Do you have ambitious growth goals for your company in 2016?

While there are many business lessons to learn from high growth startups in Silicon Valley, trying to scale your company prematurely could actually be a dangerous death trap.

Remember how hot Fab once was?

At its peak, Fab was once valued at $900 million. In 2 years they spent $200 million, but still never managed to prove out their business model, and so they eventually failed.

And so did Homejoy, Zirtual, LivingSocial, and many others who tried to scale without getting their fundamentals solid.

So why do so many companies die when they try to grow too fast?

While there's never just one reason for failure, one of the most common killers of businesses is a lack of product-market-fit when they try to scale. If you haven't invested enough into understanding your customers, you're guaranteed to have even more problems with sales, marketing, and churn as your company grows.

Here's what you can do to safeguard your business from this perilous mistake:

1. Carefully define your audience

Who are your buyers? Are they suburban moms, truck drivers, doctors, or CEOs with software companies?

Whoever you're trying to sell and market your business to, you need to have a clear picture of who you're reaching out to. You can do this by analyzing your user data, talking to your customers, or doing research online and offline. If you're trying to sell to other companies, you should define your prospective customers by things like role or title, industry, company size, etc.

2. Get to know your customers

Once you've defined who your buyers are, it's time to do your homework and get to know everything you can about your customers.

What do they like? What do they fear? What are their biggest problems and most agonizing pain points that keep them up at night? What kinds of things do they read, and what sources do they trust most when they're seeking information and advice?

The more you know about your buyers' needs and pain points, the more effective your sales and marketing efforts will be.

At a bare minimum, companies that sell to other businesses should always take the time to research at least 10 prospective clients from every audience they're trying to target. This is referred to as "e-stalking," and can be done by parsing Linkedin profiles for keywords and analyzing tone, but also on other social media channels like Twitter and Quora if those audiences are active there.

3. Test your sales and marketing theories to see if you're actually right or not

Having your mom as your biggest fan and best customer is not enough.

You need to have a large enough sample size of customers beyond just your friends and family to prove that your business actually has product-market fit, and that your sales and marketing efforts are working.

If you're a company that directly sells to consumers, this might mean running Facebook or Google Ads and seeing how they perform. One of the fastest, most effective, and accurate ways for business to business companies to test their value propositions with an audience is to run a cold email campaign to start conversations with potential buyers. The results will show you if you're on the right track or not.

Just sending out an email campaign to 100-200 leads is usually more than enough for you to get an approximate estimate of how your message resonates with prospective customers and how it converts through the funnel.

4. Figure out what's working and triple down on it

Once you've run your test, you can see which sales and marketing efforts are most effective at driving new and recurring revenue for your business.

And if nothing you try is effective, you might have some serious issues with product-market-fit.

However, not having any luck with your sales and marketing efforts doesn't necessarily mean that you have product-market-fit issues either. You could just have really bad messaging or really ugly ad campaigns that aren't performing because they aren't good and are not optimized.

But if you invest in fixing your sales and marketing efforts and still don't have any luck, there's probably a bigger problem. You might need to find a different audience to sell to or change your product so that it's a"pain killer" and not just a "nice to have" feature that is only a "vitamin" that no one wants to pay for.

Published on: Jan 17, 2016