Lessons from an entrepreneur who has built, scaled, and sold his business
Many Cinderella stories are about entrepreneurs reaching levels of success that even they themselves didn't think possible. These are brave souls who built fascinating products, learned priceless lessons, and eventually sold their businesses in an inspiring way. Some took decades to reach their goals and others, to their own surprise, did it in a record time!
Gentry Underwood launched Mailbox App in January 2013. Finding that most people were tired of searching through lists of emails to find what they needed, he developed an app that simplified and streamlined the inbox. After a brilliant pre-launch video that went viral, he managed to created a virtual waiting list of users, who were eagerly awaiting their turn to download the app. He then sold his app to Dropbox for $100 million just 37 days after launch.
Everybody has a friend that at some point said something like, "I had the idea for Facebook. If only I had acted on it" or "That baby carrier was my idea all along". The reality is, most ideas are not worth the paper they're written on. The brilliance is usually in the execution of an idea and not in the idea itself.
I know from experience that procrastination and self-doubt are the killers of success. To build is to start executing on an idea. Henry Ford said it best: "You can't build a reputation on what you're going to do."
Earlier this year, as I began to start my free hosting company, I got to know Ash Metry, an entrepreneur who sold his company roughly two years after launch. I asked him to share few lessons he learned. This is what he shared about building, growing and selling his business:
This is what he shared about building, growing and selling his business:Building
1. Achilles Tendon - This is a lesson that I will forever remember. What's worse than putting your eggs in one basket is putting your eggs in somebody else's basket!A structure is as strong as its weakest point. If you are planning to dedicate the next few months or years building a business, it better be standing on solid ground. You will likely have to rely on other businesses in the chain of delivering your product (or service). You must ask yourself, "What will I do if my provider stops offering this product?" or "What will happen if the terms of this service change?"
Many years back during MySpace's height of popularity, page backgrounds were popular. To get the cute or flashy background, you had to know how to write code. As a result, websites popped up that offered MySpace backgrounds of all kinds. Now that MySpace has changed its format and lost popularity, you can hear the crickets chirping on those website. Even though MySpace was popular at that time, the dependency was on something very specific that MySpace did. When they changed the way they did things, all these services became less relevant and eventually died.
Being a reseller or an affiliate is a great way to test a market before jumping all in, but it may not be the best way to grow a large business. There are many great service providers with stable, proven affiliate programs; however, growing a business around being a reseller/affiliate is ultimately putting yourself under the mercy of somebody else.A good exercise is to write down all the critical points that must take place once a customer places an order. Is there a contingency plan for each of these steps?
2. Killer Branding--When I first started observing the market I wanted to get into, I noticed that all of my competitors did a very poor job branding their businesses. I wanted to create a brand, not a 'company' or a 'service'. I wanted the first impression and the customer experience to be awesome.
Take enough time picking your domain name, your logo and your colors. Steve Jobs was a big believer in branding. When he was approached with the design of the new Powerbook G4, a revolutionary new laptop, Jobs had a concern. Even though the Apple logo was facing the user when the laptop was closed, it was upside down when the laptop was opened! Jobs believed that it was important that the brand is well represented in coffee shops all over the world by having the logo look right to everybody around.
3. Target Market--Many entrepreneurs have built successful businesses around something they are passionate about and eventually gained enough momentum and audience to turn a profit. I didn't necessarily want to start there. I loved the tech/dot com world, so I knew anything I would do online was going to be fun! So instead, I picked a target market and decided to spend most of my initial time understanding it.What I recommend doing is to think about a group of friends, neighbors, or a group of people that have something in common and ask, what could make their life better? (You can even browse Facebook groups for ideas)Growing
Once you have something that's working, it's time to scale and take it to the next level. Here are three things to remember.
- Out-of-this-world Customer Support--Believe it or not, subconsciously customers will remember WHO you are before they remember WHAT you do. This ties in to your brand but will come out in the way you present yourself in emails, social media, blogs and most importantly customer support. The way you interact with the people who purchased your product makes all the difference. How you project how you care about people (customers or window shoppers) will make people love or hate your brand. Remember that people are quicker to complain than they are to praise.
- Tune out the noise--That's a tough one! Being successful relies heavily on instinct and intuition. You'll come up with great ideas, be offered well-meaning suggestions, and sometimes feel you're spinning in circles. Learning to filter out the noise and choose the right ideas that best fit your company's direction is crucial. Many times I had to throw away good ideas simply because timing was bad, and that's OK!Focus on doing what you are set out to do, but doing it well is key! It's better to build something that few people absolutely love rather than building something that many people just like.
- Strategic Partnerships--In many ways it's all about who you know and the relationships you have. A single relationship can catapult your business 10 years into the future just because you happen to engage the right person at a coffee shop. Some of it is chance, but a lot of it is just...lifestyle. So remember to shake hands, say hi, tell people why you do something before you tell them what you do!A great example is TOMS who identify themselves as "We're in business to help improve lives" not as "We sell shoes." If you have business partners, remember that friction between partners is bound to happen especially as the business starts growing. Partnerships that complement each other's skillset but share the same vision and values have the best chance of survival.
When I first started, selling the business wasn't exactly on the forefront of my mind. However, taking vacations and living the 4-hour work week was! Here are 3 lessons I learned.
1. Automate the NOW - Build your business model with scalability in mind. If your business will require 10 times your current time and effort from you if it grows 10x times in the future then you should revisit your business model. It's okay to do some things manually yourself at first, but if the entire business model relies heavily on you then it will be harder to go on vacation. It will also be more difficult to get a potential buyer or investor to feel confident in replacing you without interrupting the entire workflow and ultimately affecting revenue.
2. Build TOMORROW's roadmap--Dream and write it down! Where do you see the business in 1, 2 and 5 years? What are the low hanging fruits and easy ways to expand your business. Thinking of all the future possibilities is helpful whether you decide to sell or not.If you keep the business then you'll get to execute on your dreams one at a time. If you sell then your roadmap shows your potential buyer that you see a future for the business. Nobody wants to buy a sinking ship and there is no better person to know how far a ship can travel than the person that built and captained it.A roadmap for tomorrow will help give confidence and will help potential buyers see future possibilities.
3. Hire a Broker--When it's time to sell, find a business broker to help you. Professional brokers are already connected to buyers and investors. Their entire business depends on presenting your business in the best possible light to the right buyer. They also know how to present financials and prepare you for the type of questions a buyer will likely ask. However, be prepared, their fees will vary and can range from 5-15% of the final sale price.
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