The following piece appeared in the July 12, 2010 issue of the Ottawa Business Journal
Karim and Bill have been friends since high school. While Karim went on to an athletic scholarship that morphed into an executive sales position in the consumer electronics sector, Bill parlayed his stellar undergraduate software engineering degree into a Master’s degree.
They have always wanted to start a business together, and feel the time is right. Bill has just received a notice that his position, along with his whole R&D group, has been “offshored” and Karim can’t seem to break through into upper management. In his last evaluation, his superior noted that Karim’s sales talent (consistently in the top percentile of sales executives) should not be wasted in management.
But before getting started, they are looking for some direction.
This dynamic duo have an intense and fun journey ahead of them. There will be days of euphoria and days of despair. During the ride, they need to develop their corporate and product strategies while staying focused on execution. No easy job!
1. BANG! Revenue, profit
As soon as the starting pistol fires, it’s a mad dash to revenue and then profitability. Don’t get side-tracked. Don’t forget. Don’t slow down. Don’t sleep. Get to revenue. Get to profitability. Go!
2. Differentiate or die
Karim and Bill need to understand their competitors’ offerings (“We have no competitors” actually means “We just don’t get it.”). Then they need to understand how they are going to differentiate. A common mistake is to compete on the same basis as everyone else (e.g. “ours is the best”). If Karim and Bill were to do that, they would see their profits quickly eroding just before they got eaten alive.
3. Learn to dance with the numbers
Strategy is rooted in the financial statements of a company. Karim and Bill need to understand how the company’s finances work today and in the future. In particular, what are the key financial metrics upon which the success or failure of the company depends? For example, if they plan to charge a subscription fee, they’ll probably need to finance the first few months for each customer. One of their barriers to growth will be the availability of cash.
4. Customers first, but…
No matter how good the product idea, it needs to be tested first with real, paying customers. On the other hand, Bill and Karim have to listen judiciously. Just because someone at a big company suggests a particular feature doesn’t meant it is a good one. See point 2.
5. Attract strong advisors
Neither Karim nor Bill have done this before. They are starting with a deficit of skill and experience. One way to make up for this is to build a strong advisory board with people who can help keep them on the best path. Mentorship is the lifeblood of entrepreneurship.
6. Locate the exits before take-off
Bill and Karim should discuss what they want to do with the company over time. Take it public? Sell it? Grow it as a private company? If they have an exit targeted in their minds, they’ll structure the company accordingly. If they don’t know, the simplest thing is to run the company as if they wanted to take it public. Then they keep all options available.