In this article, Donna Rachelson, CEO of Seed Academy, points out the key priorities an entrepreneur should focus on at the outset to build a business.
It is unlikely that you will receive financial support if your business is not ready for it. So, once you do receive funding, you need to impress your investors by giving them a return on their investment, expanding your business, creating jobs and contributing to the economy.
When starting up a business, there a few basic things that are really common sense, but not many entrepreneurs do this. Some entrepreneurs have different ideas about what kind of company they want to run or CEO they want to be.
They don’t necessarily realise that some of the biggest companies in the world started out in a garage – bootstrapping their business, working hard, improvising and making do till they started making the money that allowed them to scale.
Often the attitude is that if they are getting funded (especially via a government grant) then they can start ‘properly’ in a ‘nice’ office – with a few employees and all the gadgets they need in the name of work environment.
Reality isn’t kind to entrepreneurs like these. They often find that they have run out of money before they’ve even made the first sale.
It is vital to focus on user or customer acquisition. Marketing is not a waste of money. It’s an investment, not an expense.
When you start thinking of a business you have a few assumptions about who your customer is going to be. You need to thoroughly test this theory. Pick a potential customer and make a pitch. You can do this even before your launch your business. See how many companies will give you a letter of intent. See how many engage you and are excited by your business.
The more you talk to people, you will also be able to start profiling your potential customer and what they want. Based on this, you will be able to formulate a strong marketing strategy. As a start-up you need to ensure you don’t experiment with marketing money because you can’t afford to. It’s critical to get this right.
The truth is that there is only one true proof of concept – and those are your sales which put actual money into your bank account.
Invest in hiring the right people
These people may come at a price, but you can keep their remuneration performance related. Do not use a recruitment company for at least the first five employees because at this point the company’s culture is still being built and these people should be strategic and deliberate.
Most entrepreneurs come across the right people as they network (if they’re being a good entrepreneur). Often these employees buy into the entrepreneur’s vision and are willing to build the company along with the entrepreneur.
Ultimately this is one of the most difficult parts of building your company – and only when you work with someone do you know the chemistry.
I ask people to do a trial period of about a week with me for which they’ll be paid. It’s a good way to establish who has a good attitude and work ethic and who will fit in with the company culture.
Critically, keep an eye on your cash flows
Just because you have received funding it doesn’t mean you can go crazy with the cash. Cash flows are your oxygen. Without cash your business will not survive. While it’s very important to have an accountant (and there are lots of accounting and book keeping options available for small and micro enterprises) – this cannot replace the business owner keeping an eye on the cash.
Even if it’s rough calculations: How much do we have right now? What do I need to spend on? How fast do I need to close the sales I’m working on? How many sales do I need to cover my expenses?
Often your cash flows dictate what trajectory your business will take. This can change a few times based on the cash status. The entrepreneur needs to learn how to look at and manage the cash at the very least until a CFO comes on board.
Don’t use funding for a higher salary for yourself as the founder (if you can afford not to). As a founder you can get a higher salary when you make a profit. You certainly do not need that state of the art laptop right now!
We are lucky to live in an age that is entrepreneur-friendly in many ways. There are very affordable cloud based software solutions to organise your business.
Often if you use a good CRM system that is linked to your email. It’s very easy to organise information and pull out reports as needed.
Focus on meticulous accounting
Without this it’s like driving a car without being able to see through the windshield.
Be prudent about your spending, market as much as you can, and form a strong core team. Network, network, network …
Think deeply about your business every day
Entrepreneurs should maintain a journal to record their ups and downs – their ideas that change so often. It helps to put things in perspective. I don’t advocate “work-life” balance. I don’t believe there is such a thing when you are starting out. Your business is your life, and it should be.
But, often the emotional intensity of being an entrepreneur can be too much for some entrepreneurs to handle. Don’t beat yourself up if something doesn’t go as planned. Expect nothing to go as planned. As an entrepreneur your job is to improvise, change direction and try again.