Planting the seeds for sustainable growth

MaRS expert Mike Abramsky maps out the fundamentals of how to scale up with success.

There are some key questions any founder looking to drive growth should be asking: “Who do I sell to? How much do I charge? How do I convince investors I’m the real deal?”

Mike Abramsky knows how to find the answers. And thanks to the experience he’s amassed over the past four decades, the MaRS executive in residence knows how to guide business owners toward profitable and sustainable growth.

Abramsky graduated from MIT with an engineering degree and earned an MBA from Harvard in the early ’90s, then went on to hold a range of positions — from product marketing at a software firm to digital media profit and loss oversight at Rogers — that provided a wide-angle view of the corporate ecosystem. He also spent a decade as a Wall Street tech analyst for RBC Capital Markets and served as the CEO of two companies.

In his professional life, Abramsky says, he’s seen it all: “I’ve had the sweet and the salty, the success and the failure. I’ve grown one company to $100 million in revenue and had another struggle because it broke too many business fundamentals.”

That expansive perspective is a key asset in his role at MaRS, where Abramsky helps some of Canada’s most promising ventures scale to $100 million and beyond.

Value judgement

Pricing a product or service is one of the most effective ways a business can drive future valuation. It’s also particularly tricky to master.

Entrepreneurs typically emulate competitors or rely on customer opinion when determining how much to charge. This approach often causes companies to “cannibalize their own market potential” in terms of profit and/or potential clients, Abramsky says.“They either price too low, or raise prices until the customer starts wincing.”

To avoid this, he recommends value-based pricing: the sweet spot between demonstrating the value a user is getting, while ensuring it’s still affordable. The key is figuring out a solid value proposition — a cogent summary of how a buyer will benefit from their products or services compared to those sold by their competitors.

According to Abramsky, the strength of a value proposition hinges on several variables. First, who is the intended market? Too often, he says, founders try to land the widest potential customer base and wind up spreading themselves too thin. “It’s better to target a category and be dominant in that category,” he says, adding that expansion can always come down the road. Figure out your company’s superpower — and then determine the audience that best aligns with that superpower. Second, home in on how to encapsulate your value — what outcomes should customers expect when they invest in your product? Third, what differentiates your company from your competitors — why should a person choose you? And finally, what’s the proof? Founders should always showcase data, testimonials, industry studies and customer references.

Cornering the market

Once founders figure out those four key variables (“who, value, differentiation and proof,” as Abramsky describes them) and settle on a price, they must develop a marketing strategy.

Purchasing decisions are based on more than just real or perceived value. For many consumers, Abramsky points out, loyalty is based on somewhat ineffable qualities. “It’s not a direct equation — it’s more about feeling, in some ways. Why do people pay double for a MacBook compared to a PC? Part of that is the superior user experience, but it’s also about a brand premium — the Louis Vuitton factor.” Aligning with a brand name involves identifying with the values that that brand seems to represent, whether it’s an aura of wealth or a commitment to social and environmental causes (as in the case of green products).

Abramsky also emphasizes that selling to businesses is very different from selling to customers. Too often, he says, he sees entrepreneurs promoting a product’s features and user experience in a B2B context. “If it’s a business product, then it’s about the ROI — which is hard for a startup, because you don’t have a lot of data.” He advises founders to remember they’re the experts, and present themselves accordingly. “Have a thesis about how your product will improve outcomes for the business. You should be marketing the potential rate of return, increased revenue or lowered costs and risks.”

Tipping the scale

Successful growth is driven by generating demand: translating leads and potential customers into sales and signed deals. To achieve this, Abramsky says companies must consider scalability and repeatability — ensuring their product or service appeals to as many customers as possible, without having to customize for certain subsets.

His go-to example in this realm is Windows. Before Microsoft disrupted the home computing sector in the late ’90s, PC users needed a base-level understanding of program commands to complete simple tasks. Windows offered an intuitive command centre pre-loaded with legible icons that let users simply click to access everything from spreadsheets, word processors, e-mail and, yes, the occasional game of Minesweeper. The clarity and flexibility of the system appealed to everyone from Fortune 500 companies to high schoolers writing book reports — and meant that it could easily be marketed to new segments over time.

A startup that prioritizes repeatability and scalability has a good chance of establishing market traction — a solid reflection of that company’s momentum — which is fundamental in accelerating growth. “Venture capitalists look for a reduction in risk,” says Abramsky. “Market traction overcomes all the other drawbacks of a small and untested company.”

To him, assessing this aspect involves another set of questions. “Is there a real market? Do they have a good business model? And is there evidence of this with the customers that they talked to or sold to already?” If the answers are yes, it’s a sure sign a company is growing — and a green flag for prospective funders.

The MaRS Momentum program works with high-growth Canadian companies to accelerate their path to hitting $100 million in revenue. Is your business Canada’s next anchor company? Find out more and apply to join the program.