Business professionals are no stranger to risk and uncertainty. Whether it’s reaching out to a new client, or releasing a new product, risk and uncertainty influence every business decision. They can push a startup to innovate faster, or bankrupt businesses that fail to plan accordingly.
But what are the differences between the two concepts? Are they similar, or more different than people think?
The Difference Between Risk and Uncertainty
Risk is defined as the possibility or probability of an unpleasant or undesirable event.
In business, risk might suggest the potential loss of money, time, or information. Most importantly, risk can be calculated or measured. Entrepreneurs can use market data to calculate whether a new product may be worth introducing. Accountants can use balance sheets to measure the profitability of certain stores. Calculated risk can be beneficial, as risk takers can also generate significant returns.
On the other side, there’s uncertainty. In contrast, uncertainty involves situations with unknown variables, information, and outcomes. Uncertainty cannot be measured or calculated.
Since uncertain events are unique and difficult to plan for, they come with even greater downsides for unprepared businesses. During the dot-com era, companies invested heavily in expensive domains before understanding their value. When the bubble finally burst, several companies disintegrated, and thousands of employees laid off.
The main takeaway from these two concepts: risk can be measured and predicted, while uncertainty cannot.
Examples of Risk and Uncertainty
Here are a few examples of risk and uncertainty in the business world:
- Risk is when an online clothing store decides to sell a new line of clothing, based on customer analysis. Uncertainty is when that same clothing store introduces a new, unrelated product without research, such as a new furniture line.
- Risk is when a company moves their processes and data to the cloud. Uncertainty is when a major outage affects multiple servers across the nation.
- Risk is when an ad agency opens an office in a new country. Uncertainty is when the country enters a recession.
Risk Management: How to Plan for High-Risk Events
Fortunately, risk is something that can be predicted and planned for ahead of time. Gary Patterson’s Million Dollar Blind Spots, outlines a simple but repeatable process for risk management:
- Identify risk – Spot the risk early through research and historical analyses.
- Assess the probability – Evaluate all the factors involved, including the likelihood of positive and negative outcomes
- Make a cost-benefit analysis of alternatives – Measure the pros and cons of each decision you could take.
- Choose a response
- Evaluate results – How did the chosen action impact the business?
- Ongoing monitoring – Risk events should be constantly checked for changing circumstances. In some cases, risk aversion may be the best option.
While uncertainty cannot be measured, the same approach may be taken in addressing related tasks and challenges. While a recession cannot be predicted, a business can take steps to protect the future of its employees and customers.
Turning Risk Into Opportunities
Risk and uncertainty surround every business. Weighing options and outcomes, and deciding the final action as a team is just one way a business can remain vigilant. With enough practice in risk analysis and assessment, risk turns from an obstacle into a challenge. Risk forces startups to mature and innovate faster through competition, and rewards entrepreneurs with greater experience of the market and industry. Risk can’t be avoided, but when businesses learn to prepare, risk can open up new business opportunities.
Risk vs Uncertainty
The main differences between risk and uncertainty can be summarized by control and predictability. Risk can be measured, and therefore, controlled. Changes in sales because of the season can be predicted and planned. This is why risk analysis or risk assessment can be important for a business’s strategic development. Calculated risks can lead to great rewards.
Uncertainty on the other hand cannot be quantified or controlled. For example, a new local competitor can have unpredictable effects on your own sales. You cannot measure uncertainty, you can only deal with uncertainty. This is why we look for certainty as much as we can: the more certain future events are to take place, the better a business can prepare.
Need help with preparation? Read our 5 tips on business planning.
Addressing risky situations requires courage and leadership. Learn how to develop those skills.
For more tips and guides on managing businesses and startups, follow Novel Coworking’s blog today.
Back in 2010, marketer Sean Ellis ran a blog called “Startup Marketing”. He wanted to share his insights from helping startups like LogMeIn and Uproar reach IPO status. But one post in particular has a far-reaching influence.
Ellis wrote a blog post titled “Find a Growth Hacker for Your Startup” in which he detailed the unique growth challenges of a modern startup and the ideal candidate that could scale the business. But he unwittingly coined a new term and invented a new field. The “growth hacker”was someone who could efficiently and consistently take the startup to the next level.
In this post, we’ve applied Ellis’s insight and cover startup growth hacking and scalability. If you’ve been running or working at a startup for some time, read on!
What is growth hacking?
Ellis describes a growth hacker as “a person whose true north is growth. Everything they do is scrutinized by its potential impact on scalable growth.” In other words: growth hacking is about cultivating major growth (in audience numbers or revenue) in a short amount of time with a relatively small budget. A growth hacker is responsible for developing strategies around rapid growth.
But what are the components of growth hacking? There are at least four main points to remember.
- Data analysis – growth hacking is based on real data, not emotion or bias. What is the current trend or forecast for the industry? How will the audience respond? Startups must begin with thorough research before taking any other action.
- Development of SMART goals – Once you discover actionable data, your startup needs to set realistic goals. An example of one might be determining the number of customers to target on a specific channel. Who should be the target audience? How should they be reached? How will success be measured?
- Testing the goals – After your team agrees on a set of goals, you then need to start testing. You’ll soon discover a myriad of challenges and insights you never would have thought of during your planning stage.
- Analyzing and re-testing – Once your experiment is complete, it’s time to measure the efficacy of your work. How successful were your theories? What lessons were learned? Growth hacking is a series of constant testing, analysis, and re-testing.
The importance of growth hacking
So, why is growth hacking important? For one, startups can be expensive ventures. The U.S. Small Business Administration estimates it takes anywhere between $2,000 to $5,000 to start a business. Not all entrepreneurs can front this cost, so rapid growth isn’t just an ideal goal. It becomes a necessity.
