How to sell when you don’t yet have a product.
Read time: 6mins-25seconds-ish.
There are very few exceptions that I can think of where the scaling-up of a company is not ultimately dependent on the business’s ability to sell.
Having seen first-hand many meetings where investors have grilled the Founder/CEO of a prospective investment, the most common line of enquiry is all about sales traction - it’s clear investors are looking for:
- A logical and methodical Sales strategy, process and progress.
- Clearly defined Sales actions and positive outcomes.
- Hunger. The Founder’s appetite to get out and sell.
And yet many entrepreneurs that I meet are reluctant to engage in Sales until their product or service is fully polished. Worst still, some believe that they cannot commence selling until they have a finished product.
Perhaps that’s not surprising, given that getting people to part with hard-cash for your product or service is probably the most difficult thing to achieve in business. Most people find selling daunting. The outcome might just tell you that people don’t want what you thought was a good idea.
Nothing is more demotivating than the potential for rejection.
Equally nothing is more thrilling than Sales victory.
Hindsight is an exact science. I’ve talked with literally hundreds of Founders - and if there is a common regret, it is often that they wished they had starting selling earlier - that the lapsed time not focused on Sales is especially difficult to recoup. If you have created a new start-up, I am passionate that you avoid learning the same lesson.
In the concentrated environment of an accelerator like Wayra it is easy to spot a team who’d much rather stay in the warmth of their comfort-zone - which is usually product development. It’s remarkable sometimes the energy that entrepreneurs invest in ‘Sales-avoidance’.
Recently, the question I’ve been asked most is: ”How can I begin selling when I don’t even have a product yet?”.
Examples of repeat behaviour that I have observed that are common amongst the best performing, fastest-scaling, businesses are:
- Drum-Up Demand
- Network Like Hell
- Learn The Landscape
- Eyes On The Prize
- Avoid Delegation Death
- Play To Win
I’ve brought each of these observations to life illustratively to help entrepreneurs apply these behaviours to their business in the pre-product-phase. Approx read time 30secs for each segment - as follows:
I am not sure if this has always been true, but certainly now, sales transactions rarely happen as the result of a single interaction. Particularly any transaction that is valued at more than €1,000.
Substantial sales typically require: rapport; trust; consideration; comparison.
A key question you might legitimately be asked by a potential investor is: “What do you estimate your average sales gestation time to be?" Ie. from first-contact to closed-sale, how long do you think it will take to conclude a sale?
If your prospective customers are corporate companies, then it is not unreasonable to estimate the sales journey to take 12 months, or more. In which case, the sooner you get started, the sooner that time will lapse. The more the commencement of selling is delayed the greater the risk that your business may not even still be alive to see the first sale close. If this example resonates with you then please act now and engage actively in selling in order to avoid a disasterous outcome.
Your prospective customers will be pleased to hear about what you are working on and what you are developing. This positive curiosity exists in both B2B and B2C markets.
B2C Demand Generation:
In B2C people are inherently interested in innovation and entrepreneurialism. That’s why showcasing platforms like Kickstarter (the crowdfunding marketplace) and Dragon’s Den (the UK TV show) are so popular - they provide a window on the innovation of tomorrow. Evidently people love it. So get out there and present to them your idea.
I have heard founders of B2C businesses say that selling is not appropriate/relevant to their business model. I’ve heard some declare that their business has no interest in ‘revenue’ - that their business model is all about fast-growth mass-scale consumer acquisition and usage. I understand this strategy but I see it differently. If your business is dependent on achieving critical mass quickly, then you still have to sell - there are still distribution partners on whom you will depend in order to get sufficient audience reach. For example:
- To get featured in relevant magazines and blogs e.g. Techcrunch
- To partner with a major corporate for distribution
- To partner with universities to access the student population
- Getting a celebrity to endorse your product
All of these opportunities to fast-track the scaling-up of your business are dependent on someone (eg. the founder) to make them happen. In my view, invariably that’s called selling.
B2B Demand Generation:
In B2B it’s about identifying which businesses you ideally want to do business with; identifying the key contacts and decision makers within those Companies; effectively making contact with the right people; sharing with them appropriately what you are working on, in a way that does not over-share something obviously confidential but does drive excitement and anticipation among your target prospects.
The success of an early stage company is all about building demand, not waiting for demand to happen.
Network Like Hell:
Identify the businesses and the people that you need to be talking to, who specifically you need to connect with. Start the conversation. Start building positive sense of expectation about the launch of your new product.
Ask for input, feedback and advice. It is astonishing how generous people can be in response to an ernest question.
Identify, follow and connect with bloggers, commentators, journalists and investors who have a declared interest/specialism in your chosen sector.
Social media is vital to good networking. There is so much to cover on this topic, I’ll write separately about the use of social networks to promote your business.
Learn the Landscape:
Know and be able to talk about your competitors. Understand intimately your competitors’ propositions. Identify the key people that operate in your market - and where appopriate, connect with them individually.
Be clear, articulate and definitive about what differentiates your product or service.
Know the size of the potential market.
Figure out what % market share you are going to win - and how.
Know exactly what you are going to charge.
If your product or service is contractual then know all about the process, obstacles and issues that affect customers changing supplier, and figure out how you can ease that pain. More importantly understand and be able to identify the trigger points for contract/supplier review. And specifically for the key customers that you want to win, know exactly when their contract renewal dates are - ask them - and make sure that you are immersed in conversation with them at that time.
Eyes On The Prize:
No one can hit a target that is not in their line of sight. Know whose business you are aiming to acquire.
