This week I had unrelated conversations with two entrepreneurs who’ve bootstrapped their companies. They now have paying customers. One of them is looking to raise venture capital, and the other recently raised it. Bootstrapped companies survive on customer cash flow. There typically isn’t a surplus of cash on hand. This means founders are often focused on how they’ll keep the lights on. The runway is usually a few months long, if that.

Both founders are now faced with the possibility of an infusion of cash and 18 to 24 months of runway to execute a long-term vision. Until now, neither has had the luxury of thinking that far ahead. Homing in on their vision hasn’t been as smooth as they’d hoped. They’re finding it difficult to shift their mindset from survival to articulating the full potential of their company and a plan to get there.

Bootstrapping versus raising capital from investors isn’t a one-size-fits-all decision. It’s specific to the entrepreneur and their situation. Founders should know that the path they pick to obtain capital will influence how they’re able to think about their business. Bootstrapping fosters a survival mindset and thinking only a few months out. Raising capital from investors allows for long-term planning and execution.

There are exceptions to every rule and founders can be wildly successful on either path, but this is something founders should consider when they choose the source of their capital.

This past weekend, I had an issue with an expensive product I purchased a year ago. I was frustrated that it was defective and worried it might be out of warranty. I called their customer service number on Saturday morning and had a pretty good experience. I sent a few pictures while I was on the call. The rep offered to send me a replacement free of charge and alternatively gave me the option to upgrade to the latest product for a small upcharge. In the end, happy they stood by their product, I decided to upgrade.

A lot of companies focus on getting the customer and closing the deal. I’m of the opinion that how you treat the customer post-transaction is equally as important. Giving your customers a satisfying experience after the deal is how you establish loyalty and turn them into evangelists. In my situation, this company has probably gained a customer for life because of the way they resolved my problem. That’s what I’ll remember, not the problem.

Regardless of the stage of your company, remember to treat your customers well after the sale. Doing so will help you build a base of loyal repeat customers you can count on!

I connected with a serial entrepreneur this week. He has built successful bootstrapped businesses. Now, he’s planning to raise capital for a new venture. He’s working to get a service in the hands of customers. We talked about next steps and he said he wants to complete an MVP in the next few months and will do a pitch deck when he has time.

Putting together a deck is never fun. In fact, it’s annoying. Even so, it must be taken seriously. A thoughtful, attractive deck is the final product, but the value lies in the process of getting there. Good pitch decks communicate a founder’s vision clearly. They detail the problem, how the founder proposes to solve it, why the founder is qualified to solve it, and a host of other things. It takes time and energy to think through all the pieces and succinctly get them on slides.  

If you’re doing a pitch deck, when you think you’ve got it, share it with other people and ask them to poke holes in it. Then act on their feedback to make the deck better. More time and energy—but immensely valuable. You’ll come out of this process with a clearer vision, more conviction, and more confidence. You’ll have something that you, your team members, investors, and customers can rally around.

I didn’t raise capital for CCAW, so I thought I didn’t need to create a pitch deck. After many years I did one, and I regret waiting so long. The exercise led to realizations that completely changed the strategy for CCAW and reenergized me. Even if you’re not raising capital, creating a pitch deck and updating it annually is a powerful exercise. It forces you to put fresh eyes on your business and update your vision based on current market conditions. It’s an exercise in strategy that crystalizes what the company is doing and prepares the founder to move it forward.

If you’re a founder or aspire to be, consider creating a pitch deck and getting feedback on it. Doing so could be a game changer, even if you never raise a dime.

