By Sam Haffar
I have a deep affection and mutual respect for your deep-seated desires to change the world. After all, you sacrifice everything to do the impossible in building and scaling a successful company.
That said, the vast majority of you suffer from a disease that, if not immediately treated, will become terminally cancerous and lead to you and your company’s demise.
The disease reminds me a lot of moths that witness their fellow moth drifting into the glorious illumination of a 15-Watt Flowtron Bk-15D Electronic Insect Killer (available on Amazon for $35.57- this is not a paid endorsement btw). Despite witnessing their compatriots’ demise, the fellow moths continue down the same path in pursuit of the Valhalla.
The disease can be best described as the ‘busyness vs. business’ paradox, as once best put by a colleague of mine. At the very early stages of a company founders wear every hat, do all the heavy lifting and have to fight every step of the way to reach their next level. This usually entails doing every job and having a say in every decision.
Once they uncover product-market fit, make a few sales, get some positive reviews and raise some coin, it’s their job to start building a world-class team. This typically happens against all odds, against any explanation of insufficient/limited funding, availability of top talent in their geography, or any other excuse for that matter. After all, building a company is extremely hard and you’re expected to do the impossible.
Instead, most founders get stuck in what I like to call the “electro magnetic death light” (as illustrated in my moth example).
It’s this idea that the more work they do, the more features they push, the more product that gets built and the more sales that they themselves make the better their business is doing.
Shockingly, many investors, mentors and board members reward bad behaviour at this stage by encouraging you to keep hustling and growing the company. And in many cases your backers will not see your pre-product-market fit hustle mentality as your Achilles heel-moving forward.
Let’s assume you’ve truly found product-market fit (another post on this topic to come). Scaling a company requires immense focus, meticulous planning, an impeccable execution strategy and financial mastery of the business. It starts with having a deep understanding of the customer, data, unit economics, cash-flow and internal and external environments.
Once you have established clarity on how the business operates you need to create forward-looking goals and then reverse engineer how you will achieve these goals, starting by looking at your organization chart.
That’s right, you heard me correctly.
Building a plan to achieve your goals after you’ve unlocked product-market fit doesn’t start with a long list of marketing/PR tactics, or what new features to roll out or even how to increase your average contract value.
It starts with understanding what people do you have on the bus, do you have the right people on the bus, what people do you need to get on the bus? These are all critical questions that will help you identify the gaps in your business and then clearly and succinctly define roles necessary to plug the holes.
Hiring great people is really hard. In fact, it will require 100 per cent focus if you want to do it right. It will mean that your lead foot will need to get off the growth pedal while you’re searching for great talent. It will also mean that your board will need to come to grips with the fact that you (the founder) shouldn’t be doing everything anymore. It’s time for you to blossom into the beautiful butterfly (business leader) that you really are by building a world class organization.
Notice the two flat sections in the MRR graph below for a SaaS business (numbers were intentionally omitted). This is an example of a company where the founder of a pre-scale company owns the growth function of the business. When the founder is out fundraising, dealing with a crisis or on vacation the business stalls.
In the chart above it’s clear that the company would have benefited from beginning a talent search in Q4 2015 when it hits its first “electro death light” to avoid repeating the same MRR growth slump again in the future. Instead the company hits the growth slump as predicted later on in Q2 2016, after failing to find growth talent for the business.
Taking 3 months of slow growth to stop and hire most probably would have stalled the MRR during that period, but it would have paid dividends by fueling compounding growth in subsequent months instead of taking another slam as depicted in Q2 2016. This example reigns true for non SaaS businesses as well, the concept works for nearly all categories of businesses.
This company is doing terrific today and has rounded out their team; it just took longer to overcome the ‘busyness vs business’ paradigm, which I hope you understand better after reading this.
If hiring is hard for you, or you suck at it, then make it your number one focus and get better at it. Address the talent gap challenge head on if you have one, otherwise it will bite you in the butt down the road. Your chances of raising another round might be negatively affected, or even worse not a possibility.
Now I know what you’re all saying, “duh this is obvious.” No shit Sherlock.
So if that’s the case you need to ask yourself just one question, are you a Moth or are you a Baus?
Sam Haffar is a Principal at Real Ventures. He spent the previous eight years building products and scaling companies in Silicon Valley.