If asked, know who your first three customers are going to be.
If you were tele-selling tomorrow - who would your first fifty calls be to?
Don’t see selling as either;
- A future event;
- Something that you will get to (eventually);
- Easy. Selling is rarely a one stage process. Sales-conversion rarely happens on the first date.
Avoid Delegation Death:
Businesses need brilliant sales people. However, don’t allow yourself to believe that ‘sales’ is something that you are going to delegate.
As a Founder it is important to be aware that probably the thing that your key customers and prospects want most, is you. And that can’t be delegated. Buyers often want to liaise with the CEO; journalists and bloggers want to hear the Founder’s story.
Play To Win:
Pre-product it is important to present with confidence and credibility. Bring your product to life with visuals, video, demos and prototypes.
Evidence that you and your team has relevant prior experience of building something equivalent previously. That your ambition is realistic, believable and achievable.
Make sure you have a precise and robust plan for when your product is going to be ready. Declare a specific launch date - it shows you mean business. Even if that plan changes, it is important that the key milestones on the journey to launch are not vague or ill-defined.
What’s consistent amongst the top-performers is that it is not acceptable to avoid selling. Equally, half-hearted effort is not going to win either. It’s not about the effort - it’s about the outcome.
The new mobile accessory craze that’s sweeping Asia.
Read time: 1min-49seconds-ish.
Apparently the Oxford English Dictionary named ‘selfie' Word of the Year 2013.
I’d like to suggest that the world’s mobile industry name the ‘selfie-stick' Mobile Accessory of the Year 2014.
Apologies if this is old news to you, but it’s a new one for me.
Who would have thought, a simple telescopic rod with a handle on one end and a simple clasp that grips your mobile phone on the other end, would be the must-have device that is sweeping Asia.
First there were smartphones; then there were selfies; now there is the selfie-stick - a sub $15 device that serves as an arm-extender to deliver to you the perfect photo of yourself.
I asked Mick (who I photoed while he was photoing himself) if the device was blue-tooth enabled in order to activate the shutter on his phone’s camera. Apparently it’s much more simple than that. To operate the selfie-stick you simply:
- Clip your phone into the simple clasp;
- Download any one of a number of free app’s that enable a timer-delay in your phone’s camera;
- Use the slider in the app to set the amount of time you want to delay the photo (you can choose between 1 and 15 seconds);
- Press the button to take a photo;
- Thrust the selfie-stick in the air and hey-presto, a few seconds later you have a photo of you taken perfectly from a third-person perspective - without your own forearm in the foreground of the shot.
I didn’t see it coming but given how popular this simple bit of kit is, I’m sure the global market for selfie-sticks is worth many millions.
Sometimes the best ideas are the simplest. This one appears to be utterly contagious. No marketing required.
I love innovation. Especially hardware innovation. Genuinely I’ve no desire to ridicule the selfie-stick as I think that it is an icon of 2014. But I can’t help observe that one of it’s primary benefits is that we can all now have and enjoy photos of ourselves that appear as though they were taken by a friend, without actually the inconvenience of having a friend(s).
Don’t rely on a rising tide to scale-up your business.
Read time: 3mins-26seconds-ish.
In recent years we have lived through one of the worst economic disasters in history. This era will probably be remembered forever as “The Crisis” however I passionately hope that instead it is more profoundly and favorably remembered as the moment when the Digital Economy was born.
I work internationally, which gives me a perspective on how different cultures and different countries have each responded to this period of economic challenge.
I am delighted to report that across Europe there is tangible evidence that business confidence has returned. In the UK specifically apparently business people have rarely felt more confident than now.
I recently met one of the UK Government’s top economic analysts who is busy preparing reports and data to quantifiably substantiate this. He made an interesting observation: if indeed we are entering a period of economic growth, to what extent will business success be the consequence of its endeavor, or to what extent will business growth simply be the by-product of a buoyant market?
Forgive the candid language, but as a former boss of mine articulately defined this economic principle:
“Even sh*t floats on a rising tide.”
My job is to help businesses scale-up - I am passionate about their success. And so I’m not only interested in how macro-economics affect individual business growth, I’m also interested in how the mood of the business community influences behaviour - and how all of this can be leveraged to help scale-up businesses.
Renewed business confidence is a wonderful thing. Clearly how businesses (and crucially their owners) feel is very important. However, what I’m looking for is not their emotional state, but their behaviour. What I want to encourage and support is the deliberate deployment of new activity that helps businesses to scale-up.
Whilst confidence is obviously relevant and important, I’m not sure whether it’s the most important measure. Perhaps more important are ambition, appetite, and hunger for growth.
I work with and talk to a lot of investors. Many of them have told me that the decision whether or not to invest is often determined by the founder’s aspirations to scale-up their business - the extent and authenticity of the entrepreneur’s hunger for success is one of the most important investment criteria.
This is important because inevitably the majority of businesses that aspire to scale-up will require funding in order to do so. In the initial stages of scaling-up it is not uncommon for the costs to inconveniently be out of sync’ with the expected returns. And so getting investors on-board is often vital.
So what do the tangible actions for scaling-up a business look and sound like? What activities are investors looking to invest in? Some examples are:
- Taking bold and decisive action; perhaps taking more risk; being bullish; looking longer-term; proactively seeking opportunity.
- Staffing-up – the recruitment of more people; increased capacity; new capabilities; fresh talent; new energy; hiring apprentices.
- Investing for the future – buying new technology; equipment; new manufacturing capability.
- Embracing the digital opportunity; getting on-line; making your website transactional; embracing social media - extending your audience and reaching more people.
