Why Your Startup’s Revenue Dried Up and What To Do About It

Don’t freak out. This happens to every new business.

image by jcomp

Here’s a cold hard truth. No legitimate startup ever goes from a handful of sales to $1,000,000 in revenue overnight.

By the time you and I read about a startup’s overnight success, they’ve likely already sunk a lot of time and money into a slow and steady climb that eventually broke their way. And at some point, maybe at several points along the way, their startup hit a revenue ceiling. Everything they were doing on the sales side suddenly stopped working and wouldn’t restart.

I’ve seen this happen up-close-and-personal with dozens of startups, across all types and in all industries. I’ve had it happen to me more times than I can count.

Here are all the reasons why I’ve seen a startup’s sales slow and stop, and what to do when it happens.

The Startup Maxes Out Their Personal Reach

What Happens: Customer acquisition cost (CAC) goes through the roof, because the startup has reached the end of its list of personal or professional contacts. It’s much harder to sell to someone who doesn’t know you.

Why It Happens: Most startups, especially those founded by first-time founders, will lean on their own networks to answer these first few critical questions:

• Does this idea have legs and is the product any good?
• How much is the product worth?
• How should I market and sell it?
• Will customers adopt and use it?

A founder’s own network is easy to reach, likely to take the sales call, and maybe even empathetic enough to buy.

It’s not a terrible strategy. In the short term, it can be a windfall, just enough of a boost to get out of the gate, learn a few things, and generate some momentum. But in the long term, it’s almost always a stream of false positives.

What I Would Do: Flag those personal network customers, either from the beginning or when you hit the wall. Completely remove their data from your analysis, and figure out why complete strangers are buying from you.