There are a number of different ways to view a subject: close up, from a distance, at different angles. If looking at why businesses fail, one can dig through post-mortems or sift through ‘how not to do it’ manuscripts like Paul Carroll and Chunka Mui’s book Billion Dollar Lessons: What You Can Learn from the Most Inexcusable Business Failures of the Last 25 Years.
A third option is to look at the cold, hard truth of failure figures. Because, as we all know, numbers do not lie. According to some data I unearthed from the US Bureau of Labor Statistics (BLS), in March 2018, 80% of businesses survived their first year, and 70% survive year two. By year five, only half were still open and by the 10th year, 34% were still open.
Here is a sobering thought: My business partner, Greg, and I launched Fusebill in 2011. As of last year, more than 57% of American businesses that opened the same year had already gone out of business.
Believe me, I’m not going to don a cape and pin an oversized ‘S’ to my shirt, though. As Adam Osborne, inventor of the first portable computer, said, “The most valuable thing you can make is a mistake.” Looking back to the early days of Fusebill (Subscription management and recurring billing platform), here are 7 things I would do differently if I were to ever start a new business again.
1. Know your ideal customer profile and focus on them.
Before you start selling a product, it’s critical to determine your ideal customer. When we started Fusebill, we were basically talking to anybody with a heartbeat, and very quickly, that focus became blurred.
I recently recalled a poster we have in our kitchen at Fusebill comparing customer types to certain animal sizes in order to help define the ideal customer for your business. If you should be hunting deer, for example, and you go after a whale, not only are you straying from your target audience, but you’re also going to get pretty damn wet.
Three significant things are going to happen if you start chasing the wrong customer.
· You’re going to waste a tremendous amount of resources.
· Your ideal customer is going to drop right out of your sales funnel, if you even have time to see them there in the first place.
· If you should be hunting a deer and happen to close a whale, they will be highly distracting, and can drain valuable resources.
If I were to start a new software company from the ground up, the first thing I would do is determine our ICP, or Ideal Customer Profile, before we even start building the product.
2. Trust your gut more often.
What is your gut instinct? It is the intuition that to me is the core of any good entrepreneur. Trusting your gut is absolutely essential in business because just as important as making the right decision, making a decision is just as important. If there’s a problem, trsut your gut, make a decision and move on to the the next issue.
Think about an animal’s flight or flight instinct. The same principle applies to business. If there is a pressing issue, or a direction you think you should be going in, just move on it. Your gut, according to author and cognitive psychologist Gary Klein, Ph.D., is “the way we translate experience into judgment and actions.”
Naysayers are going to pull out all sorts of statistics to tell you that analysis before action is essential, but take a look at anyone who makes life-and-death decisions on the spur of the moment. If they did a SWOT (Strength, Weakness, Opportunity, and Threat) analysis before every decision, casualty rates would fall back to medieval percentages.
That’s not to say you should be an island, cutting yourself off from everyone else. “Most” entrepreneurs have mentors or advisors (if you don’t get one now!) These guys are going to give you advice, and that is essential.
But at the end of the day, it’s your business. Your accountant doesn’t know the intricacies of your business, you do. Listen to advice, but act on your own instincts.
After all, your advisor isn’t lying awake at 3 a.m. thinking about your business. You are. You know your business better than anybody else and as the founder, you are the most qualified to make those decisions.
3. Realize how damn hard it is going to be to start up a business.
Looking back to the days when founding Fusebill, I was pretty naive when it came to starting a business. Sure, you hear these stories about the blood, sweat, and tears that go into building a business. Yes, we knew the numbers: approximately 60% of startups fail.
But Greg and I were pretty spoiled. We had a front row seat to the exit of our previous employer, Protus, which surpassed $200M, after only $8M in backing from their investors; by today’s standards, this is just crazy!
As first-time founders, we really did not realize how hard it is to get a product to market, never mind actually growing a business. You have to manage people, emotions, investors, board members, customers, and… oh yeah… hit sales numbers. And then, keep bringing in those sales, month after month after month.
Plus, it is not just about Greg, me and our families; it is also about our employees and their families, our investors and shareholders that depend on our company success.
However, as much effort as we needed to get Fusebill started, and keep it going, one thing I would do differently is taking time for myself. I remember around our third or fourth year, my dentist asked me if I was under a tremendous amount of stress, because he saw signs that I was grinding my back teeth.
That was a pretty significant sign for me to start de-stressing and taking time for myself. Taking vacations with my family is as important as it is to go to the gym every day.
Keeping in mind that for a SaaS (Software as a Service) company to reach a size of significance, it is going to take at least 7 to 10 years. That is a long time to be skipping lunches and pulling 18-hour days.
Take time for yourself. Your business is going to still be there, but taking the time to unplug means you are going to be a better leader, a better founder, and a better operator.
4. It’s your business. Nobody will care about it as much as you.
Expanding on my last ‘lesson’ was realizing that Greg and I really needed to take ownership of our business. We are fortunate to have employees who truly believe in the company and the product we created, but as owners, there is a laser focus on the need to be profitable.
Most entrepreneurs know the risk of starting a business. If they don’t build a successful company, their livelihoods and personal investments are on the line.
