Building and growing a startup is a daunting task for every founder. Luckily, serial entrepreneur Jay Samit has kindly shared his wisdom to make the process a little easier. With over 30 years of experience in the digital media space, Samit currently serves as the CEO of SeaChange International, and is the author of Disrupt You!: Master Personal Transformation, Seize Opportunity, and Thrive in the Era of Endless Innovation.
During a presentation at the Los Angeles Founder Institute, Samit revealed what he considers to be the ten most overlooked startup insights that all entrepreneurs should know. Read on to see what those secrets are.
1. Revenue is Everyone’s Job
Building a business is about generating revenue. Even though it’s not crucial for companies to generate it from day one, they must have a defined business model. Entrepreneurs often underestimate the costs of acquiring new customers and maintaining them. At times, companies are unable to protect their value creation and this prevents startups from generating any return.
Figure out which are the most important KPIs for your company and tie them into your goals to drive revenue. If you determine these metrics early on and can prove their validity, you are on the right path. Remember, as Samit said,
People that are giving you money would like to get it back.”
2. It’s Not About the Home Runs
First thing’s first, build a business with a predictable financial future. Venture capitalists turn to companies that can be measured through metrics. So do your forecasting as early as possible and hit those projections. If you need help predicting your startup’s financial future, check out the Investopedia article, “The Basics Of Business Forecasting“, to help get you started.
Sure, hitting business home runs is great, but one after another is nearly impossible. Therefore, aim for a steady growth, as this demonstrates to investors that your company is sustainable.
No one likes surprises, especially in business. Samit said it loud and clear:
Hit-driven businesses are the hardest to fund”.
3. Partner With Market Leaders
When an investor sees that your startup is working with a market leader, it grabs their attention, indicating that your startup may have what it takes to succeed. If you are looking to approach a market leader, research them and see if your company has something it can offer them. Even if you think can’t help leading company financially, think about other things you may be able to offer them, like a solution to a problem they’re experiencing, market insights, etc.
Market leaders interact with customers on a daily basis, so as you develop a partnership with them, they will be more open to sharing customer insights with you. Also, partnering with other companies is a great way to help one another by offering innovative ways to make your product/service better.
4. Give Away Anything But Margin
Think twice before giving away another “half-off” discount. Not only does this affect your margins, but you are also altering consumer behavior. You see, if customers are purchasing your product or service primarily because of deep discounts, that’s the amount of value that they place on your product or service. When you deliver your offering at its normal price, those original customers are not very likely to come back.
Also, while offering discounts is a great way to build buzz on social media channels at first, the novelty of purchasing a quality offering will wear off soon.
Unfortunately, this is one of the most common mistakes that businesses make. To help combat this, build your audience first and start cultivating a regular customer base before you start giving things away.
5. People Make Decisions, Not Companies
If you are looking to pitch your billion dollar idea to Google or other major company, remember that you are not selling to the company but to the person sitting across the table from you. Since today’s corporate world is completely driven by self-preservation, think of how your idea can make that person’s job easier.
KPIs matter to industry leaders, so determine which of your KPIs are most relevant to them. Important KPIs can include conversion rate, compound revenue growth rate, new leads per month, and others. If you can figure this out, you can have that leverage throughout the negotiations and it translates to a higher chance of success.
Remember, sometimes money is the last thing in the conversation.