3 Ways a Midwest Mindset Can Build a Better Business
Take a cue from Midwestern founders who favor sweat equity over funding rounds.
Funding -- it giveth and it taketh away.
Few things feel better than that first round because it validates your idea and sets it on a path. At the same time, your company is now on the clock with a narrower margin for error and limited flexibility.
And there’s plenty of evidence to show that funding isn’t a cure-all. Who could forget the Kickstarter misstep of the Coolest Cooler, which raised $13 million and has nothing to show for it? Or the Fidget Cube, the stress-reliever that brought in $6.5 million but was undone by the faster-to-market Stress Cube?
Funding is nice to have, but those two examples show that execution is always key. Instead of putting all the company’s eggs into a VC-woven basket, entrepreneurs should adopt a different philosophy, one near and dear to my Middle America upbringing: the Midwest mindset.
A different frame of mind
What’s the Midwest mindset? It’s when founders rely on their own hard work and sweat equity -- not financiers -- to bankroll their ideas. A premium is put on humility and a can-do attitude, not wooing backers with a growth-at-all-costs strategy.
It also includes common sense. Because it’s cheaper to live -- and therefore work -- in the Midwest, the region has a built-in advantage over its coastal counterparts. When a founder spends less on rent and other ancillary business costs, the business needs less funding to survive.
The Midwest mindset shelves contemporary beliefs about fundraising and focuses on getting more output with less input -- what I call "doing more with less." We pinch pennies -- but not to the point of destruction -- and know how to weigh the value of a dollar. “Growth at all costs?” We've never heard of such a thing: Efficiency is our motto, not high burn rates fueled by constant fundraising.
Finding -- and thriving -- in the middle ground.
The Midwest mindset sets the structure for business measurement and becomes an attractive beacon to venture capitalists who like to put their money toward winners. For founders, using sales and other internal efforts, rather than funding, to boost their bank accounts allows them to reinvest instead of extending their palms to venture capitalists. Here are a few basic tenets to get there:
1. Emphasize efficiency.
Marketing. Sales. Engineering. Finance. Human Resources. Each department is tasked with countless things to do each day to help keep a startup moving, which can sometimes bog down a startup's ability to focus on big-picture duties.
The "more with less" mentality isn't just a financial approach; pulling bodies off menial tasks and investing in automation takes the onus off employees and allows them to focus on duties that can move the company forward.
Dotloop, a Cincinnati-based real estate productivity platform, decided to invest in automation and innovation early on. It should know: The company now uses an end-to-end approach to form creation, transaction logging, and e-signing documents. This helps the team drive growth for agents and realtors by optimizing businesses with streamlined automation and up-to-the-minute transaction information.
Get on board early by checking out the various simplification tools and platforms available on the market. Instead of going through the motions to get through the day, leaders and team members can put their energy into duties that'll drive revenue and stave off the need for financiers.
2. Prioritize building high-quality customer relationships.
It’s OK to put time into nonscalable to-do items, especially if they will drive high return on investment. For instance, your sales team might spend extra dollars to meet with a customer or solve a client’s issue, but the result could be a long-term, loyal partner.
Relationships matter, as evidenced by a Radius Globe study that broke down the top influencer methods by generation. For Millennials, word-of-mouth marketing is the preferred influencer for apparel, packaged goods, financial products and big-ticket purchases.
Pay attention to your storytelling and person-to-person brand bonding, and provide a high level of customer service to receive referrals, positive reviews and more. The Midwest mindset is built on consistent quality. Make that a part of your ethos from the start, and the story will tell -- and sell -- itself to consumers, and they will become your best advocates.
Related Video: Crowd Funding Strategies
3. Invest to drive long-term value.
Cheapskates make poor business mavens because they lack the foresight that businesses require investment. A Midwest mindset focused on efficiency isn't solely about lowering costs; it's about investing in efficient, high-leverage outcomes.
At my company, we weigh our costs, which includes the total cost of the time and resources required to produce an expected outcome. We never say “no” just because a solution comes with a substantial price tag. Investing in the right solutions can pay long-term dividends that significantly outweigh the initial capital expense. Put money in programs, solutions and people that will help you succeed quickly, but don’t be penny-wise and pound-foolish.
Funding is great, but it takes a startup only so far. Instead of putting value in how much a VC firm says your company is worth, drive organizational value through an efficient approach straight out of America's heartland.