Originally published in the March 2019 issue of Missouri Business Alert.
In our third year, in 2006, we got a phone call from the state of Kansas. They wanted to be the next geographic expansion of SourceLink. As part of the Kansas Economic Growth Act of 2004, they were interested in taking the entrepreneurial resource network we had piloted in Kansas City, Missouri, and launching it across the state of Kansas.
That’s when we knew we were growing a business.
The first hire, first customers, first check: those first year milestones told us that we had a product people were willing to buy. But your first strategic partners, first geographic expansion, the first time you cross the “valley of death” into actual revenue—these firsts tell you that you have a business.
When Kansas called, we knew we had a proven value proposition. We had survived our infancy. So how did we get there?
Understand your market.
According to CBInsights, the number one reason startups fail: no market need or a lack of understanding.
In 2003, we started building SourceLink in Kansas City. KCSourceLink was our pilot project, aimed at proving that building an entrepreneurial infrastructure to connect business owners to the resources they needed would translate into more startups, more jobs and an entrepreneurial ecosystem that was visible and accessible to anyone who wanted to start and grow a business.
We knew the pain points: people didn’t know where to go to get help to register and license their businesses, write a business plan, find funding or investors, etc. They didn’t know that hundreds of nonprofit resources existed in their community to help them grow businesses better and faster, at low or even no cost.
Prove your value.
We knew the stakes: about 30 percent of new businesses fail during the first two years, according to the U.S. Small Business Administration; 50 percent fail during the first five years and 66 percent during the first ten years.
But it’s these new, young firms that are responsible for nearly all net new jobs. According to the Kauffman Foundation, they are the primary drivers of job growth. (Worth noting: We’ve also run those numbers for our Kansas City community and discovered that nearly 60 percent of net new jobs are created by startups with fewer than 20 employees.)
We saw a solution: Most startups fail because of no market need, lack of sales and bad cash flow. What if we could connect early-stage business with affordable resources to help them research their markets, plan their businesses, understand their finances and find new customers? What if we could help communities map their entrepreneurial ecosystems and find out what resources entrepreneurs needed to start and grow business? How would that improve entrepreneurs’ chances of success? How would that help build local economies?
In 2003, we had to prove to people that entrepreneurship mattered. (In 2008, that argument was a lot easier to make.)
And yet the market need in Kansas City and beyond was clear. Nationally, businesses with fewer than 100 employees accounted for 98 percent of all businesses and firms with fewer than 20 employees made up 89 percent, according to the U.S. Census Bureau.
Helping them find resources to improve their chances of survival was key to building local economies. We set up metrics and tracked them with our proprietary technology, we shared our results with our community and our stakeholders, we educated our target audience at conferences, with demos, via earned media and with digital marketing—and we started building a market, where one hadn’t previously existed.
Build a plan and processes that scale.
Business plans may seem old school—or you may think you don’t need one until you’re going after funding. But to survive beyond year two, you have to serve your market in a scalable way, and a business plan can give you that vision and direction.
In our original three-year business plan, we projected our first expansion at year three. We started scaling in year two.
We could do that because of that business plan. It served as a living, working document, our guide for branding, marketing, technology development, staffing and culture. The plan kept us true to our vision and our market need and helped us document our processes, so that we could iterate and scale as the market invited us to grow. Our business plan was our playbook for scaling.
Don’t get complacent.
Comfort and certainty: these two words don’t fit neatly in to the entrepreneur’s lexicon and they’re two words that I still don’t think we at SourceLink have fully embraced.
To be perfectly honest, I always feel like we’re on the cusp of a new beginning, whether that’s a new market, vertical, product feature set, marketing strategy or community expansion. When you’re growing a business you’re constantly competing against new technologies, global players, stretched budgets and increasingly shrinking attention spans. We’re always learning, adapting, iterating, and looking for the next opportunity to do what we do better.
Because, as any growth entrepreneur knows, if you’re not moving forward, you’re moving backward.