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Growing a Startup Company with Fewer Customers

Growing a Startup Company with Fewer Customers

While the traditional mold for startup companies involves acquiring as many customers as possible in a short period of time, this concept may ultimately be changing, particularly with more competition making this less and less achievable.

Inc Magazine reports that a recent study suggests less can be more when it comes to client count for early-stage businesses, as dedicating one's resources to customer service and truly "winning over" a small group of patrons is often the best path to take.

According to the study, which was spearheaded by assistant professor of clinical entrepreneurship at the University of Southern California Helena Yli-Renko, researcher confirmed that this idea of less is more may actually be effective. The study examined a number of Finnish telecommunications startups, and researchers discovered that those with one or two large clients tended to be more successful than the rest.

"What we found was that key customer dependence actually had a positive effect on the firm's customer portfolio growth," Yli-Renko said in the study.

While advising young companies to go after one or two big clients may seem to be effective advice, the fact is the targeted customers must be the right ones. According to Inc., industry leaders - whether it be Apple, Google or Facebook - are the ideal clients, as they can lend a sense of legitimacy to the business.

As Yli-Renko explains, showing off the business's ability to attract such industry giants can instantly make other companies want to jump on board, expanding the startup company simply through appearance.

In addition to building one's reputation, a few strong clients can serve as excellent referrers, meaning they can naturally introduce one's startup to other potential business opportunities in the future.

Devesh Dwivedi, an Indian immigrant who founded a web development company, said that this concept of a referral proved to be his startup's gateway to additional client contacts.

"They ended up being a big evangelist for me," Dwivedi told the publication. "They would hire us for every project we had, but the reason I use the word 'evangelist' is because they personally introduced me to each one of their business contacts. Once I had worked for them for a while, they began to make personal introductions to other clients."

While acquiring a few significant clients can be a key first step for young companies, it is still critical to know when to expand. Russ Lombardo, president of PEAK Sales consulting in North Carolina, told Inc. that striking this balance and understanding when expansion becomes a necessity is the game-changing step.

"The question is, 'When do you start feeling the pain?' Lombardo explains. "When does it [get] to a point where a customer says 'I want a demo,' and you have to say, 'Sorry, we’ll have to schedule it two weeks from now.' That's when you know you need more resources—or fewer leads."

According to Forbes, one thing to remember when experimenting with growth strategies as a startup is not to wait too long before finalizing the company. While it can be difficult to decide whether to become a Limited Liability Corporation (LLC) or a standard C-corporation, the bottom line is the startup needs to do something to demonstrate that it is legitimate and serious, Forbes says.

It is also crucial to select a name for one's products early on, but this step needs to be taken carefully, with considerations given to intellectual property rights, as well as potential cultural or religious ramifications, Forbes notes.