- Developing and launching new products and services.
- Pursuing new markets – either through diversification; regional expansion; or exporting abroad.
I’m talking about activities that generate lots of extra new business and lots of additional new revenue. These activities require drive. They will not happen unless the CEO / founder has the ambition to grow.
It’s about acting with confidence, not feeling confident. Not relying on the rising tide, but relying instead on the deliberate decisions and actions that you choose to take.
Smart businesses actively pursue scaling-up. Now is a good time to do exactly that.
Entrepreneurs and business owners ought to make the most of these buoyant times. Sadly the economy is not always so positively elevating. In 2009 the economy experienced a disaster that we now call “Lehmans” - it was a time when the tide turned and felt at one point that it may never return. At that time I ran the P&L for the Business Division of O2 UK.
I joined O2 in 2007, and during the 57 months that I lead the Division we doubled the number of business customers (and also transformed what those customers bought) - I am proud to have delivered great commercial results despite the economic catastrophe in 2009 and the turbulent times in which we traded. It’s a business worth c. €1bn annually.
That success, and the content in this blog post are inspired by Ronan Dunne, the boss of Telefonica O2 UK - one of the most impressive CEO’s I’ve ever worked for.
To Ronan’s point, during much of the period when we worked together, “there was no rising tide”.
From my perspective, the results delivered during that time are unquestionably the commercial achievements that I am most proud of in my career.
Thanks Ronan for all your help, enthusiasm and support.
I took the photo – it’s of a plaque marking the height of an exceptional flood tide in 1774 in my hometown of Twickenham. To give a sense of perspective my daughters captured a shot of me stood by it – and I’m two metres tall.
Read time: 3mins-38seconds-ish.
The Government has a vision that the UK be known for being a great place to start and grow a business. To help pursue this, today they will announce that they are appointing an ‘Entrepreneur in Residence - Scale–up’ - a role focused on bringing practical and commercial insight from the private sector directly into the meetings, conversations and work-groups that shape the policies affecting the growth of British businesses. I am massively thrilled and honored that the person that they are appointing is me.
I’ve been immersed in the start-up scene for many years. I have helped co-found some remarkable businesses. And I’ve helped scale-up businesses both large and small.
Whilst some might know me from my active support of start-ups, I’m actually more passionate about ‘scale-ups’. There’s no doubt that start-ups are a vital component of the economy. But if their contribution were to be compared in terms of revenue generation, tax contribution and employment creation, I believe that businesses that are scaling-up contribute more than newly created start-ups.
But before businesses can scale, first they must be started. New stat’s suggest that 2014 may be a record year for the number of new businesses started. The start-up eco-system has never felt more vibrant.
In my opinion, the quality of the ventures is improving too. I see this first-hand at Wayra, the business accelerator that belongs to Telefonica which I helped build and now run across Europe. Soon the Wayra Europe portfolio will include over 200 amazing digital start-ups. Our job is to scale-up these businesses – and it’s working. From scratch, the portfolio now has an investment value worth more than €150m.
So what are my motivations, intentions and ambitions for the EiR role?
- I have always loved business.
- I’m a bit patriotic. I happen to think that as a nation we’re quite good at business.
- I find entrepreneurialism exciting.
- I’ve always had a clear sense of purpose to see people and businesses realise their fullest potential.
- It’s a relatively short-term gig - probably about one year. I’m keen to learn from the out-going EiR’s – but I think the purpose of rotation is to bring a fresh perspective to the role – that’s my intention.
- I’m not looking to be especially/deliberately disruptive. I intend to find out more about what initiatives are already planned, as I suspect that there is no shortage of good ideas already in development.
- Despite the above photo, to be very clear, I don’t have any ambition to enter politics.
- The EiR role equates approximately to one day a week. To be equally clear, I’m keen to continue to grow and develop my portfolio career including my corporate work, my extensive small business portfolio and my increasing angel investments. I am massively grateful to Telefonica, especially my colleagues in the Wayra team, for allowing me to pursue these various interests – and to Mrs D and my family too.
- Until I’ve found my feet as the EiR it’s impractical to make any bold declarations about the aims of the role, I’m yet to have my first formal briefing.
But above all that, what I really want is to help change the focus from ‘start-ups’ to ‘scale-ups’. By the time I’ve left the role, I would ideally like ‘scale-up’ to be as much a part of the language as ‘start-up’ is today. My goal is that there is as much activity to tangibly affect ‘scaling-up’ as there has been campaigning to encourage people to ‘start-up’. I’m not sure yet quite what that looks like. Two topics that I instinctively feel are a priority, are:
Through Wayra I’m immersed in the digital eco-system. I’m ambitious for UK businesses to exploit the opportunity presented by the ‘Digital Economy’. I’m passionate that ‘digital enablement’ could massively impact businesses ability to scale-up. I’m surprised by stat’s that show how few businesses have transactional websites. Businesses that trade on-line increase their addressable market by selling in other countries. I think that is a huge opportunity. Digital businesses have the scope to scale; to do so quickly; sometimes exponentially to become global mega-giants.
Secondly I’m ambitious to help the Government land more powerfully some of the remarkable initiatives already in place. Like SEIS, the tax incentive scheme that encourages people to invest in start-ups, which in my view is arguably the most generous programme of its type on earth. And the Broadband Voucher scheme, which awards grants for businesses to upgrade their connectivity. I talk to a lot of people in business and sometimes it’s surprising how few people know about these great initiatives.
