You’re about to go on the fifteenth date with that “perfect” girl. Everything’s been great. She thinks your corny jokes are funny, she loves watching The Profit with you, and heck, she doesn’t even seem to have any annoying friends. She might be the one. But then one day, things… just… stall. Not only is she suddenly “too busy” to see you, but she even lets slip that she thinks Marcus Lemonis is kind of lame.

What happened?

Who knows. But what matters is that startups actually deal with this same scenario all the time. Growth takes off, and you’re sure this company is the one that’s going to make your mom proud. But one day your growth hits a brick wall. And no matter how your good your ad creative, how optimized your campaigns, every new customers is more hard-earned than the last.

Not knowing why your startup isn’t growing is the hardest part.

The good news is that there’s probably a good reason. In this post, I’m going to show you what those reasons are and how to determine which one is the culprit.

The 3 Reasons Your Startup Isn’t Growing

OK, there aren’t only three reasons your startup isn’t growing. For example, if your company catches a whiff of bad PR for, oh, I don’t know… FRAUD, then that might be the culprit. These are reasons why nice companies selling nice things to nice people might run find themselves caught in quicksand:

Reason #1 – Bad Product: Let’s face it… you can only get so far before people realize your product isn’t great. If you’re reading this and aren’t aware if your own product is good or bad, I’ll just assume that (a) you’re brand new at your job; or (b) you already know deep down inside and you’re hoping that this article will let you off the hook. Either way, I’ll show you the warning signs of a bad product.

Reason #2 – Bad Marketing: Your product is fine. Maybe it’s even great. And people seem to buy it. But they’re not responding to your marketing, because, well… it’s lame. If you’re a marketer, you probably don’t want this to be the reason. But better you find out yourself then someone else (your boss?) be the one to break you the news.

Reason #3 – Bad Market: Trying to sell the world’s best yoga mat to your local Harley-Davidson club? Life insurance to a 17-year old? This weird, cucumber-flavored Pepsi to someone who doesn’t live in Japan? You get the idea. You’ll always hit a brick wall if they’re selling a great product to the wrong market. 

So which one of these is the main culprit? Keep reading and we’ll find out…

It’s 3rd Grade All Over Again, And I’m Giving You a Worksheet To Do For Homework

At least I won’t be grading you on the results. And this assignment will only take about 5 minutes. Here’s what you need to do:

  1. First, download and print this PDF. Or click here for an Excel version.
  2. Grab a #2 pencil (or go really crazy and make it a #4)
  3. Below is a list of 10 areas you’ll evaluate your company on. Read them now and then return here.
  4. Go through each line on your worksheet and rate your company as weakaverage, or strong. Don’t spend more than 30 seconds on each.
  5. At the bottom of this post you’ll find what results look like for a company with a bad product, bad marketing, or a bad market. Don’t peek! Whatever result your worksheet most closely resembles will point you to the real reason your startup isn’t growing.

Finally, at the end of this post, I’ll provide a bit more commentary on each result. 3-2-1-Go!

Click here to download your worksheet

Rating Your Company On These Areas Will Help You Find The Real Reason Your Startup Isn’t Growing

Again, on your worksheet, you’ll find these ten areas listed. Which of these your company is weak or strong in will indicate where your problem lies.

PPC/SEM Marketing – anywhere you spend money to drive leads, clicks, etc. Evaluate the ads themselves, not the entire conversion funnel (here are some good benchmarks to reference). Why this matters: if your ads themselves perform well but you’re not growing, it probably indicates a product- or market-related problem.

Search traffic for your product/company – what’s the search volume for the name of your company or if applicable, your own products? Nonexistent? Moderate? Growing? Why this matters: if people are searching for you, they’ve probably heard about you from someone else. That’s a usually good thing!

Search traffic for related terms – this is the search volume for terms that are related to what you do, like “landing page software”, “energy efficient lightbulbs”, or “books on how to find a girlfriend”. Why this matters: if there’s high search volume for things related to what you do, that’s a good sign that there’s a market for what you’re selling. 

PR coverage – are other sites interested in writing about you? Or does your local newspaper turn you down so they have space to cover that local fashion show for seniors? Why this matters: if you can’t get any PR, chances are your product isn’t interesting or valuable enough to be worth writing about.

Direct/referral traffic – having plenty of these visitors means people are (a) bookmarking your site, (b) heading there directly, or (c) coming to your site from articles written about you. Why this matters: it means you’re doing something right – people love you enough to visit you often to tell others.

Website Conversion Rate – you might generate lots of “top of the funnel” interest from a paid ad campaign, but once visitors actually learn what you do on your website, are they still interested? Why this matters: a low-performing site means your product just isn’t compelling, or that you haven’t described it clearly.

