How NOT To Handle Explosive Growth And Fast Scaling
For most start-ups, getting to product-market fit is the hardest part. For us, it was easy; it pretty much came by accident.
We did 200k in our first two months, and 450k in 5 months--with just two pieces of media and two people in the company doing everything.
This is insane growth, especially for a non-software start-up, and proof we hit on a big demand. And that demand has led to continued growth: we're now 14 full time people, ~120+ freelancers, have done about 300 books and about to hit 5 million in gross sales in the 2 years since we started (August '14 to August '16).
Yeah, you want success, but people forget that success brings it's own set of problems as well. So far we have succeeded in handling them--but we almost completely failed.
In fact, we handled our initial growth and scaling phase so wrong that we almost screwed up a "can't miss" idea, one with complete product-market fit, no competitors, in a new market with tons of customers waiting to give us money because we solved a huge problem for them.
How could we almost screw this up? How could this happen?
We did not make the stupid cliché mistakes that so many venture backed start-ups make. We are a profitable, bootstrapped company--there were no lavish offices, no stupid parties, no nonsense issues with equity or founders being kicked out by VC's or anything like that.
We made a whole different set of mistakes:
- We hired badly.
- We didn't build our processes with scale in mind.
- We didn't really understand what business we're actually in.
We Hired Badly
Zach and I were the only people working at Book In A Box in 2014, but after doing 450k+ of business in 5 months, we needed a lot of help.
In 2015, we hired 11 people.
It's mid 2016, and we've fired 9 of those first 11.
It's not uncommon for start-ups to have high turnover--but 82% is just absurd. That is NOT a problem with the people. That is a problem with the founders.
Lemme make something clear: we hired great human beings, and I don't blame anything that happened on them. Our hiring problems were our fault, not theirs.
Quite frankly, we had an awful hiring process, and we often rushed hiring, and as a result, hired all the wrong people for all the wrong roles.
Not only that, but we did a terrible job training them. Our training process was something akin to, "Hey, here's a bunch of random documents that are old. Read them and try to figure out the rest as you go, we're too busy growing to train you." This poor training was not malicious on our part; it was a symptom of our rapidly changing processes and the stresses of high growth.
Specific example: Andrew Lynch. He's an amazing person, I still consider him a friend, but the dude was an ENGLISH ACCOUNTANT, and we hired him for a CUSTOMER SERVICE ROLE IN A START-UP! Oh, and it was a REMOTE position, in a DIFFERENT COUNTRY--and he'd never done that before.
He actually wrote a really insightful breakdown of what happened, and why he was fired. He takes most of the blame on himself--and everything he writes is fair--but in the end, it's our fault. He was not qualified for that job, AND we did a terrible job of training him, AND he was working remote for the first time in his life. No one could succeed in that situation. The dude had no shot, and that's our fault for even putting him in that situation.
I won't break down the rest of the 9 people, but almost all of them fit into the same general box: really good and talented human beings, but not suited for the roles we hired them for, and combined with the poor training, they had no shot at succeeding.
You hear people say hiring is the key to start-ups...but you don't really get it until you have to fire NINE GREAT PEOPLE. That was the worst part. Each of these people were really fantastic, but we never should have hired them for their roles. We failed them, and ourselves. That just sucks.
We did not build our processes with scale in mind
We knew we had to build a company to scale, and we really thought we were doing it. We studied and read and learned and talked to people who had done that, and I swear, we really thought we understood.
But scaling a business (especially one as complicated as ours) is sort of like sex: there is no amount of reading or advice that will ever really teach you how to do it.
The only way to learn is experience, and neither Zach nor I had the prior experience. So we had to learn on the job, and we did not learn fast enough.
This created all sorts of problems. Our process worked great when Zach was managing all of it and doing books for only like 10 authors at once. Then we got to 20 authors, and he got overwhelmed and everything broke, so we hired Andrew and changed the processes, and it worked again and we thought we were fine. Then we got to 40 authors, and everything broke again.
Rinse and repeat, over and over and over.
Great example: We had no process for tracking how many authors were in what stage of the process. Each author was tracked in Basecamp, but we had no central repository of information about all of them, which meant we had NO ABILITY to plan for how much work was coming through and when. We had to guesstimate how many different freelancers we would need and when, and this caused all sorts of bottlenecks and issues.
I could give you 20 more examples of this, but the point is everything we did was basically duct-taping a jerry-rigged system so it would work in the moment, and not taking the time to methodically build a system that could work no matter what.
We did not really understand what business we're in
We thought we were in the publishing business, so we only worried about doing great books. And we did great books for authors. But that's not enough, especially when what you are making is not the same as the result that people are buying from you.
This sounds weird to say--our company has a process for turning ideas into books. We're in the book and publishing business, right?
Yes, technically...but not really.