But I am keen to hear your views. If you have insights; needs; wants; ideas that could positively affect UK businesses desire and capability to ‘scale-up’ then please send a Tweet to me @SimonDevonshire and @BISgovuk with your thoughts – and don’t forget the hashtag #ScaleUpBritain.
Over the coming months you’ll find me hot-desking quite frequently at 1 Victoria Street (the home of BIS) – I’m excited and really looking forward to being part of the team.
My photo - that’s me outside No 10 Downing Street, taken last year. I don’t get my photo taken every time I visit the home of the Prime Minister, however, I did ask the kind Policeman to capture this moment last year (2013) as I wanted a souvenir to mark an amazing one-to-one that I’d just had with the even more amazing Lord Young.
Read time: 2mins-52seconds-ish.
My last post recommended that when hiring, don’t choose the best person for the job. Instead, employ the best team. It is increasingly apparent that complementary skills, talent and experience are vital to the success of a business.
Equally many investors comment that they share a key criteria in that first-and-foremost they invest in ‘people’ more than they do ‘ideas’. Investors regularly say that the criteria of greatest importance is talent. A practical definition of ‘talent’ is a demonstrable track record of proven achievement.
If you are working hard to scale-up your business, I hope these observations help guide hiring the right talent for your business. Businesses often say that finding talent is their biggest challenge.
But perhaps slightly less evident is the even bigger challenge of encouraging people to be great after you’ve hired them.
With this in-mind I’m advocating a new mantra: “Be additive”.
Being additive is a key personal behaviour that I keenly look for when I’m coaching and mentoring start-ups. It’s a philosophy and ethos that I equally apply to my own conduct and participation in business.
So what does ‘being additive” mean? It’s about:
- Being demonstrably constructive and supportive;
- Taking care to add value;
- Positively embracing the thoughts, ideas and suggestions of your colleagues;
- Asking questions appreciatively;
- Not commenting unless your thoughts build on the previous comments.
When working as part of a team, there is no point in claiming to embrace the idea of diversity if in practice the individuals in the team don’t consciously pursue the synergistic potential of their complementary skills. Complementary skills are of no benefit if they are not orchestrated harmoniously.
It is OK to be different - provided that the difference delivers to the team an advantage and not a disadvantage.
Being additive is about managing behaviour. Especially self-management of your own behaviour. It’s about taking a measured view of your own interactions and your interventions in meetings. It’s about applying a conscious effort to make each of your own interventions as ‘additive’ as possible.
In sport, at the professional / elite end of the performance spectrum, analysts are now employed to record stat’s for each player. For example; in football and rugby, how many times each player comes into contact with the ball; how many passes they delivered successfully etc etc. There is no-where for professional sports people to hide. I have a similar mindset in business. In a meeting, how much did a player dominate play; and when they had possession of the ball, did they make good use of it? I’ve no desire for people to suffer ‘analysis-paralysis’ but perhaps if people evaluated more their own interventions in meetings they’d take greater care to make those interventions more effective, more positive.
And so I propose a motion that we all make more effort to be more additive.
It looks like the world economy is finally emerging out of the crisis that has dominated so oppressively over recent years. The Digital Economy is growing constantly and rapidly. I think that we will look back at this time and will be astonished at explosive growth and adoption of new technology.
And it is exactly the new tech that creates new opportunities to build new businesses. I believe that identifying the best opportunity with which to start a business starts with your own unique perspective of the world. In my experience, people who are genuinely additive in their approach to life, tend to be the ones that are best tuned to identifying the best commercial opportunities.
I think that the birth of the Digital Economy is a momentous time. But wouldn’t it be amazing if this time was not only remembered for the explosion in digital technology, but that we also remembered this era for a notable change in the way that business is done.
Don’t appoint the best person for the job.
Read time: 2mins-31seconds-ish.
For many years my work has brought me into direct contact with literally thousands of businesses.
When listening to start-ups the three biggest problems that I hear repeatedly are the acquisition of:
- Funding. Generating the investment necessary to cover payroll long enough to get the business to a level of financial self-sufficiency.
- Talent. Finding, hiring, retaining people with the skills, experience, hunger and determination to be able to materially move the business forward.
- Eye-balls. Generating the volume of traffic necessary to grow sales.
This post focuses on the second of these challenges: Talent.
In addition to meeting businesses, I am immensely privileged to also meet the most remarkable and interesting people. One such example is the fantastic Simon Fanshawe.
Simon has had a fascinating life and career, and as co-founder of Stonewall (the gay rights movement), he has an expert opinion on matters of discrimination, inclusion, and diversity. Topics about which I am equally passionate, especially so in the context of business.
During a recent meeting, Simon shared a thought:
“Don’t appoint the best person for the job.
Employ the best team.”
It is remarkable how the most profound ideas and principles that have the potential to affect success in business, are also sometimes the simplest. I happen to think Simon’s observation is incredibly insightful and relevant to business success because the best people don’t necessarily make for the best team.
In-fact some of the elite achievers I know commonly self-confess to being the most difficult people to work with.
When elaborating Simon observed that great teams inherently require a mix of talents, personality, character, capability, expertise and experience. By exclusively selecting one specific type (in this case, we were specifically talking about elite achievers), not only is the richness of diversity compromised but also, such elitist ambition brings with it the potential downside of egos, overly competitive ambition, and leadership friction.
And this idea is vital to entrepreneurs, especially start-ups, as their success is almost certainly going to be dependent on how well the team performs.
In military cliches, ‘you can’t build an army of Generals’. The same is true in business.
Sadly, and frustratingly, recruitment is such an imperfect science. If you have any doubts about the potential of a candidate to positively contribute to your team, then my advice is, either:
- Don’t hire them.
