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Original Article

3 Biggest Challenges Startups Face -- and How to Fix Them

Growing a business is a great joy for any business owner — that is, until the roadblocks and pitfalls of growth pains start fracturing your team, direction and viability. Siamak Taghaddos, co-founder and CEO of Grasshopper, knows the path of rapid growth well. His company, which supplies virtual phone systems, has grown more than 200% year over year since 2004.

Taghaddos lays out three of the most common challenges entrepreneurs face when growing their businesses.

Problem: The entrepreneurial culture quickly falls apart. “Working at a startup is typically fun, energetic, and feels like a group of friends collaborating,” he notes. “As companies start to scale however, it’s hard to maintain that entrepreneurial feel without strong core ideologies that serve as the foundation for decisions, goals, hiring, and compensation.”

Solution: Invest time in knowing and defining your true core purpose and values. These values will help you keep the entrepreneurial spirit alive.  “The ideologies can’t just come from the top-down and consist of clichés that mean nothing to employees. Core values need to matter in daily life and become a part of the company DNA. At Grasshopper, our core purpose is to empower entrepreneurs to succeed and our core values are Go above and beyond, always entrepreneurial, radically passionate, and your team. Every employee knows this and every one of them is evaluated based on those four values.”

Problem: Companies lose focus and over-expand. “In many cases, rapidly growing companies start losing focus on what made them successful in the first place: their target market. They over-expand through non-organic means, such as acquisitions, that hurt their culture, and they make decisions based on outside influences such as investors and the market.”

Solution: To keep your focus, establish your core purpose and define a target. “Growth decisions can’t deviate from the core purpose. When Steve Jobs returned to Apple in 1997, there were over 15 active product lines. He refocused the company by shutting down all but three of them: the iBook, PowerBook, and iMac. This tight focus saved Apple.”

Taghaddos adds: “Awhile back we were told to focus on vertical expansion, but it didn’t match our core purpose of empowering entrepreneurs.” Instead of taking the markets advice, he put his effort towards creating another product for young and small businesses—Chargify, a recurrent billing application with built-in analytics to measure key indicators of a business.

Problem: Management falls behind growth demands. “Read any business book on growth and you’ll hear the same phrase over and over again: get the right people on the bus and the wrong people off the bus. This advice is continually ignored. The employees that were great during the start-up and growth phase may not be the right people for rapidly scaling the company.”

Solution: Get the right people in as you grow. “New managers need to be brought in, existing managers need to be trained, and the right executives need to be in place. Rapid growth requires the right people to support and grow the company and one of the first and most important hiring decisions you’ll need to make is a great COO or VP of Operations. Get really smart people who fit your culture and core ideologies to help grow your business. Wish farewell to the ones who can’t scale.”

Siamak Taghaddos is the co-founder and CEO of Grasshopper, a virtual phone service for entrepreneurs. Connect with him on Twitter @staghaddos.