January 31, 2022

Why Initially Successful Businesses (Start-ups) Stop Growing

Own a SaaS business and have noticed a halt in growth? Don’t worry, it’s common for initially-solid companies to hit a wall after their first period of success. Because of this, we’ve constructed a detailed-specific post that suggests exactly why you’ve encountered this and how you can overcome the issue. So, why do initially successful businesses stop growing?

1. Market saturation

The first and most prominent is market saturation. When companies first market themselves to a particular customer persona, they’re fresh on the market. However, continuously optimizing your advertising techniques, the market eventually becomes saturated, and you’ve obtained all the clients possible from that target audience.

Because of this, the primary situation that reduces forecasted growth is companies believe that once a singular customer persona shows returns, they forever will. But this isn’t the case. Therefore, your “ideal” client must change with your business’s growth.

Identifying a target customer is essential for strategically planning a business’s growth. It can change for various reasons: what you sell, how it’s branded, the price that’s charged, your competitors, and much more. As a result, the previous clients acquired from an initially successful business might not share the same characteristics as the customers needed to grow the company further.

Market saturation forces businesses to analyze their offerings to find new customer personas and marketing angles. For example, let’s say you have an online business planning software that first targeted entrepreneurs and found success. After exhausting the market, you might want to re-evaluate the audience and move to a similar group of like-minded individuals, such as business owners, CEOs, managers, etc.

However, you’ll need to learn how to engage this new customer persona. Because of this, marketing strategies that previously showcased success will need to change. New audiences interpret, retain, and relay information differently. Therefore, new content must be optimized and tailored to their specific tone of voice.

2. Industry stabilization

Additionally, industry stabilization can present itself. Innovative start-ups that have created their “own market” will eventually encounter a wave of competitors entering the industry after their initial success has been shown.  

As the market becomes crowded, fewer price fluctuations occur, stabilizing the product/service costs and limiting the ability to grow through price increases. It’s a common occurrence, and marketers worldwide call this phenomenon, Industry Life Cycle.

Source: Corporate Finance Institute

When start-ups begin to grow, they eventually hit a stabilization period of revenue, cash, and profit. Trying to ride this wave will limit growth or result in a decline of the mentioned factors. Therefore, re-evaluating your current customer persona and re-targeting into a new market will allow you to ride the “wave” upwards.

Competitors are abundant when developing a start-up business, especially when they’re SaaS-related. Because of this, you’ll want to stay one step ahead of others within your market. The most effective way of achieving this is to develop a comprehensive, ideal customer persona report.

Within this analysis, you’ll want to identify who the clients are that initially made your business successful, who else could fit this criterion, along with new target audiences it could attract if the marketing angle were to change.    

Having access to this crucial data will be your growth lifeline. Once you start noticing a decrease in performance from a particular target audience, moving over to a fresh set of individuals can continue growth.

3. Psychological thoughts

Moving away from marketing for a moment, the next issue that prevents growth is psychological thoughts. Gaining popularity, hitting goals, and making significant revenue sounds excellent on paper. However, when obtaining these results in real-life, new business owners would rather preserve than grow because they’re unwilling to take risks.

Failing to find new prospects, open new opportunities, and plan for a sustainable yet growth-friendly future, doesn’t allow for adequate progression. Instead, business owners would rather be comfortable and remain in their current position. But the grass is always greener on the other side.

Many relate growth with additional risk. However, risk can be calculated and managed to reduce the occurrence of complete failure. Instead of diving headfirst into a new business venture, develop a solidified and risk-friendly plan that offers growth, yet protects your foundations.

Powerful inadequate psychological thoughts can quickly deter you from growing a business. Therefore, create solid plans that are data-driven. Doing this will eliminate any fear factor and allow you to proceed with your business forward.

4. Inadequate business decisions  

After reading the above, we’re sure you’ve gained a better understanding of why initially successful businesses stop growing. The primary source of this solely comes down to bad or poorly-planned business decisions.

A business with solid, data-driven, and strategical long-term and short-term plans won’t encounter growth problems that aren’t recognizable. That’s because they’ve already forecasted the future of business and prepared a “what if” strategy.

In this, they’ll be multiple stages: stage 1, 2, 3, 4, etc. Within each of these milestones, they’ll be data-driven requirements and plans that’ll initiate once hit. The overall objective is to continue regular growth patterns when reaching specific goals or when a particular customer persona shows red flags.

Additionally, businesses stop giving the same amount of effort after they’ve created a solid foundation. However, individuals, markets, industries, and overall customer persona’s change over time. Therefore, in-depth and comprehensive research is mandatory throughout the business’s life for optimal growth.

Now you’ve read the above, you should have gained enough knowledge of why initially successful start-ups stop growing. Primarily, it comes from poor business decisions closely related to marketing, goals, planning, and risk management. Without this, growth can seem non-present and risky, resulting in businesses struggling to grow.

Need help?

The post above clearly showcases how a target market can affect growth, which is daunting for those experiencing what’s mentioned. However, Stam Research is here to help. Our business eliminates the guesswork for finding adequate customer personas and delivers intuitive insights on potential audiences suited to your business.

To get this started, feel free to book a free call with one of our professional and helpful representatives by clicking here.