Sales Close Rate – do leads show up for calls, and are they closing at a healthy rate? Or do you resort to discounts just to get a few closes? Why this matters: a really good marketing team can get people interested, but if the product is weak and/or the market is wrong, then sales won’t get very far.

Referrals – what portion of your does your growth come from referrals? If your not sure what a good benchmark is, look at this article from FriendBuy. Why this matters: if you’re getting little growth from referrals, that’s a sign that people aren’t passionate enough about your product to tell others. 

Retention/Repeat Purchases – do your customers buy from you again? And if you’re selling a subscription-based product, do they stick around for long? Why this matters: low retention or a low repeat purchase rate is a major red flag that your product doesn’t fit with the market. 

Reviews/Net Promoter Score – either one will tell you what people really think about your product. If you don’t know how to measure NPS, here’s how to do it. Why this matters: low ratings on either metric are a sign that your product is weak. But if you have high ratings and still aren’t growing, that points to a marketing issue.

Which Type of Problem Are You Facing?

With your worksheet complete, compare it to the three examples below. Chances are it will line up with one more closely than others. If you find a match, read that section to find out the real reason your startup isn’t growing.

Can’t find a match? Read each section a few times, and you’ll probably start to see one that sounds mostly like you. And if you’re still not sure, there’s probably a combination of reasons your startup isn’t growing. More commentary on that at the end.

What A Bad Product Looks Like

This is the easiest to diagnose, so we’ll start here. Your product gets few referrals, weak reviews, and customers don’t stick around for long.

when your startup isn't growing because of bad product
When your startup has a bad product, you might be able to get people to buy it, but as soon as they find out what it’s like, your referrals, retention, and reviews will suffer.

You might get away with decent performance in your paid ad campaigns, perhaps because you’re still addressing a need that your target market actually has. And perhaps your sales team or website can even do a decent job of generating new customers. But as soon as people find out what your product is really like, the truth becomes evident.

How is this different from a bad market? These two problems are most easily confused, so let’s look at that one next…

What A Bad Market Looks Like

The tricky thing about having a bad market is that you’re also likely to see mediocre reviews, a poor net promotor score, and weak referrals – just like you do with a bad product.

But there’s a key difference.

When you’re trying to sell to the wrong market, nearly everything is a challenge. There’s not a lot of search traffic in your product category, so you can’t rely on SEO. Since your paid ads aren’t really addressing a need that your market has (or understands) they’re never going to work well.

when your startup isn't growing because of bad market
Selling to the wrong market is the toughest battle to face – nearly nothing works!

You might have pockets of people who “get” how valuable your product is. But if you’re finding that potential customers just don’t understand the problem you’re trying to solve (regardless of how well you describe it), then you’re probably selling to the wrong market.

This can be a particularly thorny problem if you’ve sold most of the “early adopters” in your market but haven’t established enough credibility to sell to the “early majority.” The book Crossing the Chasm, by Geoffrey A. Moore, provides some great insights here. If you were growing quickly early on but now your startup isn’t growing at all, it’s definitely worth a read.

What Bad Marketing Looks Like

If bad marketing is your main issue, then your company’s growth is mainly limited by your success with referrals, PR coverage, and search traffic.

when your startup isn't growing because of bad marketing
If you have a great product, some people will still buy it despite your poor marketing. You’re lucky – this is actually the best problem to have, as it’s the easiest to fix.

When customers have great things to say about you, when the press loves writing about how wonderful you are, and when more and more people search for you online, then you know that that product and the market are solid. So if these things are happening but your startup isn’t growing, it’s probably because: (1) you haven’t found the right marketing channel; (2) your ad campaigns themselves aren’t messaged properly; or (3) you haven’t figured out how to convert paid traffic into revenue.

While no one gets joy in learning that their marketing needs improvement, this is actually this best scenario to find yourself in. If you have a great product and are selling it to the right market, then marketing is really there to serve an accelerator for growth – not the only thing keeping your company alive!

The World Is Messy, And The Real Answer Might Be A Combination Of The Above

Of course, there’s probably more than one reason your startup isn’t growing. So which problem do you fix first? Here’s a quick rule of thumb:

  • Great marketing can only do so much to offset a bad product. If you’re dealing with bad marketing and a bad product, then improve the product first. Focusing marketing will only get you short-term gains. But you can actually build a business on a great product.
  • Likewise, a great product cannot account for a bad market. If you’re facing both of these issues, find the right market to sell to first. The right market will tell you what problems they need addressed (if you ask), and will lead you to the right product and the right way to market to them.
  • In other words, focus on fixing your marketing last. This may sound counterintuitive coming from a blog that’s focused on marketing, but if you deal with the underlying issues of bad product and bad market first, you’re marketing will be much more effective.

Have you dealt with this conundrum at your own company? If so, what was the underlying issue – and how did you solve it? Let me know if the comments.