Originally posted on March 31, 2023
It's kind of crazy that we are now at the end of March. It is shocking how fast time is moving. I remember that it wasn't that long ago that I was working with companies on budgets and 2023 strategic planning. Now, we are a quarter of the way through 2023.
In the world of startups, 2023 has been volatile. I see many interesting opportunities and growth in the portfolio. I also see many challenges which force startups to make tough decisions and juggle --- higher cost of capital, continued geo-political risks, and volatile public market. Indeed, 2023 is the year of resilience, adaptability, and survival of the fittest.
This is the kind of the year when operational experience from the board of directors and management will help the companies navigate choppy waters and win long-term. In good macro years, everyone does well. In years like this, business building and management experience help a lot from an investment perspective.
In any environment, my advice for startups is to grow your top line and manage your expense. It's worth repeating this again now. This works for any environment. If you can grow your sales and also manage your expense, everything else sort of falls in line. Most startups grow without managing expense. Other startups (kind of) manage expense but fail to understand how to deploy capital to enable growth (e.g., hire the right people, fast)
There is a misconception that expense must grow with sales. It's variable expense, right? For some period, it is true. But the expense growth curve must become flatter than the sales growth curve as time goes on. How to do this?
Sales and Marketing
- Charge higher product price.
- Include higher margin services.
- Improve customer loyalty and adoption of the product by the installed base.
- Launch variation of the same offering.
- Profitable commercial and channel partnerships.
- Invest in marketing approaches that works. No fancy and big ideas. Give the company marketing solutions that are cost effective and drive funnel and mind-share. Everyone in a startup is a marketer.
- Focus on what works and do it over and over again in a high-performing sales team.
- Be clear and transparent about what's working and what's not working.
- Look at your organization structure. Startups should be fairly flat, not with many layers. A+ players can do a lot of different things. If someone can only delegate and manage, the person is not the right type for a startup environment.
- Take a hard look at every expense line.
- Establish a spending approval process.
- Set a budget and stick to it. No exception.
- Know your cash flow and position every day.
Even the startups with the best ideas need great execution. Get started with the above. And stay focused and calm. You got this.
My writing reflects my opinions only and is not investment advice.