TLDR:
- You’re more inclined to hire workers to keep up with demand as you grow. But as Paul Graham says, a lot of the time you end up diluting the startup with type B procrastinators. So if you were constantly at the peak of your productivity at the beginning, you will find yourself eventually plateauing off to their interrupt-driven frequency.
- Growth killing your startup may sound crazy at first but think about the two basic economic concepts you learned in high school: labor productivity and marginal diminishing returns. Both are intertwined by the same constant: after reaching the optimal level of capacity utilization, any more additions would inevitably yield a decreased per-unit incremental return.
- Some strategies one could employ to prevent the double-edged sword nature of growth from cutting your startup open include intentionally slowing down growth, lowering your customer acquisition cost (CAC), an improved landing page, an optimized sales funnel, and customer support.
Counteracting the contrary to popular belief
Traditionally, the growth of a startup is associated with all sorts of positive things.
Increased cash flow, an increase in productivity, an increase in better maximizing your potential, and an increase in popularity and market share among many other things.
But growth can also lead to your startup becoming stagnant.
It is a nugget I picked up from reading a Paul Graham essay on procrastination a couple of days ago, where he talks about how startups are most productive when it's just two people in an apartment, mainly because there’s no one to interrupt them just yet.
He says towards the end of the paragraph that it may be better to be overworked than interrupted, for once you dilute a startup with ordinary office workers (or type B procrastinators as he puts it), the whole company will begin to plateau at their frequency. If they’re interrupt-driven, so will you eventually.
The concepts of labor productivity and marginal diminishing returns come to mind, probably one of the first few things you learn in a high school economics class.
Both are intertwined by the same constant: after reaching the optimal level of capacity utilization, any more additions would inevitably yield a decreased per-unit incremental return.
At first, neither of the two clicked my mind as I was reading this, so from a theoretical perspective, I thought he was crazy even if they were mostly type B procrastinators that were hired.
But a brief brain dive and completing the essay was enough to conclude that he’s not wrong at all.
But aside from falling victim to bad procrastination, how else can you prevent growth from killing your company?
Some basic strategies applicable across various domains would include intentionally slowing down growth so as to maintain control and staying bootstrapped at the expense of sacrificing some market share, lowering your customer acquisition cost (CAC) to improve cash flow, an improved landing page, an optimized sales funnel, and customer support.
Any sort of growth would leave its recipient ecstatic, but what most of us don’t realize is that its a double-edged sword, which is how it can kill your startup.