In my last blog, I talked about my experience getting companies off the ground, which really translates to making sure their first product is a hit in the market (I've been active in the founding, financing, or acquisition of more than 40 companies representing more than a billion dollars of capital, and involved in the launching of at least 100 products). The conclusion I've come to, reinforced time and time again, is that getting the product right--your first one, and hopefully each subsequent one--is the key to making your company work. The technique I've termed "Market Validation" is by far the most effective way to get this done, and here let me start with the big picture view of how to do it.
Why do companies succeed? They succeed because their products sell in the market. They have built something that gets customers to open up their wallets and part with their money on a regular basis. The bottom line is they generate more revenue than expense; sure. this is an overly simplistic statement, but the key is getting your company's products to play in their markets. Any successful business person readily admits that strong revenue makes them look like a genius and covers up lots of missteps. On the flip side, these same entrepreneurs will tell you cutting expenses to meet reduced revenues is not the way to make a company work; budgeting your way to prosperity is not an effective business strategy.
The point here is that, in order to make your business successful, you should focus on your product and its viability in the market. A lot of human nature will drive us to do the small things that make us look busy and feel like we've somehow contributing to the company. These are things like focusing on the books, or the costs of goods from suppliers, and other items that matter to the company, but that are not related to generating revenue. It's hard to call up a customer and get to the bottom of why he dropped you as a supplier; but in the end you need to hear the real reason and that's a lot more important than the time it takes to save another 5 percent on office supplies.
So Rule No. 1 — Focus on revenue, the top line. Make sure this is where you're spending the majority of your time. Don't get caught up in the tangible, feel good aspects of knocking off a large to-do list of important items to make your business work unless, of course, all those items are directly related to getting your customers to buy more product and services.
My name is Rob Adams. I'm currently on the faculty of the MBA program at the University of Texas at Austin, where I teach entrepreneurship courses and run the Global Moot Corp program. Prior to doing this I ran several early stage venture funds after starting and building several software companies. I've been active in the founding, financing or acquisition of more than 40 companies representing more than a billion dollars of capital, and involved in the launching of at least 100 products.
My current position in the world gives me a front row seat of entrepreneurial activities in the incredibly vibrant city of Austin, Texas. I get to deal with a city full of entrepreneurs I've worked with before as well as work closely with the up-and-comers making their way through the various MBA programs available at the McCombs School of Business. Add to this running the Global Moot Corp program, dubbed the "Super Bowl of Business Plan Competitions," where I get to see plans from the top business school entrepreneurs from around the world, and I consider myself a very lucky start-up kind of guy.
One of the great things my current position lets me do is spend a lot of time helping people get their businesses off the ground. Sometimes you never really know how much you know until you start helping others do something. I figured out I really did learn a lot by launching and funding all those companies; some of which were incredibly successful and some that were big smoking holes in the ground. I now do my best to get the entrepreneurs I help through all the risks that come with getting a start-up off the ground, which are things time, experience and spending lots of money teach you. Fortunately I've done all of these and have a wealth of knowledge to draw from—drawn from both successes and failures.
Over the last decade I've also found once you get out of start-up land, start-up experience translates to established companies when they launch new products. Same sets of issues, except instead of trying to get that first product or service to sing and dance in the market, you're trying to get a follow on one to do so. Experience has shown me much as it's hard to get the first product to work in the market, it's usually a lot harder getting a follow on to do so. Interestingly, the strategy I used and refined to get initial products to work translates directly to any company launching follow on products.
So this is where I'm investing my time these days and it's what I'll be blogging about here. I've got tons of start-up and new product experience and I'll be addressing your issues on that front. I'll also be writing about developing new products for both start-up and established companies. The process I use here I've termed "Market Validation" and look for lots of talk on the topic here over the coming weeks.
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