There is no shortage of advice on what it takes to successfully build a business. But I’ve seen enough bad advice to compel to me get my own thoughts down. I’m sure this will be a post that evolves over time. And each of these principles will eventually have it’s own post, so I can expand on the concepts. With that, here are my thoughts on essential principles of entrepreneurship.
Set short term milestones. Keep your eye on your cash runway. Prioritize execution against your financial and strategic plan. Set quarterly, semi annual and annual milestones. You’ll be surprised at how fast time goes by when you’re head down building your business. You need to set guideposts so that you can pick your head and see if you are on track, or if you need to make adjustments. Experiment. Try new ideas, test hypothesis, discard your failures and lean into your successes. ‘Move fast and break things’ is a valuable mantra in your early years. ‘Just ship it’ should be on your wall. It doesn’t mean you should race to release shitty products and piss off your customers. It means that 50% of what you think your product should be is probably wrong, and the faster you validate your assumptions, the quicker you will get to Product Market Fit. Which leads to…
Find ‘Product Market Fit’ before you pour in the cash to scale. I’ve seen a lot of high value, high cash burn business flame out spectacularly over the years. They raise millions on hype and bogus metrics they’ve spent a pile of money to achieve, only to realize at the end that once they stop spending, the customers dry up, the revenue shrinks and there is not path to profitability. Run lean and mean until you hit product market fit, which means building a product or service with true gross margins that you can deliver profitability at scale, and ROI positive customer Acquistion. Then, and only then, should you start turning up the spend to ramp revenue and growth. If you do this too soon, you’ll trick yourself into thinking you’ve achieved product market fit, when in fact you’ve run down the wrong path and there is a cliff at the end.
Know how you’re going to grow revenue and make money. Have starting assumptions around your business plan. I’m going to bet your assumptions are wrong, and you’ll have to make adjustments along the way. But you should have an initial plan around how you are going to acquire customers, what you are going to charge them, and the margin profile of the business you think you are building. I appreciate that Mark Zuckerberg didn’t have a financial plan for Facebook. I’m going to go out on a limb and bet that you’re not the next Mark Zuckerberg. It’s ok, most of us aren’t. You’re going to need this initial thinking to chart your initial course, prioritize activities, and to use as a guide to your first changes to your business plan. I’m a believer in the 3 year plan, with models to support the critical levers that drive your business. Having said that, the only thing I know with 100% certainty is that your 3 year plan is wrong. Always. So I’m also a believer in revisiting that plan every 3-6 months to make adjustments and changes. Which leads to my next principle…
Don’t run out of cash. I know it sounds obvious, but it happens all of the time. Know your sources of cash. Are you self funding? Trying to raise VC investment? Trying to obtain bank loans? Know your runway…how much time do you think you have before running out money. Now cut that time frame in half, because nothing ever goes as planned, and everything takes longer than you think. Don’t wait until you have 4 weeks left of cash to figure out how to get more funding. Run out of cash, and you’re dead. Don’t run out of cash.
Build a great team for where your business is today. This is a complicated topic, worthy of a much longer discussion. The basic point is that a) don’t overhire for your needs today, or you’ll often end up with people on board that are too senior for the level of work that’s required to get you to the next set of milestones and b) reevaluate your team regularly, and be prepared to level up your org as your business progresses to bring on more senior talent that can get you to that next set of milestones. An example of this, and a classic mistake of many early stage companies, is to hire a Chief Revenue Officer too early, when what you really needed was a scrappy experience seller or two that are willing to do the hard work of selling an early stage product or service. You don’t need a CFO when you’re 15 people and pre-revenue. You don’t need a Chief People Officer when you’re 25 people, mostly in technology and sales. You’ll spend too much money, give away too much equity and end up with someone that needs a team below them to execute.
Pay attention to your company culture and values early on. Follow the no assholes rule. Build a team of people that you want to work with, that you will want to spend a lot of time with. Build a culture of respect, risk taking, acceptance of learning through mistakes and failure. Focus on this early, or you’ll end up with problems down the road that are very hard to unwind. And your company can build an external reputation that will make recruitment of great talent more difficult down the road.
Make time to step back and reassess. When you are head down, working hard as you move from milestone to milestone, you need to pick your head back up on a regular basis and ensure you are headed down the right path. There is a culture of working around the clock that plagues the startup community. It’s a huge mistake. It creates sub-optimal decision making, and it creates no space for an honest reassement of the work you and your team are doing. I genuinely believe that in the early years, many of your initial assumptions, models, and milestones will be wrong. That’s fine, as long as you take a step back to examine what was wrong, why it was wrong, and what decisions should come from that realization. It’s easier than you would think to just keep plowing blindly down a path that you set months, or even years ago, missing signposts along the way that were trying to tell you to turn off.
Do something you are passionate about. This is the most important principle. Because starting and building a business is really, really hard. It requires a lot of sacrifice. It can take a long time to build a successful, sustainable business. Are you prepared to commit the next decade of your life to creating and building the business you’re starting, through all of the ups and downs? Is this a problem / opportunity that you are deeply committed to? So many businesses fail, after an incredible amount of effort. It can be soul crushing. If you aren’t at least focused on a problem you truly care about, the journey can be excruciating. I have to note that this does not mean “Do what you love to do.”, which can be interpreted as focusing on opportunities you may enjoy, but that ultimately can’t build enough value to be worth the effort. That’s a blog post on it’s own.