But startups aside, even larger corporations are starting to see the benefits of growth hacking. Why pour millions into expensive television and print advertising campaigns, when a viral or social media marketing campaign can be more effective in drawing customers?
Growth hacking has become an important mindset to have in marketing. But you don’t have to be a marketer to understand growth marketing. Ellis himself has mentioned engineers and salespeople becoming excellent growth hackers. To be able to incorporate rapid growth into your business plan, take some time to understand the strategy behind it.
Growth hacking strategies
Growth hacking has led to the rise of new and innovative means of finding, attracting, and engaging customers. We describe some of the most effective methods employed by various companies.
We can learn a lot from how games like Candy Crush utilize user engagement as a marketing tool. Take Duolingo, for example. The app has helped people across the world learn a new language through simple but exciting challenges. Each time you reach a new milestone or complete a course, you receive a simple achievement. Users are encouraged to study each day, as breaking a streak will result in fewer rewards.
But Duolingo’s gamification also affects its growth strategy. Each achievement can be shared by friends. A leaderboard shows which users are most active. Over time, a user’s profile can become their trophy case, encouraging them to continue learning and continue interacting with others.
Brand image and professionalism
While not strictly a strategy for growth, how a brand presents themselves can have a major impact on how customers engage with the company. Place yourselves in the shoes of your customers. Would you rather choose a legitimate business with an office space? Or someone that works out of their apartment?
Though companies like Mozilla and Coinbase have headquarters in California, they have chosen to rent office spaces with Novel Coworking in Chicago. The physical space in which business is conducted represents a brand’s legitimacy and professionalism, two key ingredients in drawing in customers in person.
FOMO/Sense of urgency
FOMO, or the fear of missing out, is a powerful way to incentivize your customers to action. By setting a time limit, customers are far more likely to engage in a call to action. They’re far more likely to purchase, join, register, or visit so they don’t miss out.
According to OptInMonster, about 60% of millennials make purchases because of FOMO. Social media has a direct influence on the feeling of FOMO. Apps like Instagram and Facebook force users to constantly view other people’s lives, without the ability to take part or participate. However, FOMO can be a delicate feeling to grapple with. So be careful how it’s incorporated into your marketing strategy.
Networking will always be an important means of attracting customers, finding new partners, and hiring new employees. In fact, word of mouth campaigns can be far more effective than the most expensive TV ad campaigns. That’s why countless trade shows and conferences pop up each year. They’re great ways to expand a business and learn more about your industry.
We recommend reading our post, Make the Most of Any Networking Event which takes a deeper dive into the topic.
These days, it’s not at all uncommon to see companies offer their software or service for free, but withholding key features. While the freemium version may be perfectly acceptable at the start, these missing features become crucial later on.
Dropbox, the popular file storage and sharing service, offers 2 GB of space, file sync and sharing for free. Once you’ve reached this cap, you’re offered upgrades such 2 TB of space, 30 day file recovery, and more. Dropbox Professional offers even more, allowing users to comment on videos and search in documents and images. These tiers are specifically structured to encourage people to end up paying, especially if they want to use the service with multiple people (such as for a startup business).
The term “influencer” is a new one, a product of the new age of social media that we live in. Influencers are like social media stars and celebrities— not quite on Hollywood’s level, but with a much larger following than your aunt or uncle. Influencer may refer to a brand or person with thousands of followers on a single social media platform. It may also be used to refer to brands or people with only a few hundred followers, but attract higher levels of engagement than most.
Influencers are not to be underestimated — they have the ability to move the opinion of masses instantaneously. That’s exactly the strategy used by Filip Tysander, founder of Daniel Wellington. In 2011, he paid $30,000 out of pocket to start the watch brand, and within a few years became Europe’s fastest growing private company. Rather than using expensive celebrity endorsements, Tysander focused on Instagram influencers, spending a few thousand for a single post that would generate thousands more clicks. He unknowingly started a new trend in growth hacking: leveraging influencers.
Growth hacking success stories
Now that you know the strategies behind rapid growth, you may be curious to learn about the tales of success behind some of the biggest brands.
Competing with a behemoth like Google, the world’s largest search engine, is no easy task. Yet DuckDuckGo, the internet privacy company and search engine, has carved a large chunk of its market share. Founder Gabriel Weinberg attributes the growth to 19 specific channels, including blogs, search engine marketing, social media display ads, email marketing, trade shows, and much more. In 2016, DuckDuckGo saw 4.1 billion queries on its site. In 2018, that figure was well over 8 billion.
To learn more about DuckDuckGo’s story, we recommend reading FourWeekMBA’s coverage on their growth hacking strategy.
If any brand embodies the spirit of growth hacking, it’s Airbnb. Starting with nothing but a few air mattresses on the floor of a San Francisco loft, Airbnb has grown to a valuation of over $10 billion, surpassing even Hilton Hotels in bookings.
During its early phases, Airbnb struggled to find enough visitors for its properties. So it turned to Craigslist. Airbnb users could post property rentals on Airbnb’s site, as well as on Craigslist. They also “poached” Craigslist posts. For any post on Craigslist that featured a property, the original poster would receive a message encouraging them to also post on Airbnb. Over time, the Airbnb/Craigslist integration led to a surge in traffic, propelling one of the best starts for a new venture in recent history.
To learn more about Airbnb’s growth hacking strategies, check out the post by GrowthHackers.
Before the Internet became a worldwide sensation, PayPal was one of the first to start a viral referral campaign. David O Sacks, former COO of PayPal, explains how the program would incentivize people to invite their friends and family by paying them. “Users just had to sign up, confirm their email address, and add a (unique, authorized) credit card. The money was simply added to their account. This was real money. Users could send it to someone else or withdraw it.” As their network grew, PayPal could no longer offer $20 per referral, and gradually reduced it to $5 (while adding more hurdles, like bank verification). But the plan was a success. According to Elon Musk, they had 100,000 customers after the first month.
