An international career, to most starters of the new generation it sounds like the dream job. However, in practice there are many obstacles holding us back from truly making the big leap. Apart from quite some insecurity, also not everyone is made for the “explore […]
Author: Florence Koster
By now you’ve probably come quite far with your startup idea already. You and your co-founder have settled and realized that this business could possibly be a quite sustainable one. Maybe you’re the next Larry Page and Sergey Brin. Maybe you’ve experienced growth just like […]
Revenues. It is the most hated but also the most loved word for newly started startups. Probably from the start you will be selling products your company produces, or providing the service you specialize in against a fee. And this handicraft way of operating your business will work, until you grow too big. Once you start generating considerable revenues, automation will be the trend within the company. And if it’s all bumblebees and butterflies, soon enough you’ll reach your breakeven point.
Revenues. They lead to the breakeven of your company. And once you’ve reached that milestone, your revenues support the sustainability of your mastermind’s business idea. Economic sustainability can be defined as the point where the revenues exceed the costs. To get there, you must make sure your team supports you, in turn motivate your team to fly high and most of all: listen to the feedback you receive from the market. Once you’ve reached the point of economic sustainability, it is time to think where you want the business to be at in a few years time. Will your idea still be innovative enough? Is your company ready to face the obstacles that will block your way to long-term goals? Once your company has built a strong culture, and the business seems enduring, investors will not hesitate to listen to your story.
Your revenues don’t only depend on the investments made by venture capitalists, as mentioned in Start-Up post 6, traction is what keeps your company rolling. It generates revenues from customers, which in the long term are more sustainable and suitable income. So take a look at your numbers. Look at revenues, net promoter scores, number of customers, profitability rates and net margin. Are they increasing positively? Very good, then you are on your way to building a sustainable company. If not, then you know where to lay your focus. One way to keep constant growth is by always analyzing the market. One way to grow is to see your customer growth as a normal function curve (see figure 1). You and your idea are part of the first 2.5%. You belong to the lucky few who can call themselves innovators. The next 16% are the crucial first followers. They are the ones trying the reliability and functionality of what you provide them with. These early adopters will be the example for the big majority, the next 34% to follow. Leading to the next 34%, the late majority and the final 16%, the laggards. If you want to build up sustainability for your company, then focus on those first followers, they can make or break your company. (TED*Talk by Simon Sinek, september 2009)
So how can we get these first followers to generate our first revenues? Public Relations is the key principle here. What the purpose is of PR, is that potential customers see how you are different from the competition and you show your absolute authority in your specific market. During the How to Start a Start-Up lectures at Reykjavik University, we had the company of Paula Gould, who is head of Marketing at a Public Relations company and came to give some advise. First of all, we were to think about the choices that consumers have, how you differentiate yourself. Why is your idea different, how is it better, is it a need or want, how will consumers know you are better than your competitors? You need to know your idea and it’s market thoroughly before any sorts of Public Relations can be implemented. And then comes the question, can you do it yourself or will you need a specialized firm to do the PR for you? Can you get these first followers by telling your story, or do you needs someone outside your company with the appropriate knowledge how to bring your uniqueness to the attention of these “hipster” customers? Even if you can’t afford a proper PR team, everyone around you can be your influencers. Your employees, your friends, your connections, anyone who knows the story of the company can spread the word.
Revenues and your first followers, they go hand in hand, they can make or break you but most of all they produce your sustainability. And once you do go into the positive rates, then things start to get fun.
This article is part of the series on How to Start a Startup, based on the lectures taught at Reykjavik University, Iceland. For more information on the course, check The Startup Iceland website
Okay, enough with all the theoretical aspects of a start-up. Time to look at real life now. Yes, using some theory in building a business is important and it will definitely guide you through some difficult steps and bridges. Also the theoretical knowledge is a […]
Traction. If you’re very serious about this business that you want to start, you probably have come across this word already. As soon as you launch the business you will hopefully see some traction happening. If it is an app that you’re launching, you’ll see […]
You’re walking in the grocery store, it’s been a while since you did groceries. You have to go to a meeting in 15 minutes so there is not much time to waste effort on what you take for breakfast tomorrow morning. Here is where traditional marketing comes in. You enter the aisle with bread spreads, and the Nutella jar catches your eye. Great, decision made and on you go with your life. Though, if you think about it, has it ever occurred to you that there are more chocolate/hazelnut spreads? Growing up in California, I knew nothing better than to have Nutella on my toast every morning. My Nutella bubble bursted once we moved to the Netherlands, and all my peers ate a phenomena called “Duo Penotti” on their bread, basically a two-colored sweeter version of Nutella. Living in Iceland now, I choose to buy the cheap Euroshopper chocolate spread. Now every country has it’s own B-version of the famous hazelnut spread, but still internationally seen, Nutella runs the monopoly.
