A dilemma all Start-up’s face at some stage is how long to keep bootstrapping the business for, when do you go to the market to raise funding and even if you can access external funding, when are the conditions right?
Regardless of it being your own or investor cash, it's important to understand the start-up landscape conditions you should have in place to maximize the opportunity an injection of funding will have on your start-up.
1. Conserve your cash until you get the product market fit nailed
Many founders I work with have almost a "blinkered" belief about the impact their product will have on their target market and often this belief is pursued in the absence of any target market validation. This alone is one of the primary reasons 9 out of 10 start-ups fail and often by the time the realization hits the founder(s) it's too late, the cash runs out and with it their dream. Whether it's your own cash or investor cash, it's important to spend very little during this stage.
Tip - Treat this as an ongoing market research phase. Keep asking questions of as many people as possible in your target market.
2. Build a sales process that is repeatable and scalable
Having defined and validated your product market fit, you are now ready to start making sales. It sounds easy and it's true that it's not complicated but it does require pigheaded discipline and determination, persistence, the ability to embrace "No" (every "No" takes you closer to a "Yes"), understand how your target market buys and a hunger to learn about all the obstacles that could arise along the sales journey. When you understand these obstacles you can then work on ways to overcome them!
A sales funnel is the engine that drives your sales operation. It's important to involve all functions and not just sales in sales funnel design (the subject of a future blog).
Tip - Focus on your buyers buying process when designing your sales funnel so it's mapping how they buy and their behaviours during the buying process (e.g., the type of content they consume, how much of it, is there more nurturing required than you though?).
3. Understand key financial metrics, manage expectations and embrace all parts of the journey
When you have defined your product market fit and built a repeatable as well as scalable sales process, you are ready to "go all in" with your own cash, external funding, energy, commitment, passion while keeping it all in perspective. Get scientific about your revenue projections, the cost of acquisition of each customer, the impact of more sales hires on top line sales revenue as well as on cash flow. For example, in a B2B monthly subscription recurring revenue business, a new sales hire might grow sales but will also eat up more cash, as the cost of acquisition will in many cases be higher than the first 6 to 12 months sales revenue. When you understand these key financial factors, it allows you to manage expectations, better manage cash and embrace the financial realities of your growth journey. Patience is critical.
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