Learn about PayPal’s rise in ReferralCandy’s blog post here.
Bryan Helmig, Wade Foster, and Mike Knoop were friends before starting Zapier. Helmig messaged Foster one day about a “killer web app” that would “extend the functionality of paid apps’ APIs”. Launched in June 2012, Zapier started with only 34 app integrations and $1.2 million in funding. Today it has over 1,300 app integrations generating an annual revenue of $50 million.
In the beginning, the founders did not focus on growth, instead prioritizing customer support. As they acquired more happy customers, they began to feature far more customer stories on their blog. Now the company has become a quintessential example of growth hacking.
To learn about the four main reasons of how Zapier was able to grow, check out Drift’s blog post.
The relationship of scalability and growth
Growth and scalability are terms that tend to be used synonymously in describing a business’s expansion. But to truly differentiate your company from the competition, you need to have a firm understanding of the difference between the two terms. Growth means adding resources as the same rate as adding revenue. Scaling is about adding revenue at an exponential rate, while adding resources at an incremental rate.
If you want to learn more about the differences between scaling and growing, check out our post on scaling your business.
So if scaling is the smarter, more responsible way to grow a business, how do you scale a startup? You need only keep two things in mind: increasing your revenue sources while keeping your costs low. This is the basis of growth hacking. In doing so, you can develop a scalable business model— a way to generate business while still having money to run.
The question then becomes: how do you create a scalable business model? While each company’s blueprint is different, we can give you an outline that can be incorporated into every company’s mindset:
- Start with a scalable idea. While developing an Apple-killer or Google-killer is admirable, you want to start with something simple that can expand over time.
- Develop a business plan and MVP. You have your idea, now how will you pitch it to employees, customers, and potential investors? You need a prototype, a demo, a trailer, otherwise known as a minimum viable product that will help you measure your idea’s efficacy.
- Build your team of specialists. You won’t be able to work on everything. In fact, the more you can focus on the big picture of the business and less on the day-to-day nuances, the faster your company will scale. Find other salespeople to help on-site, or outsource your work to contractors. Consider automating some processes (such as responding to client inquiries) to save your team time.
- Use modern growth hacking strategies. Social media, viral marketing, and display ads can win over more customers than an expensive billboard or commercial. Think outside the box on where you may find your customers and how you may reach them.
- Take in feedback and iterate. Listen to what your customers and stakeholders have to say. What are their favorite aspects of your brand and offering? What are their pain points? Remember that it’s all about the customer in the end, and they can tell you more about how to steer your business than you may realize.
We’ve seen a few examples of a scalable business model already, such as offering a freemium service or software. Offering a product for free while saving its best features for a premium version is guaranteed to convert some people.
Perhaps the most prominent example is the growth model used by many online companies. Consider Netflix, which was initially head-to-head with Blockbuster’s physical rental business model. By switching to an online sales model (i.e. a streaming platform), Netflix could effectively save on inventory costs, rent, and salespeople. Savings were allocated towards investments in server maintenance and recruiting software designers. In the end, Netflix dominated, and Blockbuster became just another part of history.
The concept of growth marketing
Now that you know about growth hacking, let’s talk about growth marketing. Not all marketers are fond of the term “growth hacking”, since it doesn’t really involve any hacking. Instead, they prefer using “growth marketing”, an evolution of traditional marketing with an emphasis on data analysis, experimentation, and optimization. So in essence, growth marketing is the same as growth hacking, only with a more specific and data-based approach to growth.
So how does growth marketing work? Instead of merely focusing on the awareness and acquisition phases of marketing, growth marketing and testing follows your customer all the way through retention and referral— making them ambassadors for your brand. It’s about checking in on the customers and keeping them engaged. Ultimately, they’ll do the promotion for you.
Another main difference with growth hacking is the focus on experimentation. Growth marketing is about A/B testing, optimizing for SEO, writing creative ads, and analyzing the user journey— all from a data-based approach. It’s following the customer at every stage, and finding out how you can add value to their experience.
Growth hacking tools & resources
Think Reddit meets Kickstarter, and you have Product Hunt. Anyone can share, comment, or vote on new products. The website organizes products into four categories: technology products (such as software, websites, apps, hardware products), games, books, and podcasts. As of 2016, Product Hunt has lead to the discovery of 100 million products across 50,000 companies. The company is valued at over $22 million. Any brand with a physical or software offering should have this website on their radar and plan to establish a brand presence here.
Ever notice a grid of recommended articles, videos, or webpages after reading an article? There’s a good chance those are Outbrain ads. This advertising platform is known for curating content to display to users when they are looking for something to read or watch. The upside to Outbrain is its cost. Compared to alternatives, Outbrain is cheap and offers you access to premium publishing channels. If your product happens to be a channel or a blog, Outbrain is a resource you should consider.
The ability to visualize how your users move through and engage with your website can be a powerful insight, and that’s exactly how Hotjar works. Using heatmaps, Hotjar allows you to display and track exactly where users click and move their mouse. This data can help you gain a better understanding of how effective your web pages are in converting customers. You can additionally use hotjar to gather surveys and feedback from your audience, making Hotjar a one-stop shop for analyzing your user’s behavior on your website.
Having troubles with mapping your customer’s journey? Drip can help with that. More than your standard CRM tool, Drip gives you a comprehensive view of your customer’s actions with your website, so that you can better personalize webpages and email campaigns to their unique journey. As well, Drip offers beautiful dashboards that help you visualize revenue attribution, clicks, and conversions. Drip is such a valuable tool for ecommerce brands, that the brand calls their product an ECRM— ecommerce customer relationship management platform.