Competition is an important part of a well-functioning market. It prevents big companies from becoming bullies, and drives for motivation to invest in innovation. Firms within an industry tend to be very much similar, even more so than you’d think. If you’re wearing Chanel sunglasses you frown upon Ray-Bans, but in the end they’re all from the same factory. Of course, it depends which specific market we are looking at. Google drives an absolute monopoly, whereas stores like H&M and Zara tend to live in a perfect competition world. Nutella is an interesting case, as they deal mostly with local or country specific competition.
Even though competition is good for the consumers, it shouldn’t be your main focus when developing your business. It only distracts you from focusing on your specific customer and the product you will deliver to him. Of course looking at your competitor’s way of operating can teach you a big deal, but you want to differentiate yourself from the existing brands, your products are not meant to be exactly similar. Furthermore, competing too badly would only lead to destroying profits for all competitors.
A monopoly is on the other end of the competition timeline. In the good old days you could be a monopolist by simply having the power over everyone else. Monopoly has gained a bad reputation, as it didn’t seem open to innovation and created artificial scarcity. Yet, times have changed and we don’t live in the static world anymore. Take the favorite monopoly example: Google. They have work very hard on escaping any unwanted attention potentially showcasing that their monopoly could be bad for the world. By positioning themselves in their consumers’ minds as ‘just another tech company’, the media will find less reason to criticize. However, if we look at the real numbers, they own the Search Engine Market, Online Advertising Market, US advertising market and the Global Advertising Market (worth $495 billion last time we checked).
Though you want to ensure that your position in the market is solid, even being the little kid between giants, be careful when it comes to outsmarting the competition. You definitely don’t want to be associated with any forms of illegal activities or the goody two shoes government favorites. What the world wants to see is the new iPhone, the new Facebook, something that can’t be that easy replicated by another firm. There has to be a new form a value to the relationship the customer has with your offering, they have to perceive it being so strong that they’ll pay premium price. The old textbooks may say that monopoly is bad in theory, but what if your business could be the next Google? Reinvent the world and it’s way of living, but still be the only one to collect the profits?
This post is part of the series on “How to Start a Startup”, based on lectures taught at Reykjavik University. For more information check out the website: Startup Iceland
Stop right here. And think. Yes, start-ups have to move fast. And yes, the competition also moves fast. Start-ups have the advantage over large organizations that they can move fast, there is no bureaucratic hierarchy, and the risk stakes are much lower. The power of […]
If you are reading this, then congratulations! As mentioned in the first blog post Start-Ups are all about not giving up on your idea! Showing courage, wanting to keep going, that’s where the amateurs drop out. If you haven’t read the first post, read it before continuing here, it contains some very important first steps in starting your Start-Up.
The Avengers. Have you seen the first action movie in which they appeared together? 5 crazy guys and 1 even crazier lady who have to be persuaded to form a team together. Why? Because there is some guy who sees potential in them working on a mission. Together. At first they don’t click, there is a lot of tension as there are many Alfa males, there are different beliefs regarding what their goal is, it all seems hopeless at some point. Then the assembler, the all-knowing guy, the founder, the CEO, whatever we may call him, jumps in before things gets too messy, give them all the same direction and the Avengers end up saving New York from some animated aliens.
Now try putting this anecdote into a real life situation. You, as founder of the Start-Up, have an idea that will better the world. Nick Fury wanted to save the world, but couldn’t do this alone. A business is something you can start, but once the crowds accept your idea it’s time to start growing. But notice the carefully place word “once”. Hiring team members only is a good idea as soon as the market has embraced your idea, as soon as you know that you can hire and not have to fire. The first members of a team are also probably the most important ones; they will feel a sense of ownership as they help build the company for the future. These first followers will help you the most when they are people you have worked with before, whom you know they will give everything to make your idea work. Teamwork makes the dream work.
So how to compose your winning team? First of all, remember that you are the founder; you have the idea and need to have the time to communicate your visions to all the others. Delegate dealing with customer problems to an expert, nowadays every good business employee is trained to have a vision, be a connecter and most of all a good salesman. To support the sales you need to have one technical savior. These days almost all information goes over the internet, you will want your company to be accessible at all times and in case of trouble your tech guy will save the day. Then as a sort back up, have one employee working on the operations within your company, someone for the everyday flow. As a start-up you have to demand excessive quality from your employees, a great team will build a great company. Also, your employees may be smarter than you, give you new insights and through good communication from your side they will live for the company.
Back to the Avengers. So Nick Fury has his team of superheroes together, they are willing to fight for the same goal, but a new problem arises. The secret panel, whose members act like the board of directors over the organization, pulls out their investments. Nick Fury manages to get them back on board and then the ships sail off to fight the intruding aliens. This is an example of the relationship between the founder and the investor. Because the interests of the investors and the company can differ a lot, it is important to set boundaries when the investor joins your team. Once again, communication is the key to a good working relationship.
