Although founders are preoccupied with funding and product design, it’s incredibly important to focus on your team’s diversity, too. Especially in these early days before you see tremendous growth.

Early stage companies tend to lack diversity. As a founder, you likely work with people who are your friends⁠—people with a similar background to yours. As social animals, humans subconsciously choose to associate with others who are like ourselves. It’s this bias that works against you if you want to grow a healthy, profitable startup.

The link between diversity and profits

Diversity isn’t a frilly concept or a box to tick on your to-do list. It’s a philosophy that should be part of your company’s cultural fabric. Although diversity is the right thing to do ethically, it’s also a sound financial choice.

The McKinsey company did a survey and found that, globally, gender-diverse companies were 21% more profitable. A 21% boost in profits is astounding, especially if you’re trying to bootstrap your early stage tech company.

But gender diversity is only one facet of diverse companies. Ethnic and cultural diversity is also critically important. The McKinsey study found that brands were 33% more likely to have better profits if they were ethnically and culturally diverse. Studies suggest a strong correlation between diversity and fiscal performance.

This happens because diversity leads to better ideas. Better ideas lead to more innovation, and innovation equals better financial performance. If you’re looking for investors or VC funding, you can’t afford to overlook diversity.

When your early stage company is earning more, your investors get a better return. Your diversity could be a big selling point to bring investors on board.

Studies found that female-founded business generated 78 cents of revenue for every dollar of VC capital. Male-founded businesses only generated 31 cents. Including female founders is important to bring on investors and give them a better return for the long haul.

How to be more diverse as an early stage company

As an early stage technology company, you live for scaling your brand. If there were a way to boost profits by 21%, shouldn’t you do it?

But it’s one thing to acknowledge the value of diversity and another thing entirely to make diversity a reality. Follow these steps to create a diverse startup that generates bigger ideas and better profits.

1.     Bring on diverse leadership early

From day one, you should bring people to the team who are unlike yourself. It’s easy to pick your college roommate as a co-founder, but this will limit your imagination.

Choose someone who doesn’t think like you. Choose someone that comes from a different background. Choose someone that doesn’t look like you. Choose someone that is not necessarily a ‘cultural fit’ but is a ‘cultural addition’. This is not only important to create a truly diverse workforce but it avoid ‘cloning’.

Studies suggest that at least one-third of your leadership should be female – and that one-third should be racially and ethnically diverse. This gives signals to ‘all’ female applicants that they’re welcome at your company. This is important if you plan to scale a diverse team over time.

Find females to fill leadership roles as early as possible. This will not only give you a good outside perspective but will attract more diversity as you grow.

2.   Talk about diversity

Diversity isn’t a rude subject in the workplace. When you talk about a concept, you make it real for your company’s culture. When you talk about diversity, it becomes a priority in the same way sales, marketing and product is a priority. This makes it easier to bring your dreams of diversity to fruition.

3.   Be transparent

Women and minorities are famously underpaid, especially in tech industries. Be a champion for salary transparency at your company. Allow employees to discuss their salaries. Pay your female and minority employees the same as their non-diverse counterparts. Don’t just ‘Talk the Talk’ but ‘Walk the Walk’. Be transparent about your pay scales. If you notice a pay discrepancy, address it immediately.

4.   Standardize hiring practices

Startups are famous for their laissez-faire interviewing practices. However, these practices send subconscious signals to potential candidates that they aren’t welcome at your company. You don’t have to sacrifice your company culture, but you do need to standardize hiring practices to level the playing field.

Ask the same interview questions with each applicant. Adjust wording in your job ads to be gender-neutral. This is especially important if you aren’t a member of a minority group yourself. You’re subject to unconscious biases that harm diverse applicants’ chances.

5.   Avoid stereotypes

Stereotypes make your diverse employees feel disenfranchised and unwelcome. Don’t reinforce tired stereotypes in your workplace. For example, don’t seek out a woman to fill the position of executive assistant. Don’t enforce strict dress codes based on gender, such as requiring women to wear heels and skirts while men can wear whatever they want.

The bottom line

The hard numbers show that diversity isn’t a nice-to-have concept. It has a real impact on your company’s success, especially in your early days. Institute culture changes early on to build a diverse, profitable company that excels.

