Published on LinkedIn on November 20th, 2019
"It’s your first entrepreneurial venture.
You’re so excited to get things started.
You’ve secured some initial seed money from your co-founders, family, friends, and your own money as well to get things off the ground.
You have a rock-solid business plan that will change the world and disrupt the marketplace in which you plan to enter with a big bang.
As soon as you incorporate the business and start running the company, you realise you underestimated the effort and budgets and the rock-solid business plan that you were following is thrown out the door and now you’re only thinking about keeping your head above water.
It’s all about survival now and you need to ensure you do not spend all the money you have and run out of cash."
First time start-up CEOs always have it tough. They don’t have prior experience starting a business from scratch and don’t have reference points as to what is needed to build each functional area without templates. Even start-up CEOs who come from large corporates are not as well rounded as they think when they have a blank sheet in front of them to draw on. There is no fallback to a shared corporate services team who will give them support in whatever they need to run the business. The full responsibility sits on the start-up CEOs shoulders to get their people motivated and to keep their eye on all aspects of the business so that it can run with as little problems as possible.
Sounds scary? It always is.
Nothing gets your juices flowing more than when you are running against time with the risk of losing your own money in additional to those who entrusted you with their own hard-earned cash as well.
On a positive note, you now have greater freedom to build a business that you believe will change the world and will grant you and your founding team financial freedom. You take pride in each small win and build upon that to make something bigger and better.
The energies in start-ups are intense as well as the pressure to succeed.
All in all, it’s a fun and dynamic environment if you embrace the good and the bad in running a startup!
Let’s look at the top 5 things that keep a first-time start-up CEO awake at night:
When starting up a business, there is never enough cash to do what you want. Keeping fixed costs as low as possible means you need to skimp on salaries and you pay the cheapest rent you can afford to house your business. During your product development stage, you need to squeeze as much as possible out of every dollar you have to get to MVP (Minimum Viable Product) as quick as possible. Only then will you be able to consider any level of sales activity to refill your coffers with cash to sustain the business. Keeping costs low will ensure the operational breakeven point will be achieved each and every month. Preserving cash with the lowest cash burn rate will be the key to business longevity in the early stages of a start-up.
Hiring people to join your no-name start-up is a selling job in itself. Getting people to believe in your mission and to join your company with less money than what they were making before requires finesse and sincerity from the hiring manager. Weed out the non-performers as soon as possible since they are cash suckers that will bring lots of inefficiencies in your monthly salary expense. Offer small perks to keep the existing staff happy and minimise staff churn as much as possible. Poor HR practices will kill the business so fast since you need stable, dedicated and productive people to run and operate the company.
3. Sales / Revenue Growth
You’ve achieved MVP now. Over the last 6 to 9 months, you’ve burned so much cash to build the product and service. Now is the time to invest in front end staff to build a sales pipeline that will convert to sales revenue. Time to revenue must be as short as possible in order to reach operational breakeven each month. Profitability can only be achieved when the business can breakeven every month. No sales, no business. It’s as simple as that. Momentum must be generated to drive sales as fast as possible.
4. Personal Insecurity
You’re driving the business hard and fast. Things aren’t moving as fast as you want it to be. You’re second guessing yourself in thinking whether you are approaching this in the right way. You stay awake at night thinking about different options to tweak that software development schedule or to tweak the sales plan. You start thinking whether you have the right skills and personality to run this business. You are in pain but whether you know the answer or not, you need to make decisions since so many people depend on you to make this a success. Second guessing your own decisions is always going to be one of the most challenging aspects for a start-up CEO to overcome when they are running against time and cash.
5. Volume of Work
Your email inbox is constantly ringing with incoming emails. You are constantly being pulled into meetings and always getting dragged into the weeds. You have unhappy staff whom you need to pacify and at the same time, you need to put together an investor plan to raise funds to grow the business. You need to meet with your sales team to review their sales pipeline as well as to gauge present business performance against budgeted figures. You need to simultaneously review the product development plan and deal with late delivery of features from your software development team. By the time you are ready to sleep, you have a thousand things on your mind that you need to remind yourself you need to do the next day or even the next week!
I’ve known many first time start-up CEOs who swear they will never do this again after they failed in their venture. I’ve also met many serial start-up CEOs who cannot think of a life outside of building businesses from scratch. How each person sees their glass as half full or half empty will determine their willingness to see a second start-up as an opportunity or as a threat.
Entrepreneurship isn’t for everyone. If you are thinking of starting your own business for the first time, make sure you surround yourself with experienced start-up mentors who will guide you through each stage of building a business.
In the end, if you are strong enough to do it again, you'll always be comforted to know that it’ll be much easier the second time around!
About the Author:
Peter Hum is the Founder and Managing Director of StrateValue Pte Ltd, a leading boutique business management and Asia market entry firm based in Singapore. With more than 26 years of international business and global telecommunications experience, Peter has held successive career roles ranging from technical, marketing, sales, executive management, and serial entrepreneurship across Asia and North America. He specialises within the fields of Telecommunications, Business Analytics, Enterprise Software, and Digital Services. Peter has provided strategic and operational guidance to senior level executives in some of the largest multinational organisations in the region.