The biggest problem that I’m seeing with startup founders is that they aren’t focused on, or interested in, business and the actual processes, theory and practical things involved with running a company that sells something and turns a profit.
For the most part they’re interested in startups pretty exclusively – the culture, the lifestyle and the glory.
This isn’t entirely healthy, and it’s about sexiness rather than the nuts, bolts and true grit. When I look at startups right now I see too many people who want to build an app, service or platform that can take investment as their goal above all goals.
Somewhere along the line, a lot of would-be founders have forgotten the key functions of a business.
The function of a business isn’t encompassed by funding rounds and it doesn’t have a whole lot to do with PowerPoint decks.
The function of a business is to attract customers, serve customers, and turn a profit. Those three functions are what it needs to stay alive if you want to have any kind of purpose.
Technical founders are a crucial part of their tech operations but lack business knowledge. Non-technical founders who think the best use of their time as the CEO of a young company is practising their pitch can build a startup but it’s rare to see them build a business.
They don’t have the necessary skills to actually run a company or make it a profitable, successful machine. Instead, they have a very specific skill-set, tailored to raising money and pleasing investors. That’s problematic. You can see it in action every time a board brings in a CEO to replace a founder once enough money is on board.
I’m not against venture capital – I think it’s awesome. But I also think that you stand a much better chance of finding capital if you can demonstrate that you’re building a business, rather than building a stage presence to go with your pitch.
One business that is both basic in its fundamentals and complex in its operation is a sandwich shop – a small cafe, selling food and drinks.
It’s a simple business model – you produce physical goods and sell them to customers who have a need. The equation is, of course, more complex than that when you put it to work. I’ve known enough people who’ve taken on that challenge to understand that running a cafe is really hard.
But here’s one thing I’m 100% sure about: If you don’t have the business skills and understanding that it would take to start and run at least a moderately successful sandwich shop, you have no chance and no business running a scalable startup.
This is what a sandwich shop has to do:
1. Develop a product that you know will sell
For a sandwich shop, this means working out what food your customers are going to want to eat, and when.
2. Attract customers and provide customer service
You want to explain to the people who should eat your food, exactly why they should eat it. And then provide it to them seamlessly and without friction.
3. Sell your product repeatedly and gather feedback
The customers that you have should want to spread the word, come back for more and not leave you.
4. Cover your overheads and expenses
You have to take in enough money to pay for what it costs to run your shop and have cash left over. This is the most important part. Does it sound too tough? It shouldn’t.
This is what your startup should do. It should meet the requirements of a sandwich shop and hit their metrics and goals. These are the accomplishments that you need to be capable of.
There’s too much of a focus these days on businesses operating like something that isn’t a business. A startup should run lean, should iterate and should have a firm focus on learning but that doesn’t mean it shouldn’t be a company and shouldn’t act like a company.
Businesses that fail to do that aren’t really a business — they’re a hobby at best, and a Ponzi scheme at worst.