What to Focus On

There are a million things to work on when launching a company so where should you focus? The answer is generally different for every company but here is an order of operation that I find to be a good heauristic:

1/ Figure out what your product is. And, preferably, have an indication of what your revenue model will be.

2/ Design or build enough of a prototype to show it to customers to get feedback. This can be as simple as balsamiq thrown into Invision or Marvel. Confirm it will indeed yield use and revenue. If it won’t, iterate and perhaps go back to one.

3/ Build the smallest version of the actual product that can sell.

4/ Sell, testing a variety of distribution channels and price points. Immediately focus all energy on the channel and price point that seems to work.

5/ Determine if the price point has the potential to yield cash flow. You might not be profitable yet – or even gross profitable – but the key is the have line of sight towards profitability at any semblance of reasonable scale relative to your addressable market. If that’s possible, continue.

6/ As your customer count grows, invest in operations and support. If your business is a recurring revenue model, this will lengthen the tail on your customer extending lifetime value. If it is a repeat transaction business, it should reduce the cost to acqure a second purchase.

6B/ Test the elasticity of your products or service now that it and it’s service model are more honed. See if you can make more for doing the same thing.

7/ Determine how to invest in scale and margin expansion. Hopefully at this point you can chew gum and walk at the same time. On top line growth this can mean new distribution channels or ancillary lines of revenue, while on the margin expansion it could be new methods of supply (eg vendors and/or source of foods or service). Be careful not to reinvent a new business too fast as opposed to what you should be doing: expanding on your existing business. If you’re truly building a new business, then go back to one. The good news is you’ll have more resources and teammates to help you this time.

I didn’t list when to raise money. The truth is that depends on many things and, therefore, can be at any point in the list above. The further down you do the less that process will be art and the more it will be science.