No one is buying a book from us. That's what we are delivering to them, but not what RESULT they are buying. Our authors are buying what they expect their book will get them, which is far beyond just the book.
Things that a good book can get you, like status, prestige, visibility, influence, thought leadership, sales, customers, etc.
This is best explained by the classic business quote by Harvard marketing professor Theodore Levitt explaining to a drill company why no one was actually buying a drill from them:
"People don’t want to buy a quarter-inch drill. They want a quarter-inch hole."
This meant that, once our process was settled, we needed to focus the efforts of the entire company on creating a relationship with a potential author, turning them into an actual author, and managing both their expectations and their experience--so they get the result they are looking for FROM the book we do with them.
But we just focused on creating great books. We thought that was enough. This resulted in so many authors getting incredible books from us, but not having a great experience working with us in some aspect (usually something small, like we weren't responsive enough on email, or we didn't manage their emotional experience of the book creation process), or didn't get the real result they wanted from their book (because we didn't understand it fully ahead of time, so we could work on delivering it).
They weren't mad--their book was good after all--but at the same time, they weren't happy. And if you don't make your customers happy, you won't be in business for long, because they won't be excited to talk about you and recommend you to their friends.
[Don't get me wrong, we have a LOT of very happy authors, but when you're charging 20k+ like we are, and dealing with the high status people that we are, we need to have authors who are ecstatic, and love us 100% (we were probably at 65-75% love last year). Motel 6 can have decent customer service and be fine, because they are cheap. We have to be The Four Seasons if we want to win our category.]
Shit Got Real Bad For A Minute
Sometime around February of 2016 (only six months ago) these three factors converged, and Zach and I realized that--even though we were making great books and had all kinds of growth--shit was about to get REAL bad in our company unless we solved these serious problems of scale and hiring.
Our inability to build processes that scaled meant we were ALWAYS in reactive mode. We'd grow, everything would break, and we'd spend all our time either putting out fires, and trying to just stop a new fires from starting. Zach couldn't create new products or services, I couldn't do much marketing or sales, we couldn't take our time with hiring, etc, etc--all because the processes we used to make books and work with freelancers were always breaking, or threatening to break.
Recognizing these issues, we hired a General Manager to help us solve them. She started in January 2016. And then our hiring problems kicked our ass again.
She was another great, talented person...who was the complete wrong hire for us. She came from a large company, wasn't used to working at start-up speed, had problems working with little oversight or management, and though she could run systems, she could not build new ones.
You can read that description and know immediately she's wrong. How did we even hire this person?
I'll take full responsibility for this hire. I liked her a lot and "decided" that she was right for us really early in the process, then spent the hiring process defending my decision. I didn't do enough to deeply examine her skills, nor did I do a good job looking for other candidates. Zach had his reservations, but was too busy operating the company to really dig in and find someone better.
As this massive mis-hire was unfolding, I spent so much time on it that I pretty much stopped doing marketing. We had a record month in January. But marketing is something you have to keep working or it atrophies--like muscles.
I didn't see this until mid-March, when "out of nowhere" we had our first down month ever. And then had our first down QUARTER ever. We'd been growing between 30 and 60% per quarter, and now sales were SHRINKING.
We were caught in this insane Catch 22: because we spent so much time fixing the things that were broken, we weren't able to create the processes that could scale up to take on all the demand out there. And every time I did any marketing, it jumped our sales and broke our processes, which resulted in me not doing marketing, which created falling sales. And nowhere was there time to figure out how to hire the best people to help us accomplish all of this, because it was a way bigger job than Zach or I could handle.
That could be a case study in how NOT to handle growth and scaling.
Everything Is Great Now!
The good news is that we've turned the ship around, and all of these major problems are now fixed.
We still have a lot of work to do, but we're pretty much in the total opposite position we were in late February.
Our crucial processes are set up to scale wonderfully, and the rest of our systems (like marketing) are being set up to scale.
We have a great hiring process that has got us 8 new people in the last 6 months who are all doing awesome.
We now deeply understand that we are in the author experience business, and everything is built around making sure every author not only gets a great book--which we were doing from the start--but they have a great experience and get the results they are coming to us for.
Our last two months have been our best two months ever, and we just had our best quarter ever (back to double digit growth), and we handled the volume really well. We have more than doubled our sales from year 1 to year 2, and are now set up to at least keep doubling our sales every year for the next 3-5 years (and maybe longer).
Things seemed so bleak--so how did we do this? What incredible lessons did Zach and I learn that turned all of this around?
I'll explain them, in detail, in the next post.
But lemme warn you: it won't be one of those bullshit "4 Steps To Fixing Every Start-up Problem" post.
The "lesson" I'm going to teach you is possibly the very definition of counterintuitive start-up knowledge (which is probably why it's working so well for us).