In the beginning, startups look very much like other small businesses. They will have little revenue, few team members, and generally are based in one location.
However, startups are fundamentally different from small businesses because they are designed to grow fast. And so, it shouldn’t be surprising that what the leader of a startup needs to focus on can be sometimes different to what a small business owner should be focussing on.
Bloo started in 2018, and we got our first revenue in 2019; since then, the revenue, albeit from a small base, has grown, and in 2022 we are likely to have 35x the revenue we had in 2019. While generally speaking, small businesses tend to stay the same size.
So the interesting question here is, what should a CEO of a startup focus on? There is often more to do than there are hours available in the day, and this means that radically prioritization is the name of the game. Do a smaller number of things very well, and let things that are not such an important slide for now.
Cash In Bank.
The number one thing that a CEO must ensure is that there is enough cash in the bank for the startup to survive.
If the money runs out, it is game over.
Money is to business what oxygen is to human beings; they won’t last very long if the supply is cut.
This may seem like an obvious thing to say, but it is amazing how many startups run into trouble because they have not kept a close eye on their cash position and then find themselves in a situation where they can’t pay their bills.
To avoid this, CEOs need to focus on two key things: ensuring that the startup has enough cash coming in to meet its outgoings, and secondly, that there is a plan in place to raise more money if needed. This may involve conscious decisions about which activities to pursue and which to let go to conserve cash.
And so, cash-in-bank metrics and free cash flow projections are key things that a startup CEO needs to track and ensure are pointing the right way.
Generally speaking, there are various sources of cash for a business:
- The CEO and Shareholders can provide startup capital or loans.
- Outside investors can buy shares
- Banks can provide lines of credit and loans based on invoices
- Customers can pay you.
The last one is the ideal scenario. You want your customers to be funding your growth, but the nature of many startups, especially technology startups, is that there is a lot of cost and time upfront to build whatever it is that you are building, and so it is difficult to charge customers before you have a fully developed product, thus the need for angel rounds and seed rounds and so on.
Taking outside investment is fine and can open a lot of doors and create momentum. Also, having outside parties can hold the management team more accountable than if it’s purely self-funded, but it does add a significant amount of complexity because once you take on professional investors, the business needs to travel upon a very specific track.
This can be a good thing because it provides focus and discipline, but if the startup strays too far off this track, then the investors will get concerned and may want to replace management.
Investors generally have an investment horizon upon when they need to realize their investment, and this may or may not play well with the needs of the people working inside the business or the customers themselves. This generally means that once a company has been invested, it needs to grow very quickly, often burning a lot of cash in the process, to ensure that it can eventually pay back a multiple of the investment.
So, as a startup CEO, you need to have a good understanding of what your investors want and be able to align that with the needs of your business.
Of course, if the startup is self-funded, then this complexity does not exist, but it does mean that cash management becomes even more important.
This often means taking on follow-on investments, and you can imagine how things then go on from there. The original founding team will often have a tiny share of the final business, which they hope they can sell or take public at large valuations.
Anyway — cash in the bank, by whatever means, is the priority for a startup CEO; nothing else matters in comparison.
As long as you have cash, you’re playing the startup game. Next thing is to have a compelling vision of the future state of the world as it relates to the organization. What do you want to achieve in the future, and what does success look like?
It is important to have a vision because this amount to a large goal, which can then be broken down into smaller goals, which you can then measure progress against.
This means that you know if you are doing the correct things. Are the actions you are taking today helping you get closer to your goals tomorrow? A lot of times, startups will get caught up in trying to do too many things, and they will spread themselves too thin. This is a mistake as it means that the company will not be able to execute well on any one thing. The CEO needs to make sure that the team is focused on the things that matter and that they are not trying to do too much.
The vision also needs to be something that is inspiring because it is the thing that will motivate the team to achieve it. It needs to be something that they can all get behind and believe in.
For Bloo, our vision is to build the world’s best project management software. If you’re into project management, this is an inspiring and ambitious goal and something that you can easily get behind.
Once you have the cash and the vision, everything else is secondary.
But there are a few other things that are worth mentioning.
The second thing that a startup CEO needs to focus on is revenue growth. While it is important for all businesses to grow their revenue, for startups, it is absolutely essential. This is because investors are looking for startups that are growing rapidly, and so if a startup can’t show strong revenue growth, it will find it hard to raise money.
There are a number of things that a CEO can do to drive revenue growth, but the most important is probably making sure that the team is focused on the right things. This means setting priorities and ensuring that everyone in the organization understands what they are. It also means having a laser-like focus on the company’s customers and making sure that they are happy.
A startup CEO should focus on revenue and free cash flow because they are the best metrics to track for a young company. Revenue growth shows that the company is doing well and can attract new customers, while free cash flow indicates whether the company is generating enough cash to cover its expenses. These two metrics are important for investors as they show whether a startup is likely to be successful in the long term.
