Things that no-one tells you when you’re starting a Start-Up [Part 1]
A few months ago, I started a digital marketing agency with one of my best friends from college. It isn’t your traditional digital marketing agency though. We identified a niche which had massive potential in our minds, and carpe diem! We went for it.
Have you ever heard the term, “wannabe entrepreneur”? Well, for a large time during college I was one. Binge-watching entrepreneurial shows & movies such as Shark Tank & The Social Network, following all these startup advice handles on Instagram, as well as spending almost all of my free time diving into the endless sea of videos on marketing, sales, finance & inspiration- I’d done almost everything that one could do other than starting something.
I loved brainstorming & contemplating business ideas. Attending local networking events & meeting people, as well as debating the pros & cons of each idea with my friends was a weekly to-do for me.
It was one such pros & cons debate that led to the idea of a building an empire over the niche we stumbled upon. The best way to penetrate this domain we decided, was through a digital marketing agency. And so the journey began….
I’ll be conveying my simple learnings from the past 6 months of what you need to know before you take the plunge of starting a business. These learnings have come from the phases of my life of being a wannabe entrepreneur, to actually going on to start one.
#1 Do not start a business if you don’t have money in the bank
Out of all startups that look to raise capital, only 0.05% end up doing so. Unless you’re amongst the absolute minuscule percentage that manages to raise funds based ONLY on the premise of the IDEA, you’re going to have to bootstrap your business. Don’t do it if you don’t have enough money in the bank to support yourself & your family.
Work a regular job, save-up, ensure you have enough runway for yourself first, then think about the runway of your company. [Runway is the time a company has before it runs out of capital. In this case, it applies to you.] This is especially for those who have families to support. 90% of startups that begin fail in the first 3-5 years. If you’re the betting kind of person, would you ever place your bet on this?
To those who don’t have monetary responsibilities, you have your work cut out for you. Bootstrapping & lean methodology is the name of the game. Make the most of your twenties & thirties following & discovering who you are through your startup.
Being in my 20’s, here’s a really inspirational picture I relate to when I feel the odds are stacked against me.
#2 It’s all about your co-founders
We’re all social animals, evolved to be co-dependent on each other. Unless you’re from a Japanese anime, you need someone to share your pain. Celebrating something is always sweeter when you have company. The journey that startups undergo is topsy-turvy: You will definitely experience highs & lows in this rollercoaster, and you will need your co-founder to share these experiences with.
I’m not going to demystify why you need a co-founder. You need one. Period. If you’re not convinced, I’d recommend doing a Youtube search to learn why.
The more pressing question is: How to find one?
So here’s a great video coming from a credible source that will better explain how.
Now that we’ve figured this part out, let me tell you how this pans out practically.
Individuals who come up with an idea, generally & naturally go on to discuss/debate it out with their friends, because hey! They are our first point of idea validation. In their own unique way, they help us bulletproof it with the infusion of their ideas. Now, psychologically speaking, if humans tend to contribute to an idea, more often than not they vest in the idea and eventually become a part of it.
And this is how, in my opinion, the majority of startup founding teams are formed. While there’s nothing wrong with the concept of starting a business with your friends, I’d like to draw your attention to a subtle but important quote:
And reverse-engineering the theme of this quote, viz., Execution is more important than the idea. It’s fairly easy to conclude that your startup’s team are the ones who will be executing the idea. As I said earlier, although there’s nothing wrong with starting a business with your friends, you or rather the founding team/initial idea debaters need to ensure that you have the right founders & skillsets to execute the various elements you have broken your startup idea down to.
You need a James Bond with you in your corner. Someone who somehow knows what to do in every situation. Someone, who not only knows to dig out & point out problems & negatives, but also someone who knows how to approach solving them. You will have disagreements, lows, and founder depression: No white light at the end of the tunnel. You need a founder who can lift you up when you’re down & at the same time complement your own skillsets. If your friend shows these qualities, you’ve hit the jackpot! Marry them into your startup NOW.
But do you know the most important thing about these qualities? You need to be these to your co-founder too.
#3 Trial & Test people before you on-board
Now, this is going to come in handy not only when you are looking for co-founders or other founding members, but also for the first hires in your company. You need to gauge your synergy, workability & skillsets before you put pen to paper.
