The Sandwich Shop Start-up.
BY JON WESTENBERG
The biggest problem that I'm seeing with founders and start-up folks is that they aren't focused on or interested in business. By business, I mean the actual processes, theory and practical shit involved with running a company that sells something and turns a profit. For the most part, they’re interested in start-ups pretty exclusively, the culture, the lifestyle & the glory.
It’s not entirely healthy. And it’s about sexiness rather than nuts, bolts and true grit. When I look at start-ups right now, I see too many people who want to build an app, service or platform that can take investment, as their goal above all goals. And I know I talk about this problem a lot, but that’s because I genuinely find it scary as hell. Somewhere along the line, a lot of would-be founders have forgotten the key functions of a business.
The function of a business isn't encompassed by funding rounds. It’s not. And it doesn't have a whole lot to do with PowerPoint decks. The function of a business is to attract customers, serve customers, and turn a profit. Those three functions are what it needs to stay alive and have any kind of purpose.
Technical founders who are a crucial part of their tech operations, but lack business knowledge, non-technical founders who think the best use of their time as the CEO of a young company is practising their pitch — they can build a start-up, but it’s rare to see them build a business. They don’t have the necessary skills to actually run a company or make it a profitable, successful machine. Instead, they have a very specific skill-set, tailored to raising money and pleasing investors. That’s problematic. You can see it in action every time a board brings in a CEO to replace a founder once enough money is on board.
I’m not against Venture Capital. I think it’s awesome. But I also think that you stand a much better chance of finding capital if you can demonstrate that you’re building a business, rather than building a stage presence to go with your pitch.
One business that is both basic in its fundamentals and complex in its operation is a sandwich shop. A small cafe, selling food and drinks. It’s a simple business model; you produce physical goods and sell them to customers who have a need. The equation is, of course, more complex than that when you put it to work. I’ve known enough people who’ve taken on that challenge to understand that running a cafe is fucking hard.
But here’s one thing I’m 100% sure about. If you don’t have the business skills and understanding that it would take to start and run at least a moderately successful sandwich shop, you have no chance and no business running a scaleable start-up.
This is what a sandwich shop has to do.
1. Develop a product that you know will sell.
For a sandwich shop, this means working out what food your customers are going to want to eat, and when.
2. Attract customers and provide customer service.
You want to explain to the people who should eat your food, exactly why they should eat it. And then provide it to them seamlessly and without friction.
3. Sell your product repeatedly and gather feedback
The customers that you have should want to spread the word. And come back for more. And not leave you.
4. Cover your overheads and expenses
You have to take in enough money to pay for what it costs to run your shop, and have cash left over. This is the most important part. Does it sound too tough? It shouldn’t.
This is what your start-up should do. It should meet the requirements of a sandwich shop and hit their metrics and goals. These are the accomplishments that you need to be capable of.
There’s too much of a focus these days on businesses operating like something that isn’t a business. And sure, a start-up should run lean, should iterate and should have a firm focus on learning…but that doesn’t mean it shouldn’t be a company and act like a company. Because businesses that fail to do that aren’t really a business — they’re a hobby at best, and a Ponzi scheme at worst.
Thanks for reading – I’m Jon Westenberg. I’m an entrepreneur, writer and avid learner. I advise start-ups and investors on how to build profitable companies and operate with a small business start-up mentality. You can read more about me on my website…
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…Or just reach out and say hi!