When I ask entrepreneurs what their most valuable resource is, I ALWAYS get one of two responses: money (aka – funding, cash) or people. And it’s hard to argue about the relative importance of these two things. But those resources are replaceable. There’s another resource that isn’t, and it’s Time. Time is an entrepreneur’s most valuable resource and is the subject of this article. Given the various other tools and resources you have, how can you maximize time? Let’s explore further.
Many (probably most) startups go through periods of extremely little cash in the bank and with visions of crashing and burning before being able to recover. Unfortunately, crashing and burning is what actually happens a high percentage of the time after getting extremely low on cash. But it’s not what always happens and even if closing the company is the only option, there is a certain way to go about it. This article highlights some golden rules to keep in mind upon hitting really tough times, having doubts about survival and deciding how to proceed.
I know what you’re thinking. “We don’t even have 20 employees, so why do we need a management system?” You might be thinking this because you previously worked for a larger company and one of the things you hated was death-by-meetings, decision-making red tape and excessive processes/procedures. Or you might not yet know what a management system is but it sounds burdensome. But every company needs a method to their madness – a way of getting things done, deciding what to focus on and communicating to the team so everyone is pointed in the right direction. That’s a Management System. Now you just need some tips for how to right-size a management system for your stage of company evolution so that it is most effective. This article focuses on the very early stages.
It’s a necessary element of your business plan and pitch deck. It’s a question you’ll get asked all the time by investor prospects. And it’s something you’ll find yourself defending, even if much of the underlying data and assumptions didn’t come from you. As the title of this blog article suggests, I’m talking about your market size. But how do you go about estimating the size of your market and what should you do if the resulting estimate is way too big or way too small? Read further for a few hints and tricks for conducting this important exercise.
How cool is it to use a code name for an important project rather than “version 2.5” or “next gen”? Below is a list of more than 150 code names to consider for your project. The left column includes code words grouped by theme (can you figure out the theme for the last group in the list?) and the right column just lists a bunch of cool words and phrases to consider. I’ve used many of these code words over the years and hope you enjoy using them too.
If you already have an experienced product manager on your team, they are probably/hopefully following some well-established product management process. But what about the early days of company formation before you have such expertise on staff? There are always more ideas (features/capabilities, new products, etc) than can be implemented in the desired timeframe. How do you prioritize the ideas to figure out which to focus on first? There’s a simple method I’ve used in the past that at least maps the ideas to various aspects of your business strategy. Let’s explore further.
Anyone that has taken an accounting class or learned basic business financials knows the interaction between key elements of a P&L (revenue, cost, expense) and a balance sheet (assets, liabilities, equity). But it’s surprising to me how many companies with recurring/subscription revenue don’t understand the interactions between the elements that make up customer acquisition cost (CAC), churn and lifetime value (LTV). There are other important operational metrics to help steer your company (see related article titled “You Never Know What Operational Metrics You’ll Need – So Instrument Everything“) but these are some of the first to start with.
While serving as COO of a SaaS company, I came up with a simple graphic that I used to educate the company’s employees about these all-important levers of success. In this blog article I use the graphic to explain the basics and then explore various “what if” scenarios. Hopefully you will immediately identify some actions and opportunities that, if properly exploited, will improve your own success. There are numerous online resources to help with the exact mathematical formulas for CAC, CAC payback, churn rate and LTV. So instead of concentrating on the calculations, I’ll instead focus on the interactions and influences these key metrics and their underpinnings have on each other.
Regardless of a company’s size and stage, maintaining focus is often a critical success factor. This doesn’t suggest nimbleness and flexibility are bad. Quite the opposite, as focus and flexibility can live in harmony with the right management system – one that spends enough time planning and visualizing the future while also looking for signals that indicate a shift or adjustment is needed. I’ve previously written about how nimbleness and flexibility are a key unfair advantage all startups have against large companies. But if flexibility isn’t balanced with focus, then chaos often follows.
At Apple’s Worldwide Developers Conference in 1997, co-founder Steve Jobs reportedly said “People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things we have done. Innovation is saying no to 1,000 things.”
In this blog article I’ll describe a few tools I’ve used to help maintain focus.