SendGrid the email campaign tool championed by Uber, Spotify, Glassdoor, Airbnb, and Yelp. You can design beautiful emails, target the right audiences, and schedule your campaigns for the best time. Then, analyze the engagement of your campaigns through beautiful graphs and visualizations. SendGrid is powerful, flexible, and sleek all in one. The tool is so popular, that SendGrid claims to have over 80,000 customers, and processes 50 billion emails each month.
No list of tools and resources would be complete without Google Analytics. Google’s web analytics platform remains unbeaten at analyzing the performance of your website and monitoring traffic. From measuring session duration to conversions, Analytics helps you review the efficacy of your webpage, right down to each link and click. You can also link your campaign to Google Ads, so that you can track how successful your advertising efforts are. Best of all, Google Analytics doesn’t cost a dime. If you can only choose one tool out of all the ones we mentioned, let it be Google Analytics.
Growth hacking will continue to play a pivotal role in the development of startups. With an increasing pool of competition coupled with rapid innovation, many startups can no longer settle with slow, risky growth. Fast and unconventional scaling will make the difference between a startup with longevity, and one that fizzles at the onset. Future-minded companies realize that models of advertising such as billboards and television ads are quickly becoming outdated. To stay blue ocean and ahead of the curve, it is in every company’s best interest to develop the mindset of growth marketing is the future of marketing.
Growth hacking relies on a productive process and team. Learn more about calculating and improving workplace productivity here.
How to grow your business
Every business owner and entrepreneur must consider the growth of their business. After all, who wouldn’t want to increase profit through expansion or decrease product cost by building scale? Business growth is necessary to create brand longevity.
As business growth involves so many moving pieces, it can become overwhelming rather quickly. From creating the sales funnel to building customer loyalty, growth strategy must be considered at every stage and at the departmental level of your business functions. Though capital investment is a necessity, growth additionally requires investments in human resources and technology.
In this article, we’ll cover what you can do to effectively grow and scale your business to accommodate more customers and lead a competitive industry.
One important note: technically speaking, growth and scale are two different concepts even though they are used interchangeably. While growth involves adding operating costs at the same rate as revenue, scaling means incrementing operating costs compared to a steady growth in revenue. Though both of the terms growth and scale are used in this blog, we will specifically refer to the definition of scaling.
How to know if your business is scalable
Before you can effectively grow your business, you first must initially assess whether the opportunity for growth exists. Amateur business owners often make the mistake of rushing to add new employees, install new storefronts, or release new products before even solidifying a reliable stream of revenue.
You don’t need fancy software or specialists to figure out your scalability. All you need to know is your business’s operating leverage. Here’s how:
First, calculate your operating cost growth. These are the costs associated with running your business. This would include marketing, research and development, software licenses, office rent and utilities, and so on. Then, comparing to the previous year’s operating costs, calculate the change in operating costs from year to year (new-old). Finally, calculate your total revenue growth.
If your operating costs are growing at the same rate as your revenue, your business cannot scale. If your revenue is growing at a significantly higher rate than your operating costs, then your business should scale up. It’s as simple as that!
Don’t be disheartened if your business isn’t immediately scalable. Many businesses (restaurants, for example) struggle to scale within the first few years, but this is not a measure of success (or lack of). Sometimes other questions are more pertinent during earlier stages of growth. For example, does the product have market potential? Or, can your business run without you? Scalability will come naturally as your business becomes more autonomous.
Operating a home business? Check out our other post on five ways you can grow a business beyond your living room or apartment.
How to do a competitive analysis
Understanding the competitive landscape is paramount to scaling your business. It’s always a good idea to learn about the brands you’re up against so you can better understand how to position your own brand in the minds of consumers. To begin analyzing the market place:
- Compile a list of your competitors. Pick companies from within your space with similar offerings. Analysis should not be limited to your current competitors. It should additionally factor in aspirational competitors- the competitors you wish to compete with (the Amazon and Google of your industry).
- Review your competitors’ branding. And not just the colors or fonts they use. Focus on their company mission, value proposition, and brand promise. What differentiates them from other brands? What are their strengths and weaknesses? What are the similarities and differences among you and your competitors? The more time and depth you spend on your analysis, the better you can understand the competitive landscape.
- Position yourself on a perceptual map. Draw a cartesian plane, a chart with an x axis and y axis that divides the page into four spaces. Then choose two attributes, such as cost, quality, originality, convenience, or reputation, to put on each axis. For example, you may choose to compare brands on cost and quality. The x axis can measure quality, with the left side indicating low quality, and the right side indicating high quality. The y axis will measure cost, with the lower half indicating low cost and the top half indicating high cost. You would then place each competitor on the perceptual map depending on how you (or the people you survey) perceive those brands. Look at the following chart from Column Five, a creative content marketing agency, for more information:
- Position your brand. Ultimately, your goal is to find a space that isn’t cluttered with competitors, and this should give you a better idea of how your brand should scale. In the example above, the quadrant with low cost and high quality is empty. This suggests that the space in which a company can create high quality products at a lower cost will be less competitive.
Business networking and partnerships
Scaling up requires cultivation and establishment of the right networks and partnerships. As the saying goes, who you know can be more important than what you know. Benefits of networking include:
- Staying current on industry developments. No matter the industry, change is inevitable and the marketplace will constantly shift. New trends and products can emerge. Long-standing titans can become antiquated, to be replaced by fast-growing startups. If you don’t stay up to date, how can you expect your business to do the same?
- Finding partnerships. Finding the right partnerships and collaborating with other companies is key to discovering business opportunities. Start by finding networking events within your area. You never know— you may run into a more cost-effective supplier, a potential customer, or a marketer looking for more work.