Don’t try to diversify your early stage company alone. Get an outside opinion from someone who has fresh eyes. Chat with Hollines Group now to get your startup on the right foot.

The post How early stage companies can leverage diversity to increase profits appeared first on Hollines Startup Growth Strategy & Transactions.

In the early stages of a startup, you’re still deciding what the company will be. This means securing funding, building a minimum viable product, and carving out a niche in your industry. These businesses inherently carry more risk because they’re unproven in the market and still need time to mature.

Growth-stage companies, on the other hand, have proven their product in the market and have secured financing. They’re in the process of growing and trying to scale, but are encountering some obstacles to that growth. The focus here isn’t on pure innovation, but expanding on what’s already working for the business.

5 ways early-stage startups and growth-stage companies differ

Not sure what category your business falls under? Consider these 5 differences between early-stage and growth-stage startups.

1. Complexity of work

Running a business is always going to be hard work. However, the complexity of running your business will differ if you’re early-stage versus growth-stage.

Early-stage startups have less complex tasks. But that doesn’t mean it’s easy; this phase of starting a company requires you to become a Jack of all trades, often working long hours to bootstrap the business. This stage is all about learning how to DIY essential processes and being scrappy with your resources.

Growth-stage companies aren’t going through such an exhausting time, although they have more complex issues to solve. Payroll, investor ROI, and market demands mean growth-stage founders are under pressure to have a consistently successful business. Your work will still iterate and transform as a growth-stage brand, but now it’s about trying to meet market demands and stakeholder needs, too.

2. Culture

Startup culture is famous: it’s known for casual dress, beer Fridays, and interesting perks like free pet daycare. It’s easy to maintain a fun and productive culture as an early-stage startup, and that’s largely due to size. You aren’t managing employees when you have a company with 2 to 10 employees, for example. You’re more likely to hire people with similar backgrounds at this stage, which means the culture will stay consistent.

That changes as your brand enters the growth stage. When you get an HR department and allow them to hire new employees, you’re relinquishing some control over the culture. As the company expands, this can feel like a game of telephone: the message will change with the more people you add to it.

This is why growth-stage companies fight to maintain their culture as they grow. One bad hire can wreck your carefully-crafted culture. That’s why it’s important to prioritize healthy culture as you grow, modeling the culture you want to see with your actions and decisions.

3. Product-market fit

Does your product have a place in the market? Is it already tested and growing in your niche?

Early-stage startups are still trying to find their place in the market. It’s early days for their minimum viable product, which means the startup experiments with their customer base as they try to hone in on their sales approach and messaging. That means features, pricing, and positioning might change overnight.

Growth-stage companies have already validated their product in the market and can prove it’s sustainable. At this point, growth-stage founders are trying to keep the brand from plateauing. This means founders are trying to grow their existing numbers, either by expanding their team or breaking into an underserved market . . . it’s about scaling.

4. Risk

Every founder has to deal with some level of risk. But you’ll see that there are big differences in the amount of risk between an early-stage startup and a growth-stage company.

Early-stage startups are able to take more risks. They’re running lean teams of 1-2 people and maybe an investor who’s along for the ride. With fewer people depending on the startup for results, the brand is able to take bigger risks—with the potential of a bigger payoff. If a startup does fail, it isn’t a disaster because the brand hasn’t grown enough to experience a true disaster.

It’s a different story for growth-stage companies. The bottom line matters much more once you have employees and high-profile investors as company stakeholders. Growth-stage companies have a lower tolerance for risk for this reason; they have more to lose.

5. Hierarchy

Early-stage startups are all about the hustle: founders wear all of the hats in the company, fulfilling orders while they try to figure out QuickBooks. The goal is to do as much as possible yourself so you don’t have to outsource tasks, saving capital.

Growth-stage companies are finally at a place where they can afford to hire team members with specialized skills. That means they’re starting to build a skeleton staff, creating departments and hierarchy within the small company.

This is good, because it means founders can focus on their vision and let employees take over more specialized tasks. But it’s a challenge to outline how the hierarchy works, and for inexperienced founders, the added moving parts can get messy.

