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Launching your own business is an incredibly hard endeavor.
Bringing a new product or service to the market is a very challenging task; it is difficult to cut through the noise and “break through” the inertia of the marketplace.
For this reason, when starting out, the aspiring entrepreneur should only focus on a few key things.
Recently, I have been revisiting the phenomenal book “Ready, Fire, Aim”, by Michael Masterson.
Masterson’s basic premise in that book is that business growth can be approximately broken down to four distinct stages.
Each stage is accompanied by its own unique problems, challenges and opportunities. Here is the break down:
Stage 1: Infancy – 0 to $1 million in revenue
Stage 2: Childhood – $1 million to $10 million in revenue
Stage 3: Adolescence – $10 million to $50 million in revenue
Stage 4: Adulthood – $50 million to $100 million in revenue and beyond
The infancy stage, where we will be turning our attention to in this article, entails taking your business from an idea in your head, to actually launching a product to the market and generating real revenue.
During infancy, you don’t really know what you are doing. Your sole job should be to validate your idea and make your first profitable sales.
In this post, based on some of the lessons from Masterson’s book, I will present various tips on how to start your new business with a bang. Let’s do it!
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1) Make sales your company’s top priority
If you had to take only one thing from this article, that would be it.
When you start out, you need to focus on making sales and cranking out revenue.
This is critically important and there are many reasons for that.
First, you will validate that your offer is really something that market wants and is going to pay for. Most startups fail because they are building something that addresses no problem or real issue. In other words, something that the market never asked for.
Secondly, you will be able to pay your bills and make your company sustainable. Especially if you are bootstrapping, you need incoming cashflow that will cover your expenses and keep the lights on.
Finally, by attempting to sell your product, you are going to get tons of direct and indirect feedback from your potential customers. This will allow you to finetune your offer and improve your product.
I can’t stress this enough: when starting out, you need to focus on sales.
As Billionaire Mark Cuban has said:
“Sales Cure All. Know how your company will make money and how you will actually make sales.”
2) Learn everything you can about sales and marketing
Since sales is your first priority during the early years, you, as the founder and leader, need to become amazing at sales and marketing. Actually, these are at the top of the list of skills that you need to possess if you wish to become a successful entrepreneur.
In the fascinating era that we are living, this is very easy. You can study books, take courses, read articles and attend seminars. Investing on your knowledge is going to yield the best return, so don’t be conservative in that area.
3) Ask for advice from smart people
While building up your entrepreneurial skills, you are going to meet or hear about successful and smart people. You should seek to connect with them and ask for their invaluable advice.
Seek out mentors and people that are at a higher level than you and you aspire to be like. A caveat here is that you should emulate what these people were doing when they were at your level, and not what they are currently doing.
These are people that have walked the walk and have a solid track record of success. It might be difficult to come in touch with them, but persistence and humbleness are your allies.
Make sure to provide some value in return even if you can’t match it in magnitude. Build real relationships and you are going to reap the rewards for years to come.
4) Don’t waste money on extras that are not benefiting the customer
Since you are trying to sell your product, all money surplus should allocated to building a better product and providing more value to your customers.
Do not waste money on expenses that are not towards that direction. Capital is scarce at your early days and should be allocated wisely.
Avoid spending money on fancy, yet useless items like luxurious office space, extravagant perks, “startup gear” and other nonsense like that. I have said it before; you are not freaking Google!
5) Don’t waste time on “business marketing”
What other precious resource you shouldn’t be mindlessly spending? Your limited time, of course.
Don’t lose time on meaningless activities like creating colorful brochures, fancy websites (unless it is consumer-facing and you sell through it), business cards and the like.
Similarly, limit your time exposure on “feel good” activities like “startup meetups” and “entrepreneurship events”.
Remember, you have only one goal: SELL!
6) Use direct marketing tactics to reach your customers
On the topic of marketing, what you should be focusing on is what is called “direct marketing”.
Direct marketing is a form of advertising in which companies provide marketing material to consumers to communicate information about a product or service.
Direct marketing messages include a call-to-action, encouraging the recipient to, well, take some kind of action (for example a sign-up or even a purchase).
The main benefits of direct marketing is that is more cost-effective and that companies are able to measure the effectiveness of their campaigns by accurately tracking their ROI.
With tools like Facebook advertising, you can reach your target audience with surgical precision level and, at the same time, personalize the marketing message to what your customers expect and love.
Avoid “brand marketing” for now; you are not freaking Coca-Cola!
7) Favor a lean approach to product development
Since you are not a clairvoyant and you can’t predict how the market is going to respond to your product offering, stay lean during the product development phase and favor rapid and incremental product releases that will reach your audience and get you feedback fast.
As Billionaire Reid Hoffman has said:
“If you’re not embarrassed by the first version of your product, you’ve launched too late”.
Similarly, if you are creating or selling a physical product, don’t invest a lot of money in inventory before you have validated that the market is going to buy your product at the price levels you assume it will.
8) Know your numbers and your unit economics
As you start crafting out your first product or service, you need to closely monitor your financial numbers.
You need to know the Unit Economics of your business, for example your Cost of Goods (COGS) and your Gross Profit and Margin from each sale.
At the same time, you need to understand the broader economics of the business, for example your Customer Acquisition Cost (CAC), the Lifetime Value (LTV) of each customer, etc.
Unless you monitor, understand and finetune these numbers, you are just winging it and praying for a miracle.
9) Discover the Optimal Selling Strategy (OSS) for your business
In his book, Masterson talks about the Optimal Selling Strategy for your product and business. At each point in time, there is only one optimal way of selling your product.
Think of it as a combination of price, value proposition, media, and positioning, that will bring you the most valuable and qualified customers.
At the beginning, your sole goal should be finding out what your OSS is. Once you find it, you run with it, doubling down your marketing and development efforts.
That being the case, your marketing team’s purpose, which you will be leading, should be to find what the OSS for your business is as soon as possible.
10) Reinvest everything for growth as long as you can
This is actually not included in Masterson’s book, but is a tactic from a master’s playbook.
Jeff Bezos, Amazon founder and CEO, created a business empire by having a very long-term view and by re-investing all revenue back to the business.
The outcome of this strategy? He is now the wealthiest person in the world, and Amazon seems unstoppable, ready to dominate every industry under the sun.
The more you can afford to not withdraw money from the business and reinvest everything in its growth, the more rapidly you are going to scale and the more valuable your company is going to be.
It is painful to generate profits and not be able to tap into them and enjoy your reward, but the more you “prolong the pain”, the better your are going to be.
Getting a business up and running is an extraordinary feat.
Because of its difficulty, at the early days, you need to stay hyper-focused to enabling the company to stay afloat.
The main avenue to achieve this is by making sales your first priority and by generating revenue from customers as soon as possible.
In order to achieve that, you need to discover the Optimal Selling Strategy for your business and take it from there.
Educate yourself, learn from other successful people, protect your money and time from useless purchases and activities, know your numbers and take a long term approach.
Now, what are you waiting for? Go out and build that great business you have always been thinking about!