Here’s what I mean by trial & testing: Say you’re about to hire the first employee in your company. As with every startup that goes on to become big, the first hires always feel like the founding members, because they’ve helped grow the company from the ground zero up. Take Airbnb for instance, they spent over 5 months hiring their first employee. [There’s an interesting interview with this first employee too.]
Take your time to find the perfect fit. And even if you do, don’t go on & on-board someone by the virtue of words & motivation after an interview. Work with them together for a week or 2 on a project. This will help you to better understand your synergy, chemistry, workability & any other parameter that you consider to be a vital part of your culture. As compared to a mere interview, filled with logic-based riddles or other impossible questions that interviewers tend to ask.
#4 Understand which business you’re REALLY in
The million-dollar question. The ikigai of your business. You ABSOLUTELY need to know what business you’re actually in. And I don’t mean which industry or domain you’re in. You need to understand the crux of what you do.
This is something that you either get right from the get-go, or you crash & stumble upon it through the various learnings in your journey. A lot of today’s big companies took their time too before they got to know what it is.
McDonald’s, one of the largest franchises in the world today, understood which business they’re actually in only after analyzing that they’re not really making any money: Although their business was absolutely exploding & growing exponentially.
That’s when they learned THAT something, that changed the course of history in the world of fast-food: McDonald’s understood that it is not in the business of hamburgers & fast food. It’s in the real estate industry.
Baffled? I was too when I read this. Here’s a great read explaining how.
Whereas for me, I’m a B2B digital marketing agency, correct? But what is the business you actually think I’m in? Is it Marketing & Advertising? Is it Creative Content?
Short answer: No.
Long answer: Let’s break this down.
While I do agree that I am providing digital marketing services for my clients in order to generate brand awareness or sales: Whatever the goal of the campaign be. But what will happen when I actually do accomplish the goal of each project?
It would mean more leads, customers & eventually sales for my client. So that means, the client earns an ROI for the money they invested in marketing.
Return on Investment is an “x” multiple to calculate the efficiency of an investment. Simply put, how much money invested vs returns from that investment.
Like I claimed, if my marketing efforts are successful and the results are indeed handsome, that means my clients earned a multiple on the money they put in.
For example, if the client paid me 100$ for marketing a product, and my marketing efforts raked in 1000$ in sales, that means I gave the client a 10x ROI. [Assuming profit margins are 100%]
So what did I essentially do for him? I took his money to make him more money. And what business am I in? I’m in the business of selling MONEY AT A DISCOUNT.
#5 This is why Founders should be in the same location
The COVID-19 pandemic has lead a lot of companies to do something they would’ve never even considered before: Work From Home.
Almost 7 months into it, from the feel of things it seems as though it’s working out for the majority. Saving on overheads, travel allowances and all the other logistics involved in a physical location, have certainly shone brightly on financial statements, amongst the otherwise declining dull revenue.
For a startup, although the mentality of work from home is really progressive & appealing, especially to younger founders, from my practical experience I can vouch that this is certainly not the case.
If you’re a startup with less than 7-10 employees, you need to be working together in the same physical location. Better yet, avoid the travel & move in with your co-founders.
Else, you’re gambling against the odds. Trust me on this one, it is really not something you want to learn the hard way.
Working in the same physical location has a ton of advantages & pros, which although is a redundancy that aspires to point the emphasis on the ‘positives’ of pros & cons, these positives are things that a young startup needs to accumulate in order to make it.
Working from the same location more of than not tends to bring a sense of accountability towards each other. Not to forget, cultivating Mark Cuban’s overly used ‘hustle & grind’ spirit that stems as a product of this accountability. You can support & uplift your co-founders when they’re down and vice-versa. You need to accumulate a lot of these positives in order to make it as a startup.
And more un-importantly, all the false glamour & trend that movies have oh so well illustrated in attracting people like moths to light & getting them to blatantly raise their hands up & say “I want to become an entrepreneur” without knowing the true grit that living this sentence.
Well by living together, you’re living the startup dream. Welcome to Hollywood!
These were my learnings & observations when I transitioned from a “Wantrepreneur” into the first 6 months of actually doing the deed. I can still very confidently say that I know nothing and I’m not even near the foot of the hill that I aspire to climb. There’s a long way ahead, and there’s so much to learn.
I just can’t wait to share what I learn the next part of this journey with you.