- Or take them on a trial/contract period whereby you can get to know them, and they can get you know your team. If they’re really keen to join your Company, why wouldn’t they want to do this?
Three final quick comments:
- Contrary to the above advice, sometimes it is perfectly appropriate to employ the best people - I can think of many situations where elite performance/performers were absolutely what a business team required. But it is essential to work out when this is the case, and when balance and team chemistry are more important.
- Secondly, (I don’t normally do this but because I think Simon has got some genuinely unique insights …) - if you would like Simon Fanshawe to apply his wisdom directly to your Company, then you can check out his business here: aster-fanshawe
- Thirdly, to my own team - you are the best.
No-one can guarantee the success of your business. But failure is much easier to predict.
Read time: 3mins-43seconds-ish.
I recently published a blog-post with a guide to getting your digital start-up started in five quick steps - how to make a demonstrable proto-type of your digital business idea.
I believe that bringing to life your idea for a digital business can be quick, relatively cheap and almost anyone can do it.
Unfortunately, and inconveniently, running a successful business is much more tricky than creating one.
Breaking down the challenge of building a start-up into a series of steps makes the tasks easier to understand and wrestle with. However, this approach alludes to a method that is incrementally sequential with a series of conveniently consecutive tasks all laid out neatly in a row.
However, I’m keen to emphasise that business success demands that the many of the steps required to build a start-up need to be progressed simultaneously, not consecutively.
Since working at Wayra, the business accelerator that belongs to Telefonica, I’ve learned that (sadly) it is impossible to guarantee the success of a business. Although, I believe that the science of business acceleration is getting closer and closer to defining a winning formula.
Whilst it may not be possible to guarantee success, however, the opposite is almost equally true - I’ve learned a lot about how to spot businesses that are likely to fail.
My work also brings me into direct contact with a number of investors. We are lucky that some of the most famous investors have helped us select the start-ups that Wayra invests in. It’s during the judges’ deliberations that I’ve heard a common concern from investors.
Investor alarm bells seem especially sensitive to hearing an entrepreneur describe their development path as a series of consecutive steps. Investors tend to worry when they hear a linear programme of distinctly separated tasks punctuated with lots of “and then”.
- "First we’re going build an MVP;
- and then we’re going to build an app’;
- and then we’re going to hire a finance person;
- and then we’re going to do some research;
- and then we’re going to start selling. Etc. Etc.
There are two big concerns:
- That ‘sales’ / ‘selling’ often comes last in the sequence. Even if it sounds impossible - the order must be reversed. Sales must come first.
- Secondly, that the progression is consecutive - that one task is not commenced until the previous one is completed. Investors tend to regard the perception of a consecutive plan as luxurious (indulgent even) - it lacks the required pace.
To help more businesses successfully navigate the especially perilous early stages of starting-up, I’m keen to change this sequential mindset. I’m keen for entrepreneurs to have a sense of self-awareness that the moment they see their actions as consecutive, that they’re potentially on a fast-track to going bust. Start-ups rarely have the funding necessary to approach business development in this way.
When looking at the businesses that successfully survive beyond the initial start-up phase, the common trait is that the founders didn’t pursue activities in a linearly sequential way. They attacked the business priorities simultaneously. Not just doing the coding, but actively selling whilst coding.
Entrepreneurial success demands the ability to progress multiple strategic imperatives simultaneously. The challenge is doing so in a concentrated focused way - that in the moment, you / your-team’s attention is purely focused on the job in-hand (without distraction or dilution of attention).
That success depends on tackling multiple business imperatives simultaneously may appear to totally contradict my earlier post that the most important ingredient for start-up success is Focus, Focus, Focus (September 2013). The need of ‘focus’ is a matter of personal aptitude and behaviour. ‘Simultaneous working’ is matter of strategic approach on which the success of your business is equally likely to depend.
And if you believe that:
- It is not yet possible for your business to commence ‘selling’;
- That your product, proposition, service is not yet ready;
- That you’ve not yet got anything for your prospective customers to buy;
- That you’ve only got one opportunity to make a sale and so if you mess-up your first attempt, you’ll never get another chance …
… I see things very differently, indeed. I’ll write separately about selling when you think that you have nothing for people to buy yet.
In the Digital Economy identifying an idea for a viable business is no longer the biggest problem (this blog contains several ideas and concepts). But building a business viably is a much tougher challenge.
Proximity to either revenue and/or investment is the most vital measure for a digital start-up.
Read time: 4mins-8seconds-ish.
My last blog-post identified nine Key Performance Indicators (KPI’s) that as an investor I use in order to get a sense of how well an early-stage business is progressing.
The investment portfolio that I’m currently accountable for at Wayra Europe contains 157 early stage digital businesses. Both the portfolio and the businesses in it are growing exponentially - last week alone we selected 13 new businesses which Wayra is investing in.
Similarly, in the last month, the fund that Mrs Devonshire manages chose 30 new businesses to invest in. Together, we manage a lot of investments in early stage businesses and this gives us a relatively rare perspective.
In sharing the performance evaluation criteria used by investors, my intention is to help entrepreneurs zone-in on the actions that will move their businesses forward most.
On reflection, what I didn’t emphasise sufficiently in my last post was the most important one - the lead indicator which separates the successful start-ups from those that are struggling.
In my view, it is that:
Proximity to investment and/or revenue is the most important performance measure of a start-up.
I think that this is an especially effective mantra for a start-up. Actually, it’s a mantra that belongs to Mrs Devonshire, who also advises that: “There’s nothing more challenging in business than the acquisition of paying punters - people willing to part with their money for your product/service.”