One strategy for acquiring customers I’ve heard early founders mention is to use marketplaces. Think Upwork, Etsy, Amazon, eBay . . . There’s lots of demand waiting on these platforms if you can provide what users are looking for. This strategy has merit and can be useful, but there are things to consider:

• Customer relationship – The relationship is often between the customer and the marketplace. The customer is loyal to the marketplace, not the merchant or vendor who provides the good or service. Some marketplaces even restrict merchants from doing offline transactions with customers they acquired on the marketplace.
• Learning – In the early days, it’s important to get feedback from customers and fine-tune your product to achieve product–market fit. Not owning the customer relationship can make that difficult.
• Why – Marketplaces don’t usually share data about what’s driving behaviors on their platforms. Vendors seeing what’s happening but they don’t understand why it’s happening. Not a big deal if things are going well. Terrifying if things are going badly. It’s hard to fix something if you have no idea what’s broken. And growth planning is extremely difficult because you don’t know what drives your growth.
• Expansion – When you talk with your customers, sometimes you learn about opportunities to add value. It’s the land-and-expand approach. Get your foot in the door and grow the relationship over time. This is difficult to do with customers acquired via marketplaces. Not impossible, but difficult. Instead of growing by selling more to existing customers, you have to constantly acquire and service new customers.
• Experience – Marketplaces often control the experience for customers. The experience is built for the masses, so it may not be an optimal customer experience.

Marketplaces are great for tapping into demand and supporting a thought-out go-to-market strategy. They aren’t a replacement for a go-to-market strategy and they aren’t ideal for all company stages. Founders (especially early ones) should be mindful of the importance of owning the customer relationship and factor it into their decision about whether to acquire customers via marketplaces.

Speed matters to a start-up’s chances of success. Let me explain. Most founders have a defined runway, even if they don’t realize it. They have a certain number of months or years to achieve a certain amount of traction (e.g. get 20 customers). If they don’t do it, it’s game over. Think of a plane during takeoff. If it doesn’t reach a certain speed and elevation before the runway ends, it’s in serious trouble. Game over for a founder can mean running out of cash, other resources, or family support.

Getting traction requires work. Founders have to execute. Doing nothing will lead to failure. Founders understand all of this. But what some don’t realize is that speed of execution is equally if not more important. They can take the right actions, but if they’re too slow about it the outcome won’t be what they’re aiming for. Founders have to be aware of time and make sure they’re executing and making progress toward their goals quickly. Otherwise they’ll find themselves staring at the end of their runway.

If you’re a founder, be mindful of how quickly you execute. If you’re not moving along at a good clip, consider tracking it and discussing it among your team.

Someone made a point in a debate I listened to today that gave me pause. He said luck is what happens when preparation meets opportunity. The Roman philosopher Seneca said that first, and I agree with him. The debater took this one step further, though. He said you have to be willing to take risks to capitalize on luck. He gave the example of a backup quarterback who practices hard and is ready when the starting QB is hurt. The backup gets a lucky (for him) break to show what he can do on the field. But playing involves risks that he must accept to take advantage of his luck. He could fail by performing poorly (this trips a lot of people up) or being injured.

I spent more time thinking about this and I generally agree with what was said today, but think they missed something. In speaking with entrepreneurs (not just techies) and investors who’ve had outsize success, I’ve noticed a distinct pattern. They all have the ability to recognize when they’re in a lucky situation and take action—rapidly, if they’re among the best. (Most lucky situations aren’t as obvious as the backup QB’s was.) Sure, things can go wrong, but they mentally set that possibility to the side, focus on the upside, and accept the risk.

When I think about what it takes to succeed, I view it as a two-step process:

·     Preparation + Opportunity = Luck

·     Luck + Recognition + Action (i.e., accepting risk) = Success

Following this two-step process doesn’t mean you’re guaranteed to be successful. But being aware of it will make success more likely.

If an athlete practices hard and finally gets the chance to play, that’s not enough. He has to jump at the opportunity, play his best, and risk failing or being injured. Otherwise, his luck isn’t going to lead to success.

I’ve seen founder friends build massive companies that started with a simple goal: to improve workflow. They took a manual process and developed software that made it simpler, more visible, and more conducive to collaboration. This great startup approach for nontechnical founders can be the secret sauce that propels a company to success.