- Problem-solving. Networking is more than just building your list of contacts. It’s about growing your knowledge base. Companies that are just starting out aren’t just lacking in resources, they’re lacking in experience. By meeting more seasoned professionals and companies, your company can learn how to approach the common problems of scaling, such as driving operating costs down or finding niche audiences.
For more mature businesses, diversification is the ideal play to maintain longevity. But it’s also the riskiest strategy, according to the Igor Ansoff Product/Market matrix:
– Market Penetration (present market and present products) – When a company successfully sells a specific product to a specific market
– Market Development (new market and present products) – When a company offers one of its existing products to a new market
– Product Development (present market and new products) – When a company brings a new product to one of its existing markets
– Diversification (new market and new products) – When a company creates a new product for a new market
Despite the major risk and uncertainty involved with diversification, it is also potentially the most rewarding. There are three types of diversification strategies worth considering:
Concentric diversification: Some businesses will want to enter an industry where they may leverage their technical experience. For example, Apple’s introduction of the first Apple Watch. Though Apple did not have experience in the wearable technology market, they were able to use their knowledge building smartphones and computers to create and excel in an entirely new market space.
Horizontal diversification: Companies can also add new products that complement their existing product line and appeal to current customers. Although Ikea is mostly focused on furniture, they will also sell smaller items such as pillows, covers, and decorations.
Conglomerate diversification (also known as lateral diversification): Finally, companies may add new products or services that have no technological or commercial similarities to their current offerings. This is what Evernote (the online note-taking app) did when it began selling physical notebooks that also allowed you to easily photograph and store those notes in their app.
It can be difficult to determine whether your company should diversify or focus on its’ existing processes. It’s important for every company to weigh the pros and cons of diversifying. Remember— this is a strategy reserved for more mature and experienced companies looking to scale even further, and would be far too risky for early startups.
Developing a growth framework
You may be wondering, what is a growth framework and why is it important? With countless marketing tools, strategies, tactics to keep track off, a framework helps condense all those concepts into a single, easy-to-follow system.
But how does one develop a growth framework? There are quite a few methods, rather than a “one-size-fits-all” approach that can be applied. Instead of prescribing a single process for every business to follow, we thought it may be more helpful to share an existing framework used in many businesses today— the traction bullseye framework.
The Traction Bullseye Framework
This particular framework features a simple five-step process:
- Brainstorm – The framework suggests there are 19 different channels a business can use to generate traction, ranging from trade shows to content marketing. The first step is to determine the benefit of each channel to your business. It’s important to consider each alternative carefully. You may want to use a spreadsheet or similar document to help you stay organized. Ask yourself— how much will this channel cost to maintain? How many customers can we draw through that channel? What experiments can we run to gauge success?
- Rank – Next, categorize each of the channels into three ranks: 1) Inner Circle, 2) Potential, and 3) Long-shot (hence the bullseye metaphor). The first rank includes channels that seem most promising and worth pursuing. The second rank includes channels that may possibly work. Finally, Long-shot includes channels that are not guaranteed to provide value.
- Prioritize – Now comes the time to start assigning value to each of the channels in the Inner Circle. Choose the three most important channels to focus on. While other channels may be important, you’ll want to allocate resources towards the top three revenue or growth producing channels.
- Test – Your ideas are still only assumptions until you can measure success. Go back to those same questions you asked yourself during the brainstorming phase— such as how much each channel will cost, and how many customers can be attracted through each channel. Just as each business is different, each channel experiment will change depending on the company. The goal is not to generate traction with a channel, but to measure success.
- Focus – Hopefully your experiments yield some useful insights (and if not, you will need to repeat the process until you find another promising channel worth testing). Once you find a channel that appears to increase customer acquisition, then you need to focus your business’s resources on that channel. It may be appealing to then improve other channels until they become successful, but you’ll get more mileage from focusing on just one channel.
The traction bullseye framework is one of the most popular frameworks for measuring growth, but by no means the only one. Many businesses have also chosen to create their own framework that effectively measure their success. Choose a framework not based on what other businesses use, but what your own company will use.
Growing a business can seem like a major undertaking, and understandably, many entrepreneurs are at a loss for where to start. But with in-depth research, the right network, and a solid framework to organize your process, your growth strategy should become less daunting.
At Novel Coworking, we’ve witnessed business growth first hand. Many startups in our spaces began with one or two workers before turning into major enterprises with hundreds of employees. With the right planning and leadership, your company may be the next success story.
Managing your talent is key to scaling effectively. Check out our previous post on strategies for talent management.
For businesses to scale, your team needs to be on the same page. We recommend using the SMART method to help your employees set realistic and impactful goals. Visit the link for more info.
Scaling your business is important to learn about Growth Hacking.
Recruitment and Talent Management
To understand the challenges faced by hiring professionals today, we have to start by observing the current industry landscape. For instance, in a study by recruitment software provider iCIMS, 61% of tech hiring professionals believe that “a four-year degree is not enough to be successful in today’s workforce.” In the same study, 74% of tech hiring professionals have hired more freelancers or contractors in the past two years because of “lower costs and more access to specialized skills and flexibility.”
Major trends are transforming our labor industry, from greater competition to newer hiring practices. Companies today should consider revisiting their recruitment and talent acquisition strategy to ensure that they bring on only the best talent. That, of course, can be easier said than done.
In this article, we’ll cover the importance of talent management as it relates to recruiting the most qualified individuals.
The 5 Stages of the Recruitment Process
Let’s recap the recruitment process. While each company has a different approach, the general outline and stages remain the same. Understanding the purpose (and flaws) of each stage can help companies improve and retool the process to attract the top talent.
