Daniel Stevenson / December 8, 2023 / 6 MIN READ

Common Mistakes Expansion Stage CEOs Make (& How to Avoid Them)

Daniel Stevenson / / 6 MIN READ

Common Mistakes Expansion Stage CEOs Make (& How to Avoid Them)

As I continue my journey working with early-stage ("pre-scale") companies, I thought I'd share some common mistakes I’ve seen leadership teams make, in no particular order:

1. Failing to Really Understand the Business

Most founders have domain knowledge, leading to customer empathy, but do you really understand your business and how to make a sustainable profit from solving customers’ problems? You must understand your market dynamics and how to build a go-to-market machine. You may have achieved product-market-fit, but now you need to reach go-to-market-fit.

2. Failing to Segment Properly

You can be all things to all buyers later. But not when you are trying to build a profitable business. You should focus your limited bandwidth and resources on the segment(s) where the unit economics (CTLV:CAC, NRR, ACV, etc.) are in your favor. Not all revenue is good revenue. You need to invest in capturing the revenue that delivers the best return for your limited investments, now and in the future.

3. Not Properly Balancing Strategy & Tactics

Some founders are great at execution but can't see the forest for the trees. Others can only paint the big picture, but they can't execute. Know that running a startup requires a balance of strategy and tactics. You need to be able to zoom in and zoom back out. Understand if you are good at one and not the other, and find team members who can complement your weaknesses or get coaching to shore up those skills. Leverage seasoned executives who can work with you and help you develop the right skills. Remember, even players like Michael Jordan and Tiger Woods invested in further coaching when they were at the top of their game.

4. Saying “I’ll do it”

Since founders have to do everything in the early days, they often maintain control for too long. Whether it is sales, partnerships, or product management, or even accounting. As your business scales and becomes more complex, you need to know when to delegate (but remember to stay engaged without having primary responsibility for the tasks). Saying “I’ll do it” probably means it won’t get done.

5. Not Transitioning from Founder-led Sales Faster

Do not try to scale your sales organization until you have your first few paying customers. Ideally, your first renewing customers. Too many early-stage companies struggle with the transition from founder-led sales. They either hire too quickly and don't understand the right profile for those early sales hires, or they wait too long. Understand that it takes time to find and onboard the right sales leader, so don’t delay the decision. If you haven’t managed Sales before, talk to someone who has.

6. And Then Thinking Hiring A Sales Leader Is Enough

Hiring a VP of Sales or a Chief Revenue Officer is not the solution to all your revenue problems. Yes, they can validate or figure out how to scale revenues, but know that they will quickly want to put in place a team to help them execute. They will have hiring requirements for a team or want to assess and potentially re-assign your current sales resources. Be ready for this.

7. Hesitating to Pay for Experience

Many founders have bootstrapped their startups. And have done all the jobs themselves. But if you are going to scale, you need to hire a team and pay for experience. At some point, you will need to work with people who have “been there and done that.” This is why you typically need to raise venture funding.

8. Not Staying Engaged as You Grow

Startups require a lot of time and energy. Founders make sacrifices to get to where they are today. We appreciate your achievements and we know the challenges you have faced. But just because you have raised money and have assigned functional leaders does not mean you can take your eye off the ball. You must stay involved as you bring in new team members to manage key functions. Do not abdicate responsibility even if you abdicate leadership. Hire the best people you can, but put in place controls. You own the business.

9. Failing to Appreciate the Impact of Marketing

Many startup founders under-appreciate the importance of marketing. Yes, lead generation is key as you transition from initial referral sales. But lead generation isn’t everything. Done well, marketing can make your sales team's job easier by presenting them with educated prospects with intent who close faster at higher average deal sizes. This takes proper positioning, messaging, and materials to educate prospects and turn them into customer advocates. All while differentiating you from the competition. See this recent blog post highlighting the differences between lead and demand generation.

10. Underestimating the Importance of Customer Success

Early-stage companies rightly focus on acquiring new customers. Initial hires for the post-acquisition process tend to be focused on either implementation or customer service. But as you scale, you need to focus on ensuring that your customers use your solution to its full potential (trust me, your salespeople are not suited to this task). Happy customers are the revenue engine upon which you will grow your SaaS business. Customer Success is not Customer Service. You need team members who understand how to drive engagement and revenue.

11. Not Appreciating the Need for Product Management

We get it. The product is your baby. You nurtured it to where it is now. You turned early rejection and feedback into a solution that people now pay for. Congratulations. But as you scale, it is time to bring in someone focused on the product's success in terms of how it delivers value and its competitive positioning. Hire a product manager who has built great businesses on similarly great products.

12. Ignoring People Management Issues

Early-stage companies need pitch hitters, team players who can play various positions. But that early hire (or co-founder) is often not the right person to manage a function as the company scales. You need to hire and manage employees for the roles they are assigned. Don’t just move people around (“Wasn't great at sales? Try partnerships…”). CEOs need to know how to manage these transitions. And it's never too early to put in place proper policies around role expectations, reviews, and compensation.

13. Not Doing Things Faster

I have often seen startup CEOs hesitate to make big changes (hiring, firing, pricing, fundraising, etc.). Trust me, those big decisions should not be put off, especially when your investors and advisors are pushing you to make a change. Take advantage of their experience and make a move. There’s nothing like creating an environment of decisiveness where risk-taking is encouraged.

14. Trying to Go It Alone

It’s lonely at the top. As the CEO, you do hold responsibility for the performance of the business. But that doesn’t mean you are alone. You need to develop peers and mentors who can help you on the journey. And create a culture of openness by sharing information about your wins and losses internally.

15. Not Knowing When to Put the Pedal to the Metal

It is hard to know when to "Go for it." Continuing to manage with a bootstrap mentality means your company will only grow linearly (if at all). Decide in advance what proof points you need before you accelerate. When you have product-market fit and the right controls in place, then you should invest for growth. No one’s perfect, but if you recognize these as common mistakes others have made on their scale journey, you can avoid them.

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