Starting a business is hard -- and so is making it into a success. How can you get to the entrepreneurial winner's circle?

For the answer to that question, I recently interviewed a leader who has been trying -- and often succeeding -- at entrepreneurship for 30 years. The CEO in question is Tim DeMello, CEO of Boston-based Gradifi which has developed "a student loan paydown platform to solve the biggest problem millennials face -- $1.3 trillion worth of student loan debt."

Gradifi sells to companies -- PwC is a big client -- that help pay down employees' student loan debt in concert with employee contributions. Companies contribute directly -- through structured and secured channels -- towards their employees' student loan principal on a monthly basis. Companies pay Gradifi a monthly per-user fee.

DeMello -- a trustee at Babson College where I teach strategy and entrepreneurship -- has been starting companies for the last 30 years before which he was a stockbroker. According to Bloomberg, he founded and was CEO of several companies including Ziggs, Spotlight Media and Replica Corporation. He also founded a grocery delivery service, Streamline.com in 1993 and was its CEO -- selling it to Peapod for $12 million in cash in September 2000.

DeMello got the idea for Gradifi in a Babson board meeting as he was listening to a discussion about student loans. He thought that students who typically borrow $35,000 could achieve a 25% reduction in their student loan payments if they could cut their monthly payment by $100.

Since founding Gradifi in 2014, the company -- with 28 employees and $7.5 million in capital -- has been on an aggressive growth trajectory. DeMello says Gradifi expects its service to be used by 10,000 employees by the end of 2016, 100,000 by the end of 2017, and 250,000 by the end of 2018.

Gradifi expects to be cash flow positive next year thanks to its high proportion of fixed costs, the economies of scale it sees when it boosts its customer base, and its "inbound marketing" -- the ability to source new customers from its current ones -- especially PwC. DeMello says Gradifi works with 600 companies and is adding eight to 10 new ones each month.

Gradifi charges companies $3 to $5 per employee -- which is less than companies would pay to build and operate their own platform. But Gradifi's biggest benefit to companies is that it lets them outsource to an expert the process of making payments directly to employees in a secure, efficient, and scalable manner.

DeMello offers five keys to startup success.

1. Be passionate about entrepreneurship

If entrepreneurship is not of burning interest, its risks and costs are way to high for you to have a chance of succeeding at it.

DeMello clearly has that passion. As he said, "I love sports but I love entrepreneurship even more. Every day I read the Boston Globe, the New York Times, and the Wall Street Journal and business is my passion. I really enjoy the world of startups. Whenever I read a business story, I want to drill down to the moment when it actually started. When I got to Babson as a freshman, I was fortunate to see Ray Kroc and Berry Gordy present and it made me realize that entrepreneurship was my passion."

2. Don't bet on luck -- just get in the game

If you want to succeed as an entrepreneur, you should not spend time waiting for a lucky break. Instead, you ought to think about how you are going to create value for customers and be willing to take action.

As DeMello explained, "I don't believe in luck. You have to be out there performing in a position to succeed."

3. Try to avoid being too early with the right idea

Timing is important - and one of the risks of that bias for action is that you see and act on a new opportunity before the market is ready.

DeMello knows from his own experience that this is difficult to do. "Timing is important. You can be too early with the right idea and fail. What you want to do is find early adopters who like your product and hope that fast followers will sustain your growth. When I started Streamline in the 1990s, it was too early. Now Amazon and others are making online grocery delivery successful. But Gradifi is right on time," he said.

4. Focus first on a venture's business model

When you think up a new business idea, start by imagining how you can create a business model that works for the customer and for your company.

As DeMello explained, "When I thought about Gradifi, I focused on getting $100 per month into an employee's account. And I tried to imagine how we would provide a product that would give us annualized revenue per user. I asked 'What is the buyer really interested in?' Receiving revenue per user is my focus."

5. Culture is critically important -- and Millennials make it harder

Culture -- a company's values and the way management encourages people to act accordingly -- is a critical job for an entrepreneur. With a strong culture, a company can get the right people and focus them on doing what will create the most value for customers.

DeMello pointed out that getting the right culture is essential and difficult to accomplish. As he said, "The Millennial workforce -- that works to live -- is different than the Gen X or Baby Boomer -- who lives to work. To accommodate that, Gradifi focuses people on outputs -- weekly accomplishments, rather than inputs -- the number of hours people spend in the office."

Follow these five principles and your venture will prosper.

Published on: Oct 7, 2016