Are We Growing or Just Getting Fat?

What's the difference between a startup that's growing and just getting fat?
Startups are synonymous with growth, so much so that we treat growth and the prospect of "getting bigger" as exclusively good. If we're growing, we must be winning, and therefore "growth is good."

But what happens when that growth turns from muscle to big, sloppy fat? All of a sudden, growth isn't good anymore. In fact, it's just kinda gross. Well, that's exactly what happens at startups, and it's not just when we hit thousands of people post-IPO. It can happen when we hit 20 people, and we're no longer the lean startup we were meant to be.

As Founders we need to be hyper-conscious about every bit of growth and whether it's actually making us more healthy overall.

What's Our Fighting Weight?

Every startup has an ideal size that it was meant to be — it's "fighting weight." That size is essentially determined by two things — its revenue and the minimum amount of resources it takes to produce that revenue. If a startup can generate $200k in revenue and it takes precisely one person to produce that revenue — that's the ideal "weight" (cost) of that company.

But, theoretically, that startup could also hire four $50k people for the same $200k of revenue and split that effort amongst them. That doesn't mean it costs that much; it just means it can afford to pay that much, given the amount of revenue it generates.

Every dollar a startup spends beyond what it has to in order to generate its revenue is where it becomes overweight. Really, this can happen at any size. You see it happen at places like Google, where I'm convinced you could fire half of the staff and it would have zero impact on output (an epic example of bloat), and you see it happen at startups with 4 people where 1 person makes almost zero contribution. Bloat is everywhere.

Growth is Weight

If we understand that our startup has an idea of "fighting weight", then we've got to understand that growth, by definition, is adding weight to our startup. Now, of course, our hope is that this additional cost (weight) will also produce more output, otherwise we wouldn't be taking it on.

But that's the rub — the Cost is a given, and the Output is variable.

This is the hardest part for us to calculate as Founders. We get so pumped up to consider what the output could be that we often miscalculate the compounding cost of constantly adding weight that doesn't generate more output. So we keep adding more weight, expecting it to manifest into more output, but over time — it's just more bulk.

Muscle vs. Fat

Our job as Founders is to maintain more muscle than fat. It's way easier said than done. To do this, it requires us to constantly stay fit by simply asking the question, "What expenses here (it's not just people) aren't 100% optimized at any given time?" The probability that every expense we incurred a year ago has exactly the same ROI today is unlikely. At the very least, it should be reviewed and most likely, trimmed down.

The longer we let ourselves go, the worse this gets. We start building an "excess mentality" that suggests we can solve problems by throwing money and resources at it versus figuring out why the problem exists to begin with. We spend money because we have money, not because it should be spent. We get lazy.

But there's another side to this. There's a version where we start lean and stay lean. We treat every decision with a focus on merit and output. We ensure that every new hire contributes more than the last, and every expense retains its value. We treat our startup bodies like the temple they deserve to be so that they can serve us for the ultramarathon we intend to run.

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