It’s not innovation or company culture or a desire to win. Those are important but successful big companies have at least some of those things too. It’s nimbleness (aka – agility). Startups have a “turning radius” measured in inches whereas really big companies can barely turn around in a football stadium. Tucked away in this glaring contrast is a unfair advantage for the startups. Let’s explore further.
Here’s the scenario. You’ve got people asking you to express your strategy as a set of milestones extending through a certain amount of time. This puts you in the mindset of building out a timeline and dropping in various important strategic events you see happening in the future. But even if you try to limit yourself to the next 6 months you struggle with the perceived precision of showing things happening on certain dates or even in certain months.
Instead of a timeline, show your strategic milestones in what are referred to as “strategy horizons”. It’s as simple as breaking the timeline into three horizons. Two is minimal but I tend to prefer three. A one year projection might be broken into next 3 months, 3-6 months and 6-12 months. Now all you need to do is decide which horizon to drop your various strategic milestone events into. MUCH easier and yet something that conveys your strategy in a way that investors (or investor prospects), board members, strategic partners or candidates for executive employment positions can digest with solid understanding.
Here’s an example of a way you might graphically depict the exercise:
Experiencing rapid growth is different from having scalability. Growth is an aspiration or end result while scalability is a capability that may or may not get exercised. Growth can come in spurts and is most commonly thought of in terms of sales and marketing attributes. Scalability is architected in and is commonly reflected in the “back office” or the technical architecture of the product solution. In other words, not the sexy stuff but rather the “plumbing”.
It’s true that having genuine scalability can dramatically affect how your company is able to handle sustained periods of growth. In fact, this is probably the right way to think about scalability – what is needed so that we can fully exploit sustained periods of growth with minimal risk and disruption to our company? Going into an “all hands on deck” mode is one way of getting through periods of excessive growth but it comes at a cost of disrupting all sorts of things that are surely strategic and you can’t live in this mode for very long.
Here are some examples to help convert the concept into specific actions:
I guess the correlary to this could be “don’t use a compass when the precision of a GPS is needed”. In fact, the main point is to use the best tool for the job at the time. If you need to move fast and just want to make sure you’re directionally correct, then a compass is perfect. With plus/minus a few degrees of precision, you can quickly set off in the right general direction. In fact, I wrote a blog article on this exact topic titled “An Unfair Advantage All Startups Have Against Big Companies“. Same for things like estimating your TAM/SAM market size (does it matter if it’s $3.2B versus $3.3B?), estimating salaries for new hires over the coming year and the like.
The analogy of using a compass is ideal for times when speed and flexibility are more important than precision. In other words, make sure to use a GPS instead for things like revenue recognition and your investor capitalization table – where precision is mandatory.
Wait, there’s much more!!!
The information in this article is just a very small piece of what I cover in my Founders Academy Video Library, which includes more than 35 topic-specific modules and 6 themed compilations.
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I don’t have anything against a traditional SWOT analysis but recently found myself helping a couple of startups figure out how they are progressing against their business plan and vision. They were less concerned with external market forces like competition or market growth and more trying to figure out if they were on track versus off course. I asked them to create 4 lists:
- Things Validated – Thinking in line with the Lean Startup (order book here) validated learning concept, what has already been validated regarding your product, pricing, sales model, support model, etc? Do you have evidence to support this validation? Gut feelings aren’t good enough to place an item on this list.
- Initial Indications – These are items that aren’t yet validated but you have indications that they are moving in the right direction and are likely to be fully validated in the next couple/few months.
- Identified Issues – Pretty self-explanatory. These things aren’t working and you know it. But perhaps you don’t yet know what you’re going to do about it.
- Still Unknown – Elements of your business plan and vision that can’t be included in one of the above three categories.
It happens over and over and over again. A company has a successful growth spurt and is ready to ratchet up to the next level. They are sitting around a table trying to decide whether to add more offerings, enter adjacent markets, raise their prices, etc, etc, etc. Very quickly they realize it would be ideal if they had analytics and metrics on A, B and C to help make the best informed decision. But they don’t have A, B and C because they didn’t capture the data during the earlier days and now it’s too late.
This dilemma happens at all stages of company evolution. So why not instrument everything for data collection from the start? Seriously, data storage is unbelievably cheap so that’s not the inhibitor. The hardest part is deciding what information/metrics to keep. My answer is EVERYTHING. Now you just have to figure out what “everything” means. Let’s explore further.