I recently joined the board of directors of a newly formed technology company which will soon launch its first product into the market. The savvy founder is taking steps to help obtain success in this risky venture, and I want to share his plans with readers of Enterprise who may plan to launch a new business.
The Board of Directors.
The founder, who I will call Peter, established a three-man Board of Directors with himself as chairman. Peter has a solid technical background but no general management or sales management experience. As the late business writer, Peter Drucker, counseled, augment your skills with that of others in areas where you are not strong. Peter did that. Both the other director and I have run financially successful companies and made our living earlier in sales.
Peter reviews his product offering with us, the pricing and service commitment, how he wants to sell and market, and the type of initial staffing he needs. As Peter’s plans develop, my colleague and I review and critique his plans. In the main, they are sound.
If anticipated growth looks aggressive; we suggest toning it down a bit. We discuss the product, how it later can be modified to serve other market segments. We discuss initial sales territory; how far afield the product can be sold and serviced.
Seeking Additional Capital
Every entrepreneur knows that success beyond selling a market attractive product or service, it’s all about money. First, seed money to develop the idea, then enough financing to develop the product. Finally cash to sustain the company until revenues cover costs. Peter has used his own funds so far, but now he seeks market funding. He holds numerous meetings with investor groups, and it’s a hard slog. Besides wanting a substantial percentage of the company in exchange for an investment, investors ideally want to see existing customers, an increasing revenue stream and a persuasive rationale for the business.
Peter is making powerful presentations. He also is close to landing his first big customer. This will help show the market’s acceptance of Peter’s technology.
Entrepreneurs don’t like giving up a piece of their hard-won company in exchange for needed money. Among the most famous success stories: Xerox and Apple, each took investor funds in exchange for shares in the companies.. It’s a bargain that often needs to be made, and one that can be managed.
Making the Key Hire
The sales function is arguably the most important in the company. No sales, no revenue; no revenue, no business. Staff people sometimes don’t get it, incorrectly believing that administrative beauty trumps income. In this case, Peter recognizes that while cash may be short, hiring a competent sales leader is key.
He has identified a highly successful sales person in an affiliated business segment who is ready to take risk and potentially earn a great deal of money when the company flourishes. It’s a risk, and a risk taker is the person an entrepreneur wants in the job.
Aggressively Conserving Funds
Peter knows that cash is king and that keeping what does not absolutely have to be spent, is the way to help ensure he can continue until revenue exceeds expenses. While he may stay at the Four Seasons hotel when on holiday with his wife, in his start-up business, it’s Holiday Express or Hotel 6. And though personal airline trips may be made on business class, going the cheapest class for business is only prudent. When the boss practices what he preaches, there can be no question that his employees do the same.
Keeping a Life Balance
All work and no play does not promote a healthy life. Peter has been consumed single-mindedly with establishing his new company for two years. This focus can begin to wear on good humor and relations with family and friends. Peter knows this and with the support of his wife, participates in social life as much as possible and occasionally takes short vacation trips. Like all business people seeking success, especially where their own money is invested, work comes first, but not to the complete exclusion of a balanced life.
How’s It Going?
The next chapter in Peter’s quest for success remains to be written. But he is making the right moves. Now the market needs to respond to his technological invention..
Last June Enterprise published my article on Eight Strategies to Improve Your Start-Ups’s Chance of Survival. When his company gains traction, I will point him to that article. To those of you also launching companies, this article and that earlier one may augment what you already know about the hard road of competition. It’s an exciting one with no guarantees but the prospect of great satisfaction and financial reward.