Today I met with a founder who’s pursuing an idea about improving a very specific and highly technical process involving lots of parties (internal and external to the company). The costs of errors to many stakeholders are high. He’s spent over a decade learning the space and has deep relationships (his unfair advantage). He has a unique insight that differentiates his solution from that of competitors. And he’s built an early version of his product to test with customers. This founder is well positioned to build a large software company by making a specific process easier for his target customers.

I’m not an idea person, nor are many other founders. Fortunately, you don’t have to be brimming with creative ideas to be a successful founder. Aspiring founders can easily find ideas that could lead to terrific companies by looking around for inefficient processes that take tons of time or cost lots of money to execute. The more painful the better! The next time someone is complaining about something that annoys them about their job, listen. It could be the seed you need to grow the next billion-dollar workflow management company.

I’ve previously shared my thoughts on founders feeling like they have to come up with an Amazon-caliber idea to start a company. That’s a path, but there are others. I often meet with entrepreneurs who aren’t idea people but still make it work. They find (or stumble upon) a problem they want to solve. They research who else is solving the problem and learn how effective their solutions are in the eyes of customers. If customers are only partially satisfied, they set out to close the gap. These entrepreneurs don’t dream up a completely new solution; they make a better iteration of what’s already out there. They know what customers like and don’t like about it, so it makes sense. There are countless examples of companies like Facebook, Zoom, and others who used a similar playbook, and for good reason . . . it works.

If you take this path, you need to acknowledge that’s what you’re doing. When you explain your solution and vision, your pitch will go over much better with investors and recruits if you acknowledge that you have competition and articulate precisely how they fall short of customers’ expectations. You’ll be demonstrating that you have a unique insight that the market has missed. Your unique insight differentiates you from your competitors and will become the flag that others rally behind in support of you.

Unless you’re creating a new market, you have competition. Find a way to understand what your customers think of your competitors’ product or service. Being able to articulate this insight clearly could change the trajectory of your entrepreneurial journey!

Today I had a conversation with an entrepreneur about their 2020 plans, which they’d clearly spent a lot of time thinking about. One thing jumped out at me. They have six objectives in the first quarter alone. A similar number of objectives were listed for each of the other three quarters. The plan was extremely aggressive, especially considering the considerable uncertainty that characterizes the economy at the moment.

Based on my experience, it’s hard to get a team to focus on more than two or three objectives in a short time (e.g., three months). When I spread myself or my team thin with too many priorities, it usually didn’t turn out well. Either nothing was completed or a fraction of our goals were reached, which still felt like a failure. Over time I learned to distill things down to the two or three most important things and focus on those areas. The trick for me was figuring out what the two or three things were that would move the needle.

If you’re starting 2021 with a long list of priorities (or none!), consider taking time to craft a list of the two or three things that will have the biggest impact.

I had a conversation today with a friend who’s also an entrepreneur. He has a consumer-facing business. He told me about a difficult customer who has unrealistic expectations on a shoestring budget. I had this exact same situation many times in the early days of CCAW. We tried to work with customers who had tight budgets and priced our products aggressively. In the end, we accomplished our goal of attracting more customers. What I didn’t realize was that some of them weren’t a good fit for our business. The time and energy required to service these new customers skyrocketed. Many of them were unprofitable and impossible to please.

As CCAW grew and we had more resources, we developed a more sophisticated pricing strategy and implemented it in a dynamic pricing engine. The strategy was aimed at attracting customers who wanted a fair price but also wanted high-level customer service. These customers were OK with paying a little more for peace of mind. Over time, our data told us they were also more agreeable and easier to work with when unavoidable circumstances arose (e.g., bad weather). We ended up building a large profitable business by targeting this type of customer.  

When you’re starting out, you’re figuring out how to solve a problem in a way that people are willing to pay for. Once you do, it’s worth stepping back and thinking about whom you want as customers. You can’t be everything to everybody. All revenue isn’t good revenue. If you’re intentional about the customers you want to serve, you can steer clear of those who aren’t a good fit—who, frankly, are more trouble than they’re worth—and build customer loyalty.