One of the best things about a business that leans on the digital world for all or most of its revenue is that there are relatively low barriers to entry. When I started Talk the total capital investment I had to make was a Macbook and an iPhone, both of which I already owned!
Of course with any business or startup that has a low barrier to entry, a big challenge you often face is how to differentiate and grow in the market.
There are a bunch of things that, with hindsight, would have been great to have the inside scoop on before cracking open that MacBook and beating the drum on the iPhone. Things that would have really helped Talk to carve out our points of difference and achieve success faster, so we thought it would be great to take some time to outline a few of those tips for any aspiring entrepreneur or business owner looking to take their first steps in setting up a business or startup.
It takes more time than you think
In the early days of Talk I had this raging obsession with bigger, bigger, bigger, more, more, more. There was always another meeting to lock in and another deal to chase. But this mentality that I seemed to default to was more than just signing new clients. Office space, systems, IT, corporate travel; anything that the big guys were doing or looking to do, I was bent on making sure Talk was doing well as well.
With 20/20 vision, this is a bad call.
Almost everything you might think matters – the right office, the right system etc – doesn’t matter like you think it does.
Instead, the first step in building a sustainable business is recognising that it takes time. Real time. Its easy to get caught up in the trappings of big business success – investments, cars, real estate etc – but the reality is a lot of that stuff is way, way outside of reality for a small or medium business owner.
Lets do a quick calc on that…
Say you would love to have access to $3 million so you can set yourself and your family up with a nice home, perhaps a car or two. You know, a few of the trappings.
Well, that would need to look like this;
You’d need to do about $40 million (that’s $3.3 million every. Single. month.) of revenue in one year
You’d need to manage costs like a razor even sharper than your grandads cutless to get to a 10% profit margin.
That leaves $4 million.
Leave half of that in the business for growth and cash runway build-out.
You’ve got $2 million you can spend.
But you then need to take tax out of that. Depending on your jurisdiction (Bahamas, anyone?) you could be left with as little as $1 million.
So we’re talking about managing a large volume of staff all with their own wants and needs, a monster client or customer base and a mountain of stress and competing priorities.
And doing it three years in a row.
That will then get you to your magic $3 million.
But of course, let’s not forget the build up. It takes many people a lifetime to build a business, and the vast majority of them will never even hit $40 million in revenue…
Like we were saying, it just takes a lot of time to get scaling profitably. Of course, if you’re in startup world and taking on outside capital to fuel growth at all costs, that’s a different discussion… but warning – your paper riches on your escalating valuation won’t buy no Ferrari (if that’s what you’re into).
My much better half and I spent the first three and a half years toiling away in the business virtually every waking hour, drawing $0 out of it. We were fortunate that Elise also had a steady job as a nurse at the time so we could put a loaf of white bread on the table and a drop of unleaded in the Hyundai to get around to meetings. This essentially meant we were given the gift of time to work in and on the business, at no cost to the business, day after day after day.
It’s not lost on me how fortunate we were to have this set-up. We were yet to have kids (we’ve got two in tow nowadays) which also made the 18 hour days about 10 million percent easier, but you get the picture. Anything you can do to facilitate gifting time and energy into your business or startup at no cost to your business or startup, the more chance to have of giving it time to grow, prosper and build up into a sustainable operating business model.
Chaos breeds chaos
The early days of Talk were the days of the cowboy.
Grow, grow, grow.
Sign, sign, sign.
There were a million and one things going on and it was close to impossible for the small team working in the business at the time to decipher and clearly articulate exactly what the vision, mission and direction of the business was.
And that came directly from me, as the Founder.
Any time you have the opportunity to instill direction, purpose, calm and focus, do it.
Nothing (really, nothing) good comes from hurry.
Plenty of good comes from urgency, particularly in a startup, but the difference between hurry and urgency is bigger than the gap between Australia and the rest of the world when you’re attempting a long haul flight.
Always instill urgency. Never instill hurry. Hurry is the root cause of chaos, and if as the owner of the business you operate in a chaotic manner, so too will your team. You’ll be spinning your wheels with a grand total of ZERO traction.
Teamwork makes the dream work
When you’re in the really, really early days of a startup business, the success or failure of the business rests almost exclusively on your shoulders. You likely have no financial cushion, no backup, no rolled gold list of clients. Its you, your ideas, and the thought of building a team.
And this is a great place to start. Backing yourself into a corner in business startups means you HAVE to win. It means you have to self-generate ideas, revenue, clients and customers, processes, products, services. It means you don’t need to spend elsewhere – nothing but your time. But the nanosecond you can start building a team, do it.
We’re yet to find the magical unicorn that can do opps, SEO, SEM, social, management, HR, finance, web dev, design and make a mean office birthday cake well. We’ve decided it’s because those unicorns don’t exist.
That’s why we have teams.
Start by identifying the things that you just aren’t that good at. I LOVE sales and marketing, but am embarrassingly bad at attention to detail and operations / planning.
Enter a few key team members that can spin 10,978,215 plates at once while looking relaxed, brewing a coffee and chatting about their weekend. If you loathe sales, learn how to do it to a point where you’re generating enough revenue for your business to be viable (every business owner needs to know how to sell their product or service. Non negotiable, sorry. DO NOT OUTSOURCE IT until you are at scale) then hire the right rainmakers, support them and scale that sales org to the moon.
Every business is powered by people, no matter how automated it is, and the stronger your team, the stronger your business.
Profit breeds security
It’s reallllllly fashionable these days to measure cool factor or level of success in the business world by either headcount or top line revenue growth.
Without a doubt, both of these are effective ways to pulse check a business, but unless you’ve secured significant outside funding with a clear agenda to grow top line, you need to start thinking about profit.
Profit in business does one key thing above all else. It breeds security.
Security when lockdowns and stay at home orders are enforced.
Security when you loose a key customer or two (every business does at some point).
Security when you want to take a step out and put a foot on the growth pedal in new markets or verticals.
Building your cash runway up over time with your company profits is a sure fire way to turn your brain off at night so you can actually grab a few hours of sleep here and there, so if you’re not thinking about profit in that way, we’d strongly recommend you start. We have.
Almost nothing you think matters, matters
When you are an entrepreneur building a startup business you need to focus on bleeding monster value out of every precious dollar that you spend. This is why you need to triage your business priorities from ‘most impact on revenue and profit growth’ to ‘least impact on revenue and profit growth’.
Regardless of business, your number one priority should be your people.
Never stop thinking about how to develop and support your people – they will power your success.
Next is IP. Anything you can potentially monetise over time and turn into new revenue streams.
The more you can build and monetise your IP, the more you can relieve workload pressures on your people, which as we’re continually banging on about, are your most important asset in the business.
From there pretty much everything else is negotiable based on industry and needs. Think business essentials first (retail space if you’re a retailer, for example) then nice to haves absolutely last, always. That trip to the Ferrari dealership will have to be put on hold after all!
And bonus tip – always try to avoid long term, lock in contracts. Even if the shorter term options cost a little more. As a startup your needs will evolve and change fast, so your cost base should be able to as well.