The “firsts” of your business can be nerve-wracking. Here’s how to make sure everything goes smoothly.
In the startup world, beginner’s luck won’t cut it. The bitter truth is that most startups will fail, and the odds are more heavily stacked against rookie entrepreneurs. So, what separates experienced entrepreneurs from those just starting out? Knowledge. Educating yourself on common milestones in your startup will give you a better chance of getting through the stages of your growing business. Here’s what I learned about five big “firsts” from my executive roles in multiple businesses.
First Dollar of Revenue
Your first dollar proves that your business model can generate revenue. It shows demand and market validation for your product or service. Yet there are some things to consider about your first dollar that will provide valuable insight into your business.
Ask yourself: How long did it take you to generate this first dollar? How long will it take you to generate your additional revenue? How much did it cost you in time, money, or effort to get a dollar? Will you be able to cut your acquisition cost down?
If it took a long time to generate your first dollar, or if you spent more on customer acquisition than on the lifetime value of a customer, then you need to re-evaluate your business model. Identify potential problems early on and make corrections. You’ll develop a scalable business model that will lead your business toward long-term growth.
Congratulations — you’re ready to make your first hire. Make sure you clearly define the goals of the position you’re trying to fill and determine whether there’s room for growth. More importantly, make sure you are adding diversity to your team — a topic often overlooked. Add diversity not only demographically, but in terms of experience, skills and network. Yes, you want to hire people who you get along with, but you also need to expand your horizons by bringing in someone who will expand your capabilities rather than just multiply what your current team already does well. When you finally do find that ideal candidate, make sure to properly incentivize them as one of the first employees. Their performance will have an incredible amount of influence on the success of the company at this early stage, so reward them appropriately.
When seeking your first investor, it’s important to have a relevant network because your connections will be able to make warm introductions to people with experience in your industry. During your initial meetings, make sure you evaluate the investor’s potential as a reliable partner by focusing on the types of questions they ask about your business and how interested they seem. It’ll help you figure out if they intend to dedicate time and effort to your business or if they’re just betting on as many startups as possible.
If you’re lucky enough to secure an offer, don’t jump on it right away. An investor’s value goes beyond money, as they must also serve as a mentor and friend. Many times, these intangible benefits are significantly more valuable than any amount of funding, so be sure to carefully evaluate each opportunity before you make the final decision. Once you finally decide on your first investor, you’re responsible for delivering results not only for yourself but your investor as well, since they’re putting their money, reputation and time on the line.
Successful brands like Instagram, Pinterest and Twitter all made pivots at one point or another. Your company will most likely do the same. You simply cannot anticipate exactly what the market needs until you fully immerse yourself into it. Work with customers and adapt your business model based on firsthand data.
Leverage your industry knowledge to effectively pivot your business. Ideally, it should keep you in the same vertical but might require making a change to the way in which you approach a slightly different market need.
When you finally decide to make the pivot, consider bringing on a new employee to provide a fresh point of view. Her expertise in your new direction will serve as a guidepost in helping you quickly adapt your product to your customers’ needs. When you pivot, also make sure that you clearly communicate the change to your customers in a well-thought-out manner. They’re your potential customers and shouldn’t be left wondering what happened to your previous business.
Your first office is not only a place to work but a reflection of your company. It legitimizes your business and demonstrates to new employees, investors and partners the kind of environment that brings out your best work and ideas. Since your office is such an important projection of your image for both internal and external partners, make sure that you consider several important factors.
What kind of look and feel do you want to convey? What’s the best location for employees and for your company goals? Is the layout conducive to productivity and comfort? Is the office space the one you want to grow into and are the lease terms aligned with your long-term company plans?
At our company, these are the kinds of questions we suggest our clients ask before they commit. In doing so, you’ll ensure that you have a suitable environment to best help your business grow. Engaging brokers who are familiar with high-growth companies will enable you to quickly find the office space that fits your needs and provides flexibility for an upgrade once your business grows.
The path to success for startups is tricky and covered in potholes. You’ll likely encounter both jubilation and frustration during the early stages of your startup, but following these tips that will help you come out ahead. Good luck!
BusinessCollective, launched in partnership with Citi, is a virtual mentorship program powered by North America’s most ambitious young thought leaders, entrepreneurs, executives and small business owners.
Image Credit: CC by Markus Spiske