The bottom line

Whether you’re in the early stages of a startup or you’re starting to see growth in your company, it isn’t easy to know where to turn. Avoid the delays, nasty fines, and lost income that come with bootstrapping everything yourself. Instead, rely on a trusted advisor like Hollines Group. Now’s not the time to plateau—it’s time to scale upwards. Get in touch with us now to brainstorm your brand’s next big move.

The post The Difference Between Early-Stage Startups and Growth-Stage Companies appeared first on Hollines Startup Growth Strategy & Transactions.

As an early stage company, your pricing can make or break you. Even if you’re competing against giant companies in your niche, business cost optimization can give your business an edge.

Cost optimization helps you streamline processes and increase your profitability. Unfortunately, many early stage companies neglect to optimize costs while they’re small. As businesses scale, the costs grow unchecked, increasing the likelihood of financial problems.

Don’t create problems for yourself down the road. Do cost optimization with a trusted advisor while your company grows. You can cut your operating costs as much as 20% and improve your business in the process.

What is business cost optimization?

Business cost optimization is the key to profitability for your company. It’s a process that cuts business costs without affecting your company’s performance or quality.

Essentially, cost optimization is about making smarter money choices for your business. This isn’t a frilly process, either.

In fact, many investors will expect you to have a cost optimization plan in place. If you’re trying to appeal to investors, you need a cost optimization plan.

Aside from attracting quality investors, cost optimization helps your business earn more money for less work.

How to optimize costs for early stage companies

Although you can DIY some cost optimization, it’s best left up to a neutral third-party, like a cost optimization advisor.

Here are five ways an advisor can implement cost optimization for your business.

1.   Renegotiate contracts

You likely have a few contracts in place with vendors and clients. Unfortunately, without an advisor, many early stage companies sign contracts that are unfavorable for their business.

Look over your contract terms and costs. Can you save on your manufacturer’s contract? Are there discounts available for software you use? Can you buying more units to qualify for a lower price?

Cost savings in this arena mean increased profits for you. You’ll never know how much you can save unless you ask.

2.   Standardize

Custom orders are great for customers, but they’re taxing on your business’s efficiency and costs. You can’t do custom everything in a scalable business; it just won’t work.

Instead, standardize your process. You can still offer some facets of customization, but overall, your product needs to be as standardized as possible.

For example, you can let customers white label a software platform (customization), which is created through a standardized process on your end.

3.   Outsource

When you’re founding a startup, time is literally money. How much money and time are you wasting on meaningless tasks?

You can’t check email for two hours a day and expect your business to grow efficiently. Sometimes tasks like email are a lost opportunity; in this case, your time is more valuable chasing leads or making deals.

Consider outsourcing tedious or time-consuming tasks to put your time to its best use. 

4.   It’s all about your culture

Company culture is important to your early stage company’s success. You need two components to have a culture for cost optimization.

First, frugality is important. It’s okay to give your employees and co-founders some perks, but they can’t go wild with the company credit card.

Create systems so people stay accountable. Outline what is and isn’t a valid business expense so people can be good stewards of company funds.

As a founder, you need to follow this system to a tee. Create the culture you want to see by shopping for the lowest prices and cutting out unnecessary expenses.

Second, you need a culture of improvement. You want open-minded, critical thinkers on your time. As a startup, you probably already have this, but it can be easy to succumb to burnout as you scale.

Build a culture of improvement and growth from the get-go. This mindset helps your team constantly seek out efficiencies to improve your business.

5.   Digitize manual work

Your employees’ time is so valuable. Don’t waste their salary on manual tasks. Create a process and flow for digitizing manual work.

Project management tools like Asana can lead your employees through a process so they drop fewer tasks.

If you’re savvy with code, consider AI solutions for automation. For example, you can use chatbot technology to give customers a great experience without hiring 50 sales reps. AI can also conduct data analysis and scan for anomalies.

Let the robots do the heavy lifting for you. These solutions are often cheaper and faster when a robot is at the helm.

The bottom line

Use funds wisely as you scale your early stage company. The key to growing a business is to optimize your costs as you grow. But don’t go it alone; sometimes it’s hard to optimize what’s right in front of you.

Instead, partner with a trusted, impartial advisor. The Hollines Group specializes in business cost optimization for your early stage company.

The post Bootstrapping and bucks: Business cost optimization for startup and early stage technology companies appeared first on Hollines Startup Growth Strategy & Transactions.

