Busy is best

I deal with a lot of startups at the moment and as a general rule, they are too precious about customers. Fundamentally, a business is a business because it has revenues. Products support revenues, obviously, but revenues also support products and too many startups seem completely focused on product without revenue.

Image courtesy of DueDil.com

Bad websites can make huge amounts of money (I saw on DueDil.com recently that the company that operates ingramuk.com, turns over £1bn in revenue in it’s last set of accounts. Their website, if you visit it, is the opposite of user friendly. It doesn’t matter, the company makes an astonishing amount of revenue and from that a decent amount of profit.)

In the last set of accounts, shareholder funds in the company (Ingram Micro (UK) Limited) were £29m. The company operates on a shoestring in terms of tech development, but it operates and it makes huge volumes of sales.

The conversation among many entrepreneurs seems to be about the quality of sales activity, or of revenue. The truth is that a company making a solid revenue stream is in a much better position than one scouting for the best opportunities and being overly selective. In fact, being excessively busy, may well buy you the freedom of selectivity: each time a new opportunity comes in it can be judged against the current spread of opportunities and accepted if it is better, and discarded if it is worse. Sitting waiting for the big opportunity to arrive could spell disaster, because you don’t stop spending money just because you stopped earning.

The key to success for most small businesses is focusing on getting a safe revenue stream established which can be used to finance other ventures. The same could be said of individuals. Too much attention is attached to the vanity metrics of net worth and top-line revenue. The thing that matters at the end of every day, or every month or every year, is how much you kept from what you made, but in the early stages, it is almost certainly better to make a lot and and keep a little than to make nothing and to keep nothing.

Spending money is easy, keeping money is supremely difficult and spending wisely is hardest of all. Startups should focus first on revenue and then on margin and then all manner of opportunities will begin to present themselves. 100% margin on nothing will spell bankruptcy in the end.

Originally published at engollan.com on April 19, 2016.

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