Entrepreneurs and founders often have grand plans. They are visionaries, able to see opportunities that elude the rest of us. Funding the pursuit of their ambition is usually the biggest and most common obstacle.
Entrepreneurial dreams require people and talent to pursue them. Entrepreneurs rarely build successful businesses alone. Commercial success requires teams. And teams invariably require funding in order to exist.
Creating jobs is a brilliant thing. However, payroll is a massive responsibility.
Which is why so many start-ups are pre-occupied with generating sufficient funds to finance the talent required to build and deliver the ambition of the business.
Realistically, there are only two ways to raise the necessary money:
- Revenue. Charging people for supplying what your business does, ie. raising sales invoices.
- Investment - either via debt or equity. Debt meaning simply to borrow money. ‘Equity’ means selling a bit of your Company in order to raise money.
Investors have a common objective: to create a positive return on their investment. Investors have several ways to generate a return, for example, to subsequently re-sell their equity to another investor(s). However, eventually, inevitably, sooner-or-later, there is no way to avoid investor ROI being dependent on the delivery of “billed revenue” - in other words, sales.
The same is equally true if you borrow money. The snag is that people who lend it will understandably want repaying, usually with added interest. Debt repayment requires actual money. It is an option to pay-off debt by borrowing more from someone else - but like equity investment, eventually the debt has to be serviced.
All of which is “stating the bleeding obvious”. However, what is less obvious, and I have witnessed repeatedly, is the amount of lapsed-time it takes entrepreneurs to work out:
a) That they need to raise money.
b) How much they need to raise.
c) How quickly they need to raise it.
d) What actions they need to take in order to raise money.
… whether that is to raise money by landing sales, or whether it is to compel an investor to invest in the company.
If you run a start-up, don’t spend ages working out that your business needs to raise money.
As an example, if your business is lucky enough to successfully win a place in an accelerator (e.g. like Wayra), then please don’t spend nine months building an MVP only to discover that you and your business are bankrupt. Please don’t spend five months recruiting a team; finding talent; interviewing candidates; negotiating with them; hiring them; inducting them - only to discover that actually first you needed to raise the funds to be able to pay them.
You don’t need to be especially numerate to work it out (although numeracy helps). If you employ a team that looks a bit like:
- You / CEO / Founder / evangalist
- A numbers / commercial person
- A business development / marketing / sales person
- A ‘chief’ developer
- And a couple of coders
… it’s not hard to imagine your business is burning c. £10k+ a month. Do the maths to work out your projected burn-rate now - don’t wait to discover the actual cost after you have hired people. And if your forecast burn-rate looks like this example, then get-on and raise a minimum of £150k immediately so that you’re giving yourselves c. 12 months clear runway to get stuff built and marketed immediately. Boot-strap like hell. And remember, every sales invoice you raise now buys survival for another week.
Don’t regard the challenge of either landing sales and/or securing investment as a future event that you will eventually get around to. Be clear that your business has no future unless you address this need now. Writing code and building a product is not a job, it is a necessity. If the task of product building is not equally accompanied by the pursuit of sales and/or investment, then your endeavour is in danger of being a personal indulgence - which is absolutely fine if you can afford to fund it yourself. (Which may sound harsh, but I’ve heard investors express this frustration much more severely).
If in doubt, generate sales.
The performance measurement of a start-up.
Read time: 5mins-38seconds-ish.
Over the past two years in my day job at Wayra I have had the privileged and unique opportunity to observe an investment portfolio that has grown at a run-rate equivalent to more than one new investment per week.
I also have a personal portfolio of businesses in which I have a vested interest. Two that I’m currently driving especially hard are:
The obvious performance criteria shared by all investors is for their investment to deliver a healthy/positive return.
The challenge is to identify the ‘lead-indicators’ of this successful outcome, (or conversely, the early warning signs that perhaps all is not going so well).
What follows is a very personal perspective of the lead-indicators that I look for when assessing the on-going performance of an investment. I’m not talking about a mathematical financial assessment, I am talking about the various lenses through which I look at the performance of the team.
I’m keen to emphasise that this is my view, (not Wayra’s evaluation criteria). [Tip: points 8 and 9 are the most vital.]
1. Doing what you said.
Sadly, endeavour; hard work; long-hours - are not enough. Nor necessarily are positive results. More impressive than these is making clear the most powerful priority that you (and your team) are focused on; seeking some consensus about that prioritisation; then delivering it.
2. Clear deliberate, decisive, action.
Make sure that your business is full of purpose. Being purposeful is a very good thing. Avoid deliberation and hesitation.
3. Don’t polish it. Launch it.
The transition from ‘pre-launch’ to ‘post-launch’ is not just momentous, it’s often the most traumatic moment in the entrepreneurial journey.
Launching your product/service is the acid-test - does anyone actually want what you’re offering? Many entrepreneurs and developers that I meet are often much more comfortable building technology and propositions than they are managing and running a live business.
My advice is: get it gone. “It” can always be improved. Avoid the temptation to overly invest in proposition improvement prior to launch. Get your proposition in front of paying customers immediately - then improve it.
We’d all like to invest £100k and three months effort on research to validate our hunch and avoid embarrassing failure. Sadly this is a luxury no start-up can afford. Navigating this challenge is invariably vital.
So once your business has been launched, how agile you are in adapting it, your ability to improvise on-the-fly, will often be the key determinant of the business’s success or failure.
I’m looking for evidence of extemporary excellence - which is why entrepreneurialism is so difficult to teach.