Planning is the first step, not only in recruitment, but in any major business process. The more time you spend planning the recruitment process, the more time you save down the line, and the less risk you’ll face. This stage involves understanding the recruitment objectives of the business, and the criteria for the ideal candidate.
By the end of this stage, recruiters should be clear on the following:
– Job description and responsibilities
– Necessary skills and qualifications
– Salary or hourly rate
– Starting date
– Whether the position is temporary or permanent
– Company background
– Other pertinent information
After the planning phase, recruiters must devise a strategy for finding the candidate. Strategy is distinct from the planning phase, as it involves the actual tactics that will be employed by the company for recruitment. For example, will the company hire externally, or from within the organization? Where will the talent search begin? How long will the hiring period last? This phase mitigates the risk involved with new hires, and ensures that you increase your chances of finding the best candidate.
With your plans in place, recruiters next need to focus on attracting job seekers. Typically, it involves using a specific set of recruitment websites, such as Monster, Indeed, Linkedin and even Craigslist. However, the search phase depends on the position to be filled. For entry-level positions, such as receptionists or salespeople, recruiting via college job boards and fairs may be more appropriate. For positions with more seniority, such as a C-level title, hiring internally can produce better results, particularly if your company has a proven culture. One study from the University of Pennsylvania found that internal hires tend to outperform external hires. Communicate with your hiring managers and consult your strategy to determine which approach to follow.
After successfully attracting a pool of candidates, recruiters face the challenge of sifting through the applicants to select the best person for the role. But selecting the best person is no easy task. Sometimes multiple people are qualified and recruiters are forced to use their best judgment. In these situations, it’s important to thoroughly research and learn about the top candidates. What can they bring to the company culture? Recruiters would benefit greatly from taking additional time to interview candidates on their own goals and aspirations, as well as their listed references. What others say about those candidates is just as important as what the candidates say about themselves.
Evaluation and control
Onboarding the new hire is not the last step! Surveys and post-hire interviews can help companies streamline their recruitment process, while ensuring employee engagement remains high. Recruiters would do well to follow up with new hires a few days or weeks after their onboarding period, just to ensure that they are settling into the team and handling the workload efficiently.
The Importance of Positioning Your Company
You can hire the best recruiters and create the most robust HR strategy, and job seekers still may choose another company. Today, company culture is more important than it’s ever been before. According to the Society for Human Resources Management, 55% of surveyed HR professionals believe company culture helps hire the right people, while 49% believe it draws a greater number of qualified candidates. Promoting your company culture shouldn’t be an afterthought, it should be the main reason why candidates choose your company before your competitors.
Create a unique story that defines your company’s purpose. Simon Sinek, author and organizational consultant, has penned several books, but his most famous by far is “Start with Why”. In the book, Sinek defines the Golden Circle, a diagram that helps leaders understand their personal or organization’s purpose. Three concentric circles make up the diagram. On the outside is the “What”, which defines the actions or tasks that a business or person carries out. The middle layer is “How” which defines the manner in which these tasks are accomplished. Finally, at the center of the circle is “Why”, which is the purpose behind these actions. Sinek argues that if a company wants to sell anything (say, it’s own brand to job seekers, for example), you have to start with why.
Take inspiration from Sinek’s methodology. Identify your key competitors and try to understand their own “why”. How does it differ from yours? What can you do to better stand out against the sea of competition?
For more information on why culture is important, check out our previous blog post.
“Who is Your Audience?”
One of the most important questions a marketer must answer is, “who is your target audience?” Without a definition of the ideal person you’re trying to attract, you could end up chasing individuals that have no interest in your brand. The same goes for recruitment and talent acquisition. Each person in the company (not just the human resources department) should understand the type of people that belong in the organization.
Consider Apple, one of the world’s most popular and influential brands today. Earlier this year, the company posted a $11.5 billion profit for the three months ending in June. They’ve developed products that have revolutionized the phone, music, personal computer, and television industry. But there’s one core value that ties all their work and talent together. According to founder Steve Jobs himself: “we believe that people with passion can change the world for the better.” That’s the belief that not only empowers Apple to create iPods and MacBooks, but to hire the greatest and most dedicated artists, engineers, marketers, and other talented individuals.
What core belief ties your business together, and how does it define the type of people you hire? Where can you reach your audience, or in this case, your talent? Understand your prospect and when it comes to choosing between the best applicants, you’ll know how to decide.
Leveraging Employee Connections
Besides work experience, there’s another reason companies favor candidates that have worked at prestigious companies. Usually, these individuals still maintain a connection or several connections at those companies. That can lead to greater business opportunities, such as finding new hires and interns.
Set up an employee referral program that encourages and reward employees for getting highly qualified candidates to apply. Your employees have already done half the legwork- they’ve screened them and determined whether they’re culturally fit and qualified for the job. All that’s left is to find out whether they would be interested in working at the company, something you can usually find out through interviews.
A study by Everyone Social found that employees have 5x more reach than corporate accounts. It goes without saying that relying on your employee connections can also bolster your social media recruiting efforts. Instead of simply posting a status update or tweet by from your company describing the job, ask your employees to share the opening. Employee social connections are more organic, their interactions more natural, which means leveraging their profiles can boost your social recruiting.
Tips on Working with a Talent Acquisition Agency
So far, we’ve mostly been covering recruitment, as it’s typically the most common way to fill openings in a company. But if you want to focus on attracting the top talent, you need to work on talent acquisition. What’s the difference between the two? While recruitment aims to fill vacancies, talent acquisition is about hiring specialists and leaders. One way to do so is to work with a talent acquisition agency. Here are a few tips for doing so:
- Assess your options. Not every talent acquisition agency will be worth their salt. Don’t just go with the first option you find or the one with the flashiest ads. Conduct some research— try to find out more about their various clients, read through past testimonials. Above all, you should treat these talent acquisition agencies as you would your top candidates.
