#8 Cardinal Rules to Build Profitable Start-up - Retrospective Account
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The past couple of years have witnessed a lot of start-ups rise and shine and then there were others who witnessed a deep decline. Many of them even shut shop.
Here’s a quick account of our story — a journey that started from a dingy, windowless room. At the time, our clientele included other excited and young entrepreneurs. But when it came to monies, we were all largely sailing in the same boat of being penniless. It didn’t stay that way for too long.
Over the years, many of our early clients grew and we grew as they grew. We procured a seed funding of $500K from Blume Ventures and Mumbai Angels in 2012. In spite of being largely bootstrapped, we have completed six years and are building a profitable business.
I reckon that we have learnt a few things that helped us not just survive but thrive over the years.
Eight rules to build a profitable start-up are as follows:
Money Not a Make or Break Deal:
A lot of entrepreneurs spend time raising money. While money is a great thing to have, it is not the make or break factor. Money is a great thing to have and burning money is good, only if used wisely. In all other cases, it only leads to more waste.
Differentiation is a powerful moat. Spend time on it. Differentiation can manifest as the first-mover advantage, or thought-leadership or a massively disruptive product. The more thought goes into this aspect of differentiation, the more powerful this moat becomes against money.
Set Clear Business Priorities and Strategize Accordingly
The decision to become an entrepreneur is a disrupting one. It is easy to lose sight of your goals and vision in the longer run. To succeed as a business, founding members need to decide on their vision and mission for the company. For example: Making quick money is a very different goal from making a great product. They are both equally valid goals. But your strategy and operations will depend on what you want to achieve.
In order to put the company’s interests above your own, conscious commitment and persistent effort are required once the priorities are put in place. More than once, entrepreneurs may find themselves in situations where they have deviated from the direction originally envisioned. A critical review of wasteful products, processes, time, and distractions can help bring the company back on its original track- in a lean manner.
Ride on Trust for Faster (and Better) Decisions
Using extensive data to make major decisions is a no-brainer. As counterintuitive as it may seem, it is not data-deficit at play in situations where meetings stretch out repeatedly, and decisions are put off indefinitely. It means you are facing a trust deficit. It is a good indicator to go back, work on the trust problem and fix it. Once people in the company trust each other, the need for long meetings and presentations gets obviated. Surround yourself with people you trust and be worthy of their trust.
Find ‘Fast Acting’ Solutions that Work
How do you know if you have an idea worth pursuing? The starting point is to figure out what works and dispose of ideas that doesn’t and it is paramount to do this quickly. Now, there are two ways to do this — one is to scratch your own itch. My company emerged out of a solution I had built to manage a start-up I had built prior to this. In cases like this, you know exactly what problem you are addressing and the solution that will resolve it.
Another way to quickly learn from trends happening elsewhere, to stay on top of the “What’s working” pile is to follow and respond to trends elsewhere in the world. Picking up on those cues helps you keep your products relevant.
Real enterprises will likely be a combination of both. The right product is often built upon your own frustration to fill the gaps, and leveraging the guides from around the world. Once these two elements are in place, it is time for your customers (sometimes brutally honest) reviews to make their way into your product iterations.
Continuous Market and Product Testing
Intuitively, most start-ups begin with market testing and product fit analysis. However, I think it is a continuous process, and it is worthwhile to use some indicators to prompt you to go back to the market. Two of the strongest indicators are when your growth slows and when unused product features surface. As with everything else, is it important for your people to be aligned with the market vision as well. It is a good idea to re-evaluate relationships that do not align with your market vision.
Maximise Resource Utilization & Minimise Capital Expenses
Undoubtedly, the best way to make the most of your resource is to have people who are excited to be working on your team and enthusiastic about the work they do as these are the people who deliver on the vision. One of the better ways to track your vision is to break them up into smaller plans and goals and track work against those goals. Building an aligned metric for productivity against those plans is a great way to keep from sidestepping on your vision.
However, I think of these productivity metrics as useful but lagging indicators. The leading indicator is always the excitement your people bring in.
Create an Innovative Culture
Usually, disruption is spoken about in terms of ‘market disruption.’ However, truly disruptive attitude radiates into other areas of your organiztion — hiring, pricing, process etc. Great products are not created with just two or three people thinking about disruption but when the desire for great work is absorbed into the company fabric. The culture of disruption needs deliberate work from the get-go.
Going Lean Applies to Everything, and that Includes Your Vision
A few years ago, I was a person who tracked many different things. Maybe it was the fact that so much was happening around me, or that different people were doing different things, I got lured into the web of metrics and measurement. Today, I track only the absolute essentials that align against my critical goals that measure up against my vision. Often, lean trickles from the top, and what can be higher than your vision.