In the remarkable words of Matthew Key: "Use your instinct and trust your intuition. It’s what got you here."
5. Being clear on what success looks like.
I often ask entrepreneurs to define what their key measure of success is - what’s the one KPI that they are most focused on? The answer provides a very clear view of whether or not the team is pursuing the most effective/appropriate goal.
Are you chasing revenue or traffic? They’re not necessarily mutually exclusive objectives, however the strategies to pursue them may vary considerably.
6. Attacking your ‘A-list’.
I’ve previously written that business success is all about ‘Focus’.
The concept of the ‘A-list’ for your business is simple: whether your business is B2B or B2C you should be able to identify, define, articulate and target the “must-have” people/contracts/deals that would have a positive transformative effect on your business. Whether that’s doing a deal with Tesco - or Google, or getting a celebrity to endorse your product - it is up to you to define who (or what) is on your A-list, and what is your traction in courting them?
I’ll write more extensively about this with a separate blog-post.
7. Health and well-being.
I’ve yet to find a business whose success was not utterly dependent on the extraordinary effort of the Founder and their team. Businesses both large and small now fundamentally require people to disproportionately invest their discretionary effort and good will. Which is why brilliantly inspiring leaders are so vital to the success of modern business. But this requirement has a risk of being unsustainable. If the demands of the business are too severe it will quickly become apparent - which in-turn means that the business is possibly not viable, the team-effort not sustainable. I look for happy, healthy people who are able to have fun. Grumpiness, tiredness, lack of humour, pallid complexions are all lead indicators and early warning signs.
There is no doubt, hard-work is an integral part of being an entrepreneur and/or working in a start-up. But symptoms of acute exhaustion are hard to hide and can be symptomatic of far bigger issues.
8. Proximity to investment and/or revenue.
Proximity to investment and/or revenue is the most important performance measure.
All the time you can demonstrate that you are absolutely achieving positive traction in landing a substantial order; or that you are demonstrably closing the necessary investment (ideally from quality investors) in order to continue the growth and development of your business - then you’re making great progress.
If such progress proves ultimately elusive, then the viability of the business will inevitably be brought into question.
9. Keeping the dream alive.
Occasionally, I see start-ups that I believe really do have that “billion dollar” potential. The magic exponential potential that “this could be the next Facebook”.
'Exponential potential' is a rare quality.
But if your business possesses this remarkable scope - then your job is to keep this dream alive. Take care to avoid proving that this potential is not realistic; that the idea is too far ahead of its time; that the endeavour required to achieve success is overly excessive.
I am sure that we can all think of examples where businesses are valued in billions but who have yet to raise an invoice or generate a single dollar of revenue. But clearly, they must be doing something right or they would not have received the valuations that they have.
Five quick steps to getting your digital start-up started.
- The five steps: approximately 30secs-ish.
- The detail: approximately 6mins-58secs-ish.
I have helped co-found several start-ups. Over the years I have refined the method I use to build a start-up. What follows is a 30 second guide on how I go about creating a new digital start-up:
1. Identify a need / opportunity.
2. Give it a compelling name.
3. Get designing. Package the idea beautifully.
4. Get coding. Create a MVP.
5. Promote the hell out of it.
If any of these steps seem impossible to you, please read the remainder of this post. I believe that anyone can make a demonstrable proto-type of their digital business idea. And that building it needn’t cost a fortune.
What follows is more detail about each of the five steps together with indicative costs:
1. Identify a need / opportunity.
At a very basic level, business fundamentally relies on a value exchange between two or more parties.
More than ever before, the world now has:
- More computer processing power
- More connectivity between people and between things
- More freely available open-source-code
Which is why I believe there has never been more opportunity to ‘add-value’ than there is right now. Welcome to the Digital Economy.
To bring this to life with an example: We now have the technological capability to be prompted when our house-plants are too dry and need watering. This may seem trivial to you - my point is, if we can do this, what else can we imagine?
The challenge is to identify opportunities to add-value and work out how to translate them into a commercial business. Key questions to help with this:
- What problem is your business trying to solve?
- What is it that your business is improving?
Your start-up can’t start until you have identified and can articulate what value you are going to add to whom. Customer insight is the key to unlocking this potential.
Ideally you need to pick something about which you are overwhelmingly motivated and feel passionate to pursue.
To create a successful start-up it is not essential to invent something completely unique or original. (In-fact investors often regard a lack of identifiable competition as evidence that your intended market does not yet exist).
But, to succeed, your business will need a meaningful point of difference. What are you going to do better? (For example, there are a number of people already working on the houseplant watering idea above - so why should customers choose yours? Entrepreneurs risk failure if they do not look for, and sufficiently acknowledge, the competition.)
Indicative Cost: Creativity and inventiveness at this level of business development should cost nothing. Don’t spend fortunes on expensive research and validation at this stage. Instead, rely on:
- Your instinct. What annoys you? What’s inconvenient? What’s not dished-up as you want it?
- The power of your own observation.
- The strength and value of advice from trusted friends and willing experts - especially those with a proven track-record of success. Listen carefully to them. Don’t be defensive if they don’t tell you what you want to hear. Don’t be in denial.
2. Give it a compelling name.
Having chosen what the business does, the next step that I usually take is to invent a name for it. This may sound premature, but for me, it works.
The success of a business idea often depends on the ability of the founder to articulate the proposition in a succinct, powerful and compelling way.
In many ways the name that you choose for your business or brand is the ultimate distillation of its proposition.
Which is why finding and choosing the right name for your business is often vital to packaging your proposition in an impactful way. The more immediate this impact, the better.
