It’s that time of the year to start planning for 2010. Our process is pretty loose right now and is continually evolving. Here are some of the steps we take:
Personally, I like doing tasks more than I like planning, but I realize the importance.
One of the hardest lessons to learn, and one that isn’t talked about much, is that as an entrepreneur of most types of businesses, your revenues reset each year. What I mean is that you have to sell a certain amount of your products or services the following year just get to the previous year’s revenues, and then some amount more to grow. Resetting revenues make growth difficult in tough economic climates.
This is also one of the reasons why business models with subscriptions, like software as a service or required maintenance and support contracts, are so desirable. Assuming a high retention rate (90%+), each deal sold in a new year represents growth as your revenue base is already the revenue from the previous year, if not higher due to more recurring revenue at the end of the year compared to the beginning of the year.
My advice for entrepreneurs is to look for businesses with a recurring revenue component.
A gentleman reached out to me to get my advice on angel investing in companies that are pre-revenue and/or pre-product, of which I have very little. He’d heard about Shotput Ventures through the Atlanta community. I told him that I didn’t have much experience other than the eight companies Shotput funded this past summer. Of course, I had to give him something, so here’s what I came up with:
I’ll revisit this post in 10 years and have even better advice to give.
Note: This advice is for pre-revenue companies.
In a startup, there are so many moving pieces that change on a daily basis it is easy to spend all your time putting out fires and being reactive to what’s going on in the company. One of the more important things I underestimated is the value of celebrating the small victories. I’m talking about progress-type victories as opposed to serious, signed-on-the-dotted line victories.
It is important to stop everything, get the team together, and do some cheerleading.
As much as technology like IM, Skype, and email make it easy to not do things in person, nothing beats the emotional connection of being face-to-face. I recommend teams get together once a week and celebrate the small victories.
Note: Celebrating the small victories is separate from an accountability-type weekly tactical.
Wow, I just finished reading an interview with John Imlay about his life and storied career. It is packed with great stories and insights that every entrepreneur should read. Here are a few key points from it:
This really is one of the top 10 entrepreneurial articles I’ve read this year. Read it on DocStoc:
An Interview with John Imlay.
Here’s the second and final piece on blogs I read. My goal is to skim 100 posts per day.
Naturally, I’m biased towards technology and startup blogs. I hope this helps!
I mentioned earlier in the week that I read 100 blog posts per day (that’s blog posts and not blogs). The blog posts act like my personal version of a newspaper and give me food for thought on a daily basis that I can bring back to my company. Here are the blogs I subscribe to in my Google Reader:
Well, that’s almost the half of the blogs I read. I’ll add the second half tomorrow. Here’s Part 2 of blogs I read.
Note: I didn’t include links to the blogs of our competitors, for obvious reasons.
Software-as-a-Service (SaaS) really is an amazing delivery model for software in that it better aligns interests of vendors and customers compared with installed software that requires a large, up-front fee. In reality, the monthly or annual fees for SaaS make it so that the vendor is financing the customer due to the fact that the customer needs to hang around long enough to become profitable. If you sell a large enterprise installed product and the customer isn’t happy, it can still be profitable (though isn’t good business practice). With SaaS, if you have difficulty on-boarding the customer and making them successful, they can walk away.
A hidden problem with SaaS is the on-boarding and switching costs relative to the cost of the solution don’t usually match up.
Think about it: if you charge $1,000/month for a SaaS product, you need to be able to make customers successful with almost no effort, otherwise you need to have additional implementation fees for thousands of dollars, driving up the pain of switching, increasing the sales cycle, and increasing the non-scalable labor aspect of the business. Many SaaS companies don’t adequately account for the on-boarding costs to their business model as well as how it impacts the amount of time it takes for a customer to become profitable. SaaS is a more capital intensive model for entrepreneurs compared to installed software.
My challenge for entrepreneurs is to incorporate the on-boarding costs into their model and really think about how they can remove the enormous friction that comes with switching over to their system.
At today’s EO Accelerator Monthly Accountability Group we had a good conversation about doing sales proposals. As an entrepreneur or sales person, proposals can be one of the least fun things to do due to being time consuming and not always producing revenue. Here are some tactics we discussed:
Proposals are an important part of business and these tactics should help you win more deals. Good luck!
People like to ask me how I get so many different things done. Of course, I’m flattered, and I need a better, more self-deprecating answer. The answer lies somewhere in being able to read something once, make a gut decision, and never look back. I move quickly.
On a tactical level, I have a few simple guidelines I follow:
I don’t believe there is one right way for people to get things done, but this method works for me.
David Cummings on Startups 