- Have company branding and information ready. You’re not just selling your brand to customers, you’re selling to potential new hires. If your branding material doesn’t reflect the professionalism of your company, then why should others bother to research you any further? Make sure you have a presentable website, relevant handouts and marketing materials. Besides enticing applicants further, these branded documents can help talent acquisition agencies better define your company and inform candidates.
- Communicate your needs clearly. Talent acquisition agencies operate best when they know exactly the type of talent you’re looking for. This is where your initial planning and strategy comes in. Be clear about the necessary skills and qualifications, as well as the type of personality that would best fit and contribute to the company culture.
- Analyze tracking acquisition metrics. One of the most useful aspects of using a talent acquisition agency is the different insights you can gather based on their work. Metrics such as cost per hire, time to fill, offer-acceptance rate, and time in process step (time a candidate spends in each step) can help you evaluate and improve your talent acquisition process.
Tips on Hiring Freelancers
Some of the top talent you’ll find won’t be C-level executives, but freelancers and contractors that you hire on an as-needed basis. According to an Upwork study, 35 percent of the U.S. workforce (55 million people) freelanced in 2016. By 2027, more than half of all American workers will have some experience as an independent contractor. Here are a few tips on hiring freelancers:
- Use freelancer marketplaces. Places like Upwork, Fiverr, and Freelancer have made it more convenient to find freelancers online. All you need to do is define the project, pay, due date, and you’ll have a handful of freelancers bidding to do your work. However, it’s important that your brand maintains a good reputation on these platforms. That means paying your freelancers on time and interacting with them in a friendly way.
- Define your project scope. One of the biggest challenges in working with freelancers is communicating the scope of their work. Since they’re not in regular contact as full-time employees, it’s much easier for a miscommunication to occur and potentially throw a project off the rails. Be absolutely clear about the deliverables, the method in which they are to be completed, and deadlines.
- Ask them to sign NDAs and non-competition agreements. Freelancers aren’t bound by the same rules as full-time employees, but they still have a similar level of access to sensitive data. That’s why it’s crucial to ask your freelancers to sign agreements preventing them from sharing this information with competitors. It may seem minor, but you could prevent your company’s IP from being stolen or customer data from a significant breach.
- Check the freelancer’s timeline. Freelancers can have dozens of clients at a time, and they may not be particularly adept at juggling all their assignments and responsibilities. Before assigning a major project, check in with them regarding their availability and the project timeline. You could potentially avoid a late submission or work conflict.
Tips on Finding Remote Workers
Last but not least, your company may want to look into hiring remote talent. These remote workers can be particularly helpful on projects that need continuous work- while your team sleeps, they can continue development in their timezone. Here are a few tips for finding remote workers.
- Hold in-person or video interviews. Even though remote workers don’t necessarily operate in the same building or office as the rest of the team, the initial meeting should still be held in person. The reason for this is it gives a clearer understanding of a person’s character, such as their tone of voice or personality, that isn’t always conveyed in a call. But if that’s not possible, a video interview may suffice (especially if they live in a different country).
- Give them skill assessments. The only way to find out whether remote workers are reputable or capable of doing the work is to give them a skills assessment. For writers, this may be a writing prompt for a brief essay. For developers, it may involve a coding challenge.
- Set expectations. Similar to freelancers, it’s easy for the project scope to become muddled in communication. Make sure you clearly convey the deliverables and due date for remote workers so there’s nothing amiss.
- Schedule regular check-ins. Timing is one of the biggest challenges with remote workers. Usually, when they’re resting, you’re working, and vice versa. Schedule a day and time in the week that works for the both of you to wrap on certain tasks and projects.
Recruiting can be a challenging process already, but when you focus on attracting the best talent, that process becomes even more complex. You not only need to consider your recruitment and onboarding process, you also have to think as an applicant yourself, and the qualities and characteristics of a company that would compel you to apply.
The more planning and consideration you give to the process, the more your company (and team) gets out of it. Over time, your business’s mentality will shift from filling vacancies to attracting the best talent. That’s when your business can truly begin to grow and thrive.
To read the Novel Coworking guide to talent management, check out our post here.
Want to improve your strategy for talent management, we break it down in this article.
Looking to find more content about talent management and acquisition? Visit Novel Coworking’s blog for more information.
Anyone can start a business, but it takes dedication to grow it from that initial startup phase. For entrepreneurs that run businesses out of their home, the challenges are slightly different. Not only must they learn to run a business, but they also need to elevate their business to compete with bigger brands.
How to make your home business more professional
Home business owners are in luck: with a few changes, a freelance gig or startup can transform into a more professional and legitimate business. In this article, we’ll cover a few methods to help you get a head start.
1. Build out your team
When you start a company, you naturally have to wear several hats—from accounting all the way down to sales. All this multitasking, however, can put a strain on your time and energy. Eventually, all that work leads to burnout and even lost business.
Once the basic foundation of your company is set up (LLC, contracts, first few clients), you need to start looking for people that can help you out. This may include classmates, ex-coworkers, business partners, even family and friends. Standardizing the process is key. Once you begin delegating work to others, you can focus your energy on finding more clients to expand your business.
2. Rent an office (or a coworking space)
In a world where almost everyone owns a laptop and work is migrating to the digital realm, the traditional 9-5 is falling by the wayside. Working from home is becoming more commonplace, with 4.3 million employees working from home at least half the time. With that said, operating a successful business requires a step beyond the confines of your home.
As your business grows, expect to meet with more customers, clients, and potential business partners. Of course, you’re free to hold meetings in your home, but if you want to be taken seriously as a business, a dedicated office is crucial. For one, a private office (or coworking space) looks more professional to the clients and partners you bring over. But a private office also helps you to focus on your work, avoiding common distractions at home like pets, Netflix, or your comfy bed.