However, as a startup or early stage tech company, you still share some commonalities with other businesses in your arena.

In fact, as you develop your startup strategy and  prepare to scale your business, there’s no harm in looking to the tech giants for inspiration. One of the best ways to scale efficiently is to learn from those who came before you.

America’s hottest technology companies

Even in today’s rapidly changing market, there’s still much we can learn from the greatest technology companies of our time.

Amazon

eCommerce titan Amazon is one of the most diverse, innovative tech companies on the market today. They rose to fame thanks to their two-day Prime shipping, but have also excelled through innovation.

Thanks to mergers with companies like Whole Foods and their research into drone delivery, Amazon is quickly becoming the go-to company for all things convenience.

Facebook

Although Facebook experienced the Cambridge Analytica scandal in 2018, they’re still one of the best tech companies of our time.

Bootstrapped in its early days by the resourceful Mark Zuckerberg, Facebook has been one of the most successful social networks on the web. Utilized by both businesses and consumers, Facebook earned nearly $56 billion in 2018 alone.

Alphabet

Google’s parent company, Alphabet, includes the search engine as well as other subsidiaries, like Google Fiber, Waymo, and Loon.

Famous because of its fanatical obsession with user experience, Alphabet aims to improve the world without “being evil.” The company is known for innovation and creativity, which is likely why Alphabet earned $136 billion in 2018.

A blueprint for your success

What do these tech giants all have in common? When we break down their history, it comes to five essential components.

1.   Talent

Amazon, Facebook, and Alphabet hire only the best. While these multi-billion dollar companies have the budget to bring in high-dollar talent, early stage companies can’t afford that luxury.

How do you attract and retain talent as a small, early stage and scaling business?

It’s about having a mission. Salary is important, but your tech company also needs to have a clarified mission with short and long term goals.

To achieve your mission, remember that you can’t do everything alone. There’s a time for bootstrapping, but if you want to scale your business, you must hire a reliable team.

Acknowledge your weaknesses as a founder. Emulate these famous technology companies by hiring people who complement your weaknesses.

2.   Product-market fit (PMF)

You can have a great corporate structure and product. But if no one is buying your product, your company can’t be successful.

That’s why product-market fit is so important. Companies like Amazon took the time to gather consumer data and understand their audience. Facebook and Alphabet do extensive testing to understand their audience before rolling out a product.

You need to do the same. Understand who you’re selling to before you even develop a product. Address audience pain points to make selling and scaling easier for your business. Lastly, validate why a consumer purchases your product or service.

3.   Industry knowledge

Some people, like Mark Zuckerberg, created a product without necessarily being inside the tech industry.

When it comes to industry knowledge, you can do one of two things: hire people with the experience to help you or take the riskier DIY approach.

When it comes to growing your early stage technology company, knowledge is power. But don’t worry . . . if you don’t have the experience yet, you can always bring someone on your team who has the knowledge.

Use their wisdom to your advantage. Know what your competitors are doing, understand user buying habits, and how your business can stand out.

4.   Funding

Funding is both the lifeblood and a persistent problem for early stage tech companies.

These giant technology companies are very successful in raising capital. Why? Because they didn’t just look for a simple cash cow.

Instead, they sought out investors who could be a business partner. They used investments as an opportunity to grow a brand and build connections. You need to do the same.

5.   Adaptability

Technology is a changing market. You can’t scrape by, hoping that what you’ve done in the past will continue to work. That’s why most people use Google instead of Yahoo! . . . one company adapted, while the other remained in the past.

Your business needs to adapt to the market and consumer behavior. Think strategically. Know where you need to pivot your business to scale efficiently.

The bottom line

Early stage technology companies have so much promise. You want to grow your business in a way that’s sustainable and successful.

You can learn through secondhand knowledge by emulating popular companies. However, this approach is rife with trial and error. When you’re growing a business and have employees on the payroll, you can’t afford errors.

Partner with someone who’s invested in your success. Choose an experienced advisor to grow your early stage startup. Partner with Hollines Group.

The post What the 3 greatest technology companies all have in common – and how to develop a startup strategy to copy them appeared first on Hollines Startup Growth Strategy & Transactions.