Once you’ve built a team around you, make sure you keep the good ones and fire the ones that cannot adapt to the rest. Set goals for your team so they know what is expected of them, but don’t try to guide them too intensively. Remember you hired these employees for a reason; they may have more expertise on certain topics. As long as the results you wish to see are communicated clearly, then everyone in the team will be aligned. Your role as CEO will keep changing every time you hire new team members. Your job will consist of 5 sub-jobs:
- Set the Vision. Make sure all levels in the company understand where they are working towards. Keep focus, then the team will follow. Goals may be overarching, always keep something you want to reach for.
- Build a Great Team. Every person in the company has his own role, and it has to be clear what this role is. It is your will and intuition that got the company this far, but accept that stability will become more important.
- Ensure the Necessary Resources are located at the necessary locations. This can be people, money, information or communication.
- Over Communicate. It’s all about the communication.
- Track the Every time you meet up with employees, they must have achieved something.
If Marvel can create the Avengers and make billions out of them, why couldn’t you too? At least you have more time, at the moment there are no impending threats from aliens, but when the time comes, have your team ready.
Link to the How to start a Start-Up lectures: Start-Up Iceland
Irritation runs through me as I try to get all the items on my grocery list. My 4 roommates decided that they want to eat spaghetti tonight, but the smallest pack I can find is 1 kg, enough for at least 10 people. Same problem when I try to buy meat. Either it comes in a single-person package or it is enough to feed my entire street. Bon. We will be eating spaghetti the rest of the week. It may be quite an investment now, but at least we dine a couple more days for free. Now here is where the problem starts. With me being an average Dutch student it is no problem to invest such money today and therefore don’t have to spend anything the rest of the week. In the case of spaghetti and meat, it is even cheaper as the single person packages cost you relatively up to 40% more on average. Good savings that are spent well on partying. But what if I didn’t have the money to buy family packages? What if I only received a few coins a day, just enough to feed me for that day? What if I lived off $4.00 a day, and on top of that even have to pay the poverty tax?
In the underdeveloped parts of our world people often have to live off the money they earn that very day. Think again when walking past a little kid trying to sell you some weird toy or souvenir, he might be trying to earn his meal for the day (on the other hand, it could also be the case that this is spent on cigarettes or other bag things but let’s be positive for once). When this kid’s mom takes the money to the supermarket, she won’t be able to buy big packages, as this would be too much of an investment. So every day new food has to be bought. Say they buy 500 grams of rice every day for 4 days, paying 1 euro per pound. That is 4 euro’s in total, whereas buying a 2 kg pack would have only cost 2,40 euro’s. This phenomenon is called the poverty-tax. Let me introduce you to a company trying to tackle the so-called poverty tax. The start-up company Algramo was formed in 2011 when owner José Manuel Moller lived in one of the lesser neighborhoods of Santiago de Chile. Having a low income and only buying food for the day itself, he discovered the relatively high price of smaller packages. Determined that this relative extra fee you pay on small formats shouldn’t be the case for people already living in great poverty, Moller was inspired to make a business plan. In 2012 the real first investment came and Algramo’s idea was presented. A prototype machine, functioning as a dispenser, was developed after being inspired by the idea of a refill vending machine. The process is simple. Households can buy plastic containers from Algramo, which last for years. Once empty, these containers can be re-used and filled with the same product again. This can be done at the vending machines that Algramo has placed all around several underdeveloped neighborhoods of Santiago de Chile. The products such as detergents, rice and oil are bought at wholesaler amounts and then can be sold by Algramo at fair prices. Using this system food can be bought daily without having the extra costs for smaller packages. Currently there are more than 1,000 Algramo dispensers found around the neighborhoods of Santiago and yet more to come.
The vending machines of Algramo could be implemented in local stores anywhere; the poverty tax is a problem in all underdeveloped parts of the world. But next to solving this inequality issue the dispensers could provide a solution for another great problem that generation Y is facing. As our pace of life increases, our time to put effort into many daily activities will decrease accordingly. Fast food restaurant work with increasing amounts of trash, 4 million Starbucks cups are thrown away every day and yet we still believe that the world is becoming more sustainable. Studies suggest that the total waste of the human being will rise by 70% over the next ten years. Try tracking your trash during 1 week. Every little piece of paper or packaging, collect it in a bag, then realize that in a few years time you will have almost two bags. And so will the rest of humanity. Implementing the vending machines of Algramo all over the world could reduce some waste; if the idea is developed even further it could make a big difference. Already some bio supermarkets sell with refill packages, but with all honesty they are still too inefficient to make the change. Having the Algramo machines in your daily supermarket, however, would mean easier access and therefore a whole new customer base.
Algramo is not yet ready for a worldwide implementation. Moller rather focuses on the 73% of the people in South-America that live under the poverty line before thinking about expansion to Western world, even though several offers from Germany have been made. “It is important to keep to your values and beliefs and not be tempted by the addictive big money in the business world. Whatever you do, stay grounded.”
The idea seems so simple and is yet so effective and provides a clear vision for the future. With millions of start-ups slowly taking over the new market of demand for sustainability, when will the big Western companies finally really start following?