New to renting offices? Check out our tips for your first office space.
3. Boost your online exposure
Modern businesses cannot thrive without an active online presence. As modern consumers become more and more tech-savvy, they discover brands through search, online reviews, and social media. That’s why it’s important for any business to have an updated website (optimized for mobile devices) and the relevant social media profiles.
Don’t get carried away— you don’t need to have a highly active Facebook, Twitter, Instagram, LinkedIn, or any other popular social media platform. Start with one or two that your audience typically uses and go from there. For a better idea of when to post and for how often, check out CoSchedule’s guide.
4. Focus on improving your customer experience
Maya Angelou once said, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” Every interaction with your brand will be remembered–not for how much money they saved or how fast the service was provided, but because of how they felt during the experience.
Create a memorable customer experience from the moment they hear about you to the point where they consider purchasing again. The last part is key: it can be up to 25 times more expensive to find a new lead than to keep an existing customer. It makes sense to keep your customers happy even after they are served–particularly for a home business with limited resources. By keeping your interactions authentic and intentional, you can convert them into loyal customers and build a positive reputation for your brand.
5. Partner with other businesses
If you really want to take your business to another level, it’s time to begin partnering with other businesses. Just as we mentioned before, there’s only so much you can do before the work catches up to you and you need to team up with another brand.
For example, your business may use professional photography to sell products through an online store. At the start, packaging your own products is perfectly acceptable, but after some time, you may want to look at partnering with a fulfillment center. Not only will you save time from packing items yourself, but you may inadvertently be able to open your brand to a much wider audience.
The journey from a startup idea to a full-time home business is no easy path. You’re bound to encounter major challenges along the way— demanding customers, lack of work-life balance, and potentially even legal encounters. These are all trials that will test your mettle and passion for entrepreneurship. But with an ambitious mindset and strong work ethic, you can turn that passion into a successful business
Still just getting your business up and running? Read our post on building your startup from scratch.
If you’re ready to bring your product or service to more people, you’re going to need funding. Here’s how to find the right investors.
For more articles and content on entrepreneurship, follow Novel Coworking’s blog each week!
Out of all the risks that entrepreneurs take, perhaps the biggest is failing to establish a solid legal foundation for their startup. Legal documents for startups include protecting a startup’s inventions, or the rules which define each leader’s position in the company. Without them, the startup is no more reputable or organized than a scam.
Don’t make that same mistake. Start with the most important legal documents for the formation of your business. You may just avoid several headaches down the line.
Here are a few legal documents to get you started.
Articles of Incorporation
One of the first legal documents a startup has to concern itself with is the articles of incorporation. Although entrepreneurs have the option of foregoing incorporation in favor of sole proprietorship, this usually results in some major tax consequences later on. Incorporation is also ideal if you plan on attracting outside funding in the future.
Each state has their own unique laws regarding incorporation. For example, in Illinois, incorporation must involve a registered agent and include certain abbreviations.
Intellectual Property (IP) Assignment Agreement
Have you ever seen Shark Tank? The most commonly asked questions on the popular startup funding show almost always have to do with intellectual property. These IPs typically include software licenses, invention patents, secret recipes, and other proprietary knowledge. IP assignment agreements ensure the company has the sole rights over the intellectual property.
For instance, you may hire a graphic designer to create your brand’s first logo and other branding material. But without an IP assignment agreement, they may be able to walk away with the rights to that material- even if you paid them! Make sure any technology, design, or information unique to your brand has a corresponding IP assignment agreement to avoid any future disputes.
Pandadoc has an example of what an IP assignment agreement looks like here.
Also known as an operating agreement, this document prevents any sort of disagreement between the founding parties and co-founders. This document sets out to define the basic roles, rights, and responsibilities that each of the founders have in relation to the company.
Starting out, agreements may be informal and spoken, but without having them in writing, conflict can quickly arise. Arguments may break out, but without any evidence, it essentially becomes one person’s word over another. Protect everyone involved by hashing out the initial founder’s agreement early on.
Similar to the Founder’s Agreement, bylaws dictate the business’s internal rules, leadership roles, and shareholders’ rights. Bylaws also clarify the voting requirements for introducing new laws, electing new board members, or raising topics for discussion.
Nondisclosure Agreements (NDA)
An NDA is a contract signed by individuals protecting confidential information in your startup. For example, startups may ask contractors to sign NDAs when they are shown an unreleased or unannounced product, or when a vendor is asked to review a marketing plan for the following year.
NDAs typically define:
- The information considered confidential or not for disclosure
- The manner in which confidential information is meant to be handled
- The owner of the information
- The time period for confidentiality
Employee contracts and offer letters
Companies that plan on hiring new employees need to have clear documentation on the nature of the business relationship. Employment contracts and offer letters clearly communicate the following:
- Responsibilities (from daily tasks and monthly goals)
- Ownership of IP (graphics/ written content)
- Best practices/ expectations (how one is supposed to conduct their job)
- Company policies (working hours, dress code, office conduct)
Shareholder agreements define how among shareholders how a company should be operated as well as shareholder rights and duties. It ensures shareholders are protected.
Creating a startup and seeing it to fruition can be one of the most rewarding feelings. But far too often, entrepreneurs and founders forget to take basic but important steps in protecting their future. As a result, competitors manage to steal proprietary software, founders bicker over profits, and new hires may cost the business a fortune.
Take the long route and seek professional counsel. It may seem tedious, and even overwhelming at first. That’s natural. But by establishing these six legal documents at the onset of your startup, you can safeguard your business from years worth of financial and legal chaos. In fact, these initial steps can make all the difference between an amateur startup and a long-lasting business.