4 business growth strategies for surviving the ‘Valley of Death’

4 business growth strategies for surviving the ‘Valley of Death’

Almost every business will face the daunting ‘Valley of Death’ before it becomes profitable. The key to survival is not avoidance, but preparation. By planning ahead with the right business growth strategies, you can minimise the time your business spends in the Valley and get back on track to profitability.

As the below diagram above illustrates (Source: Osawa and Miyazaki, 2006), the Valley tends to coincide with commercialisation. It arrives after you have invested time and money into research, product development, and the product launch.

 

By the time you commercialise, you have already spent a lot of money, so even though you are selling products you still have to climb out of the Valley to make that money back.

 

The point of the Valley is to illustrate that successfully launching and selling a product does not guarantee profitability and business growth. A successful product does not equal a successful business. You must have a strategy for funding the business while it’s in the Valley in order to survive (and thrive).

 

Here are some tips for surviving the Valley of Death.

 

1. Commercialise as fast as possible

 

The more time you take to research, develop, and launch a product, the more money you will spend. If you can speed up the time it takes to bring your idea to market, you will have less money to pay back once you start making sales––and you will therefore spend less time in the Valley of Death.

 

“Many New Zealand entrepreneurs wait until the ‘perfect moment’ to launch their product, but this can sometimes be too late,” says Bellingham Wallace Director, Mike Atkinson.

 

“It’s better to release a slightly flawed version of your product or service now than to wait until it’s absolutely perfect. You can always release an updated version in 12 months.”

 

2. Create a budget for the Valley

 

Get really clear on how much it will cost you to keep the business going post-commercialisation. Figure out how long it will take you to pay back your initial investment once your product starts selling. It’s normal for a business to take years to become profitable. In a start up mode, the second year is often the hardest. In year one, you are new and interesting, and by year three, if you have survived, you start to make money.

 

In a start up mode, the second year is often the hardest.

 

Also identify how much you would be willing to invest into commercialisation. What is the absolute maximum you can spend? Draw a clear line in the sand and work backwards to understand what needs to happen for you to stay within your budget.

 

3. Consider different funding streams

 

How will you fund your business through the Valley of Death? Will you invest your own capital or apply for a business loan? Can you redirect profit from other areas of the business to support business growth? Would you be willing to bring on an external investor?

 

Make some decisions before you enter the Valley so you can prepare in advance. Be proactive, not reactive.

 

4. Don’t be scared of the Valley of Death

 

If everyone avoided the Valley of Death, there would be no innovation.

 

“The answer isn’t to stop looking for new ideas and bringing new products to the market,” says Mike.

 

“Don’t be scared of the Valley–instead, look to understand the cycle, be prepared for the dip, and create a plan to keep you moving in the direction of profit and growth.”