Ideally, it is best to choose a name that is distinctive - something that you can own.
There are loads of online companies that sell URLs / domain names. Use one of these to search if the domain name you like is available. Buy the domain if it’s available. (I’ll write a separate post on what to do if the URL you most want is unavailable - but for now - give-up wanting a name that you can’t have and choose another one - keep searching).
Tip: Canvas the opinions of your friends. If people ask you to repeat the name (ie. if you have to say the name twice), it’s probably the wrong name.
Indicative Cost: Domains are really easy to buy. You should not have to pay more than £8.99 for a “.com" address. I no-longer bother buying all the surrounding / associated domain extensions and variations - that is a bridge to be crossed further down the line.
3. Get designing. Package the idea beautifully.
Bring your idea to life. A picture paints a thousand words. Two steps that I strongly recommend:
- Work with a designer to create a brand identity / logo.
- More importantly, work with a designer to visualise key elements of the user experience. This is about bringing to life the customer journey; visualising the key points of functionality; the pivotal points in the user experience. Not all of it, but the key points.
For example, of your idea is a mobile app’, then get a designer to convert your rough sketches into something presentable for the most significant moments in the user journey.
In most cases, coders will need some form of design-layout in order to convert your ideas into something that actually operates on the internet / or on a device (eg. a smart phone). Even if you are lucky enough to find a coder who is also a gifted designer – being able to show the coder what you are looking to build will significantly help reduce the time and cost of writing the code to make it work.
Many businesses struggle to find good designers and engage creative people. You can choose to work with just one designer, or you can crowdsource creativity.
I helped to co-found a crowdsourcing website - it is called www.ConceptCupboard.com - it enables businesses to:
- Crowdsource creativity, design and marketing.
- Get ideas and concepts from not one designer but a range of designers / creatives.
- Connect directly with creative students thereby accessing the very latest talent, ideas and creativity fresh from college and university.
- Buy creativity cost effectively.
- Give young people an invaluable opportunity to ‘earn & learn’ and build proper commercial portfolios that demonstrate their talent.
Indicative Cost: I used ConceptCupboard to get the TallManBusiness logo designed. Basically briefs on ConceptCupboard are a bit like a design competition, whereby the winning designer gets the prize. I offered £350 to design the logo for TallManBusiness. I received designs from 21 different creative students. The winning designer received my £350.
If you want to brief-in some page layouts for a new website I’d recommend being really prescriptive on exactly what you want (ie. not creatively restrictive, but be explicitly clear about the scope of work). You should choose a selection of key pages from your new website - ideally you should draw some rough sketches of them yourself. I’d set a fixed budget for the project - depending how much work, perhaps a prize somewhere in the region of £1,000 to map out the look of key product pages/fucntionality. Go to ConceptCupboard's website for full details of how it works.
4. Get coding. Create a MVP.
Find a good coder / coders. Make a modest investment to start building a MVP (minimum viable product).
The scope of this will depend on how ambitious your idea is; how technically demanding it is; and therefore, how much coding it requires. All these factors will all go to determining the size and extend of the build required.
Good coders / computer-scientists will be able to give you advice on this. It is vitally important to start the process of engaging coders in order to get this technical input.
If it is not viable to build the whole concept that you have invented, work with the coder to define what is possible that would bring to life the initial designs that your chosen designer has visualised. If your idea is too difficult to build fully, perhaps a coder can help build an initial simulation.
Even if all you can practically build is a demo and not an actively working prototype, this is still a massive step forward and one that will help significantly develop conversations with potential investors / accelerators who may be willing to invest in the development of your dream.
Indicative Cost: I help run Wayra, the business accelerator that belongs to Telefonica. At Wayra we tend to invest in teams rather than solo entrepreneurs. As investors, we’re not alone in this preference. You may already know great coders who you are keen to work with. Getting connected to the right technical coding talent is something that I see many aspiring entrepreneurs struggle with. Which is why my friends and I built www.CodingCupboard.com. It’s a similar idea as ConceptCupboard - a marketplace that connects businesses with great student talent - only this time it’s all about coding; coders; geeks; and computer-scientists. It’s simple to use:
- Write a brief.
- Name your price (define the budget).
- Receive proposals from brilliant coders.
I’ve just completed a project on CodingCupboard to fix the Twitter feed on this blog and significantly enhance the ‘share’ buttons. I received six proposals from six different coders. I chose one who completed the work brilliantly for c. £150.
5. Promote the hell out of it.
You may well have noticed that two of the five steps [that I recommend] actively promote businesses in which I have a vested interest. I thought about declaring this at the start of this blog post. Perhaps I ought to apologise. However, I am immensely proud of both ConceptCupboard and CodingCupboard - and the much needed services that they both provide. The insight is clear - I regularly see start-ups and entrepreneurs struggling to source good creative and good code. I want to alleviate these obstacles and see more businesses fly. I perceive a skills gap and I want to bridge it.
And I want good students to be more ‘work-ready’. It is incumbent on people in business today to build the talent-pool of tomorrow - on which their future business will inevitably depend.
Once you have some form of alpha / beta / demo / ‘show-piece’ that brings together your idea into something tangible that you can present to people – then go and sell the hell out of it.
Pitch your invention to anyone who will listen: other entrepreneurs; potential investors; media / PR opportunities; and probably most importantly, to potential customers.
Please Tweet me if you are at:
#Step1 - “I have an idea” - or magically you are at either: #Step2; #Step3; #Step4; #Step5 - in which case, don’t forget to mention your business’s name.