thing you and your co-founders must figure out to help manage the growth of your marketplace. Are you looking to become the next big player in your industry? While money is of course the driving factor for the success of your business, becoming profitable must the ultimate objective. A marketplace can not survive without a positive cash flow and identifying your objectives clearly can help you reach just that. The strategy that is created much see the whole scope of your industry and the market. Who are your competitors? Where are your distribution channels? What areas will you be targeting and have you identified the demographics of your market?
While it’s important to keep your eyes on your growth strategy, you must allocate your finances accordingly. Just because you can throw an x amount of money here to grow your business, does that necessarily mean you should do it? Understanding whether you can handle that growth and sustain it as a marketplace is extremely important. Take a look at your growth rate and monitor it over time. If you do not necessarily have the experience in handling growth, be sure to bring on a team member who is.
2. Analyze Your Finances
This goes back to having a positive cash flow. While money is going out to help run your marketplace, is money coming back in? Analyzing your finances can help determine the health of your company and which direction it is heading. Whether you are running on investors, bootstrapping, or on a loan it is important to know where your money is going.
As transactions are occurring on your marketplace, you must keep in mind a sale isn’t complete until the money has cleared the bank. I am not saying you need to nickel and dime every dollar of your business, but managing your finances accordingly is essential. Your marketplace must come up with a payables method to ensure sales dealt with accordingly and no issues are occurring. One of the worst things that can happen is accounting for money that isn’t even there and throwing everything off.
3. Control Your Budget
We often hear of startups and marketplaces that are forced to shut down due to spending all their investments. This is a very common theme since the boom of the Silicon Valley startup scene and happens more often than we hear. Does your company have a strong budgeting habit in place? Sure money needs to be spent to help a business grow but don’t go too crazy with it. Before making a purchase or spending on business related items, ask yourself, “How will this help benefit the company for the future?”
Take Beepi, a marketplace for people to buy and sell used cars, for example. The company was valued at $560 million and was going through about $7 million a month in expenses. That is a huge amount of money to spend and to think in one year the company spent about $84 million. Was there a cash flow of $84+ million coming back in? Definitely not as the company barely lasted 3 years. This is a clear cut example of poor budgeting and issues with the structure of the company. A large chunk of the month expenses were cited to “high salaries” and spending on items such as a $10,000 sofa for the conference room. Seems a bit much doesn’t it? While sure we want to have nice things and make the office a great place to work, there must be boundaries set.
4. Evaluate Your Marketing
This department is the driving force to your growth. What marketing strategy do you have in play to help drive customers to your marketplace? How are you reaching your current and more importantly potential customers? One of the biggest difficulties businesses face is stagnation. How are you helping your marketplace grow and taking it to the next level? Set goals and expectations for your marketing team to help track your growth on a regular basis. Break them down into monthly, quarterly, and yearly goals. This will allow your team to see where they need to be and their progress along the way.
There is no one size fits all solution to marketing, especially when it comes to different industries. What may work in tech, may not be the same in the sports industry. It’s important to be patient and test out your market with different strategy. Find what works for you and run with it. Don’t forget to make updates as the economy changes as well.