What is great about free cash flow is that there is no opinion on what this is, and so startup teams cannot use different accounting methods to show a rosier picture than reality. It is simply the sum of the expenses plus the income to show how much money enters or leaves an organization in a given month.
Without customers, there is no business, so it goes without saying that they should be a key focus.
One mistake I’ve seen with many startups is that they want to try and act like a “big company’. This is a mistake because you are giving up what is unique about being a startup — the fact that you can be considerably more personal with your customers and far more approachable.
I often reply to support tickets when Bloo customers email in, and this is something that is significantly more difficult for the CEO of a much larger software company to do, because he or she will have far more on their plate than I have.
The key thing is to focus on what you can do that is different and unique, and that will often be things that require personal interaction. It might be something as simple as sending a handwritten thank you note to each new customer, or it might be something more complex like setting up regular calls with them to check-in and see how they are doing.
The key thing is to make sure that your customers feel valued because if they don’t, they will leave, and they will never come back.
There are two main ways to acquire customers: organic growth or paid acquisition.
Organic growth is when customers come to you because they have heard about you through word of mouth or other marketing activities (such as PR or content marketing). This is generally the most efficient way to grow a business, but it can take time to build up momentum.
Paid acquisition is when you pay for customers through activities such as paid advertising. This can be a quick way to acquire customers, but it is often more expensive in the long run.
As a startup CEO, you need to focus on acquiring customers in the most efficient way possible. This means figuring out which channels are most effective for your business and then focusing your team’s efforts on those channels.
It is also important to ensure that you have a good retention strategy in place. This means keeping your customers happy so that they continue to use your product or service.
There are a number of things that you can do to achieve this, but the most important is probably to ensure that your product or service is solving a real problem for your customers. If it’s not, they will quickly become frustrated and will look for a solution elsewhere.
It is also important to have a good support system in place so that if customers do have problems, they can easily get in touch with someone who can help them.
Finally, it is worth mentioning that it is often easier to keep existing customers than it is to acquire new ones, so it is important to focus on retention as well as acquisition.
Hiring is another key area that a startup CEO needs to focus on. Your team is not going to build itself! This is because the people who work for a startup are its most important asset. A startup is only as good as the team that works for it, so it is essential to hire carefully.
There are a few things to keep in mind when hiring:
- First, you need to make sure that you are hiring people who are passionate about what they do. These people will be more likely to stick around even when times are tough and they will also be more likely to go the extra mile to get things done.
- Second, you need to make sure that you are hiring people who fit with the culture of the company. This is important because you want everyone to be on the same page and working towards the same goals.
- Third, you need to make sure that you are hiring people with the right skills. This means looking for people who have the experience and expertise that you need in order to achieve your goals.
As a startup CEO, it is important to be involved in the hiring process. This means taking the time to interview candidates and get to know them. It is also important to set up systems and processes that will help you to hire effectively.
One way to do this is to use data-driven methods to screen candidates. This means using things like job boards and application tracking systems to identify candidates who meet your specific criteria.
It is also important to have a good onboarding process in place. This means making sure that new employees understand the company culture and their role within the company. It is also important to provide training so that new employees can hit the ground running.
Finally, it is worth mentioning that it is important to keep your employees happy. This means providing things like competitive salaries, good benefits, and a positive work environment. If your team members are happy, they will be more likely to stay with the company and do their best work.
Another thing that a startup CEO needs to focus on is profitability. This may seem like an obvious thing, but it is actually quite hard for startups to achieve profitability. This is because they often have high costs associated with their growth. For example, they may need to hire a lot of people or invest in marketing to grow.
As a result, it is important for startup CEOs to focus on profitability. There are a few things that they can do to achieve this:
- First, they need to make sure that they have a good understanding of their costs. This means knowing exactly how much it costs to run their business and where their money is going.
- Second, they need to focus on revenue generation. This means finding ways to generate more revenue so that they can offset their costs.
- Third, they need to focus on cost-cutting. This means finding ways to reduce their costs so that they can become more profitable. Ideally, startups need to be somewhere between 5x and 10x more efficient than large organizations, where a significant number of the team members will be asleep on the job.
This might seem surprising, but in my experience, it is true. In large organizations, 20% of the team members are driving every initiative forward; everyone else is just along for the ride and making sure the paperwork is done.
And so that’s that!
- Ensure that there is always cash in bank.
- Create a compelling and exciting vision for the future.
- Grow your revenue, and use this as your success metric!
- Be ridiculously obsessed with your customers.
- Hire the right people, and give them the resources required to do a great job.
- Aim to be profitable, you get to keep your independence!