Yet, a business is much, much more than the founders, and we know is absolutely essential to engage employees so they value the business as well. We are in the process of fine-tuning our set of core values here at Fusebill HQ and continue to build on our company culture. We have always had a “Family first, always” approach, but there is a significant difference between saying something and making it a tangible part of culture.
For numbers people, here are some interesting statistics: Businesses that have highly engaged teams are 21% more profitable than their counterparts, because absenteeism is reduced by 41% and there is 59% less turnover.
5. Take the time to listen to customers.
One of the top reasons startups fail is because businesses do not listen to their customers.
It sounds like a pretty simple problem, with a simple fix–but if it were that easy to understand, this problem would not be so prevalent.
Who is going to tap into their customer better: a founder who sits in his ivory tower and focuses all his efforts into ‘running the business’ or one who gets out of the building, to speak, and talk to customers. And by that, I mean actually talking to them.
You know your product; after all, you designed it, right? Your product is one of the building blocks of your business. BUT, as much as you may think you know your product and how awesome it is, your customer is looking at it from a completely different point of view. They use it day in and day out as a solution. And if that solution is not working for them, is it really a viable solution?
Your customers pay your bills. You need to listen to them.
And by listen, I don’t mean waiting for the gripes to roll in about a problem and then creating a patch for any issues. I mean, going out and proactively talking to the end user to really gauge what they like and do not like.
In our early days, we were completely focused on creating our product and driving it to market. Those things are important, but there is so much more. In the last few years, we brought a team of resources onboard to focus on the user experience. These are our UX and Customer Success teams.
One of the first things we did back then was to reach out to our customers. We asked them how they liked using our software. If they could wave a magic wand to fix one key area, what would it be and why?
The feedback was pretty humbling. They felt that our UI, or User Interface, was outdated. Ouch. It was kind of like having the ‘cool kid’ in school tell you that bell bottoms went out in the 70s. Of course, we made it a priority to update our UI, released that update last year and the feedback was monumental.
6. Build a solid management team early.
We all know solid employees create the foundation for a solid company. What we did not realize early on is that while employees create the foundation, the management team is the cornerstones of a solid, productive business.
We thought we knew this. But, like a lot of founders, we thought we had superpowers that allowed us to manage everything. As we hired, we knew we were bringing on talent, but that talent didn’t necessarily complement our business plan.
In any phase of your business, you need to have functional experts leading and managing each department so you can focus on leading the business. However, if the VP of a certain department looked better on paper than she does in your day-to-day business’s ecosystem, it’s time to make a change. And you need to be prepared to do it quickly.
But you absolutely cannot do it alone. I’m a SaaS founder. My expertise is in sales, business development, and customer relationships It is not in user experience, product support, or product development.
In the formative years of Fusebill, I knew I needed to hire experts leading those departments. Since I’m admittedly not proficient in every nuance that each department leader needs to bring to the table, I should have initially brought in an impartial third party to help select these team leaders.
When we hired our first VP of sales, as well as the sales team this person brought on, it took us a while to realize how badly we misfired. In our ‘fall back and regroup’ phase, we knew we had to go to a higher level of recruitment. Get a good recruiter, and hire per candidate.
After we made the change and hired a new VP of sales, we were finally able to look at what it cost to go in the wrong direction. Between missing targets, hiring the wrong staff under this person, and then having to let them go, it cost us an estimated $1M… all because of missing targets and flat out wrong hiring.
7. Generate quantifiable company-wide goals early.
Just as essential as hiring the right management team is setting the right goals early on. KPIs, or Key Performance Indicators, are absolutely essential. In another article, I walked through our process of setting KPIs, but it is worth revisiting because it is certainly something I wish I had done earlier.
KPIs are values implemented to measure and provide insight into how well we are doing in specific aspects of the business. As a SaaS company of our size, we have three high-level KPIs that center around MRR (Monthly Recurring Revenue) and other SaaS metrics. There are three ‘owners’ across our business who are responsible for each KPI but every employee is aware of these numbers.
KPIs not only demonstrate our effectiveness as a company, while also allowing us to forecast as much as 18 months out.
I firmly believe that the right KPIs are an absolute must for any successful business, which is why I wish that I had implemented a KPI program as soon as Fusebill was out of the gate. It wasn’t until we went into our Series A round that we selected our KPIs and put them to work for us. And frankly, it was largely due to Kent Thexton from ScaleUp Ventures and our then new Chairman of the Board.
Kent was so effusive about the success of KPI programs he had set up that we implemented our KPI program almost immediately.
That’s the good news. The not-as-good news is that Fusebill opened its doors in 2011 and it was 2016 when we finally selected and started our KPIs.
It has been so successful and has made such a difference in our business that I would encourage anybody establishing a business to start running with a KPI program as fast as they can. For us, it’s our north star and drives all our behavior as a company.
As I mentioned earlier, there are so many different ways to view a particular subject. Just because I can look back and pick out 7 things I wish I had realized when starting Fusebill doesn’t mean the learning is over. There will always be challenges, but those are opportunities to improve. We are continually looking for different ways to underscore the value of our business, and our employees, and build on those strengths.