What's the Most Important Thing at a Start-Up?
When you run a start-up, it's easy to focus on things that seem important rather than the one thing that actually is important. Arguing about website design, nitpicking logo options, and playing ping pong in your oh-so-hip office space may feel like a full day at the office, but if you're not working on generating sales, then nothing you did actually matters.
A company's success or failure has never been determined by the exact right shade of green as part of a company's logo or a clever welcome video. Ultimately, success comes down to whether a company can generate revenue. Keeping customers or clients happy enough that they continue to give you money is the only way to buy time to get everything else right.
Eyes on the prize
My background includes working at one start-up that successfully reached an initial public offering and another that sold for $32 million (although that amount was never fully collected) after spending about $1 million. More recently, I spent two years focusing part of my efforts on a web development company that worked largely with startups that had already raised between $500,000 and $1 million in funding.
When I worked in the latter position, my business partner saw the same mistakes over and over again. Company founders/upper management worried too much about being ready for the market and having everything just right instead of focusing on revenue.
Whether you sell a product or a service, it's important to generate revenue -- or at least pre-sales. It's kind of a "fake it until you make it" philosophy. Even if your product has not been manufactured, you can take orders and collect deposits. If your company provides a service, it's best to book some sales, even if you're not quite ready.
Why does this matter?
Whether you're bootstrapping it or have raised money from outside investors, your company's ongoing value is determined by revenue, not how clever your idea is. If you need to raise or borrow money, your ability to do that and your valuation or loan terms will be based on you showing an ability to bring in money.
That's why on nearly every episode of Shark Tank, the sharks ask the people pitching for their sales numbers. If those numbers are impressive, it sometimes creates interest in a company that otherwise seemed silly. If the numbers are bad -- or worse, nonexistent -- then it's very rare that a deal gets made.
Work it from day one
A significant portion of company resources should go into drumming up interest in your product or services pretty much from day one. That doesn't mean you should avoid the other things it takes to build your company, but sales and revenue generation should be something that gets focused on every day.
You should know what your cash burn rate is and exactly how much money is needed to buy you each extra week of being in business. If you have investors or are planning on raising venture capital money, you should do your homework to know what their revenue expectations are before they offer further investment.
Don't let the little things distract you. Your letterhead and mission statement don't need to be perfect from day one, and making sure your office has those awesome walls painted as whiteboards can wait. Focus on sales. Work on acquiring customers and putting your company in a position where it generates revenue.
Even if the clients or customers you lure in early are not the ones you hope to serve down the road, the revenue they generate -- as long as they pay their bills -- will keep your start-up afloat.
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