Many business articles list the top reasons why startups fail. However, the biggest cause is usually overlooked, namely premature scaling. Several studies suggest that premature scaling is responsible for 70% of tech startup failures worldwide.
Let's see how to identify and prevent premature scaling.
Premature scaling leads to desynchronisation of your business processes and total chaos. It occurs when a business scales faster than it should. The three metrics below clearly show whether a startup is scaling prematurely:
Unsustainable CLV/CAC ratio
Low customer retention rate
Declining team morale
The iterative process shown in our illustration will help you scale your business sustainably, namely:
Improve value proposition
Test and strengthen product-market fit
Validate growth hypothesis
Scale your business
To successfully scale your business, you need to invest enough time and resources in the first three steps. It will improve your CLV/CAC ratio and customer retention rate, which will automatically lead to higher team morale.
Contact us if you want to accelerate the process in your business. https://www.startupmetrics.ch/contact-us