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Why startups fail to generate revenue quickly

In startups, the difference between staying out of the runway and running out always takes our eyes off revenue.


We do not want to do this, and we certainly do not do it on purpose. But when we run in the middle of a startup, it is a very easy task to waste time on feel-good tasks, which sounds like progress but doesn't come in any money.


No entrepreneur is immune to this trap. It is a part of the drive that makes successful entrepreneurs successful.


I set up a ton of startups, worked on, and advised them, and each made the same mistakes where revenue is concerned. Whether an Owner is launching his first company or fifth, there is one common fact they cannot neglect: the path to success starts with survival.


The probability of survival depends on how fast you can generate revenue. The key to getting revenue fast is to do nothing else but to seek it. Here the easiest are falling into the trap and how to stop them.


Mistake # 1: Raise Money Before You Are Ready


No startup joins it to do something common. But if you want to do something extraordinary, you will need money to accomplish it.


That won't happen overnight. It takes place in stages - sometimes long, mostly boring, often very scary stages. The problem is that we usually see, hear, and read about startups as overnight successes: some child talent has a great idea, dropped out of college, worked on it for a few months, And then raises a few million dollars in $ 1 billion valuations.


This is the trap: like the greed of a lottery but with a pitch deck and spreadsheet instead of a Powerball ticket.


Before you try to raise money, you need to establish that what you want to create will generate revenue. And remember: Raising money is not the equivalent of generating revenue.


Here I usually recommend avoiding this trap: You can guess that you need a few million dollars to take a serious run in the company of your dreams. Break that number down into smaller pieces, and increase just enough to get that first revenue-generating piece. As a guide, think of your own money that you can get together to put into your company. Multiply by 10 and increase it.


However, before that, think out how you will get your first dollar revenue, and then build your layer, financial model, and pitch by repeating that process again and again. Because this is what almost all successful entrepreneurs do anyway - they only take steps on a large scale. This is also the reason why investors love entrepreneurs over and over again because those entrepreneurs can say, "Remember the time when I made all that money? I'm going to do it again but a little bit different.


You can't tell investors this unless you already have a track record - and trust me, it's not as easy as your couple to get out from under your belt. Is not easy. The more revenue your evidence brings out, the better you can invest (and not waste).


Mistake # 2: Creating Company Before Product


From business plans to business cards, the Owner can spend a lot of time imagining and building his company before the first money is created. Before going after revenue, there are some things that startups do not need:


  1. A website or social media presence.
  2. A mission statement, brand statement, or logo.
  3. Board of directors, advisory board, or management team.
  4. A financial plan or P&L statement.
  5. Office space, T-shirt, or sticker.


It is not that a startup should not have these things. But how the initial revenue will change rapidly, not only those things are needed, but also their true purpose. A common example of this trap is building an amazing web app and then realizing all that paying customers are three or four clicks deep.


I think the company and brand building are there to establish legitimacy. The advice I usually give to avoid this trap is as follows: “You want to be an entrepreneur? Boom. You are an entrepreneur. No matter how cold your brand is or what your mission is or how far your financial plan is, you are not an entrepreneur unless someone pays you money for something you create. gives. "


Everything will change when this happens, so do it quickly.


Mistake # 3: Teaming up or Hiring before the idea is fully formed


I cannot exaggerate the number of times a startup co-founder has come to me with a lack of revenue and it turns out that a dozen people are fighting over the strategy of a company that does not have a single paying customer right now.


See, running a startup can be difficult to do alone. But for your sanctity, as well as the integrity of your vision, it makes sense to go as far as you can down the revenue road on your own. You may not be a coder, but many SaaS tools can get you to MVP. You may not be a financial expert, but most of us can erase a spreadsheet in the early days. You may not have the magic of sales, but if your idea is good enough, you're probably the right person to bring it into the hands of paying customers.


Yes, it is always easier to make something with other people, except when it is not. There are priorities to juggle, there are rotation programs, agreements to build consensus, decisions to achieve consensus. Trust me, it can be much less than a headache to go it alone, especially in the early days.


Mistake # 4: Mapping the entire structure of the product before the first release


If we are building a rocket, we first need to build something that manages to land and land without detonation. How far it flies, its reusability, and what color it is, is not yet clear.


This is a trap that most repeat entrepreneurs catch, and I still fall for it. I know that the correct vision that I want to make is not one, but version five of my product and the trap I am falling into is trying to make all five versions at once. In other words, before launching, I plan every use case in every scenario with multiple features in each customer segment.


My advice to avoid this trap is something I still tell myself every week: throw it down and set it up for a small section with manual steps to a small section. Then collect money, find priorities based on where the money comes from, and what breaks down, and move on to building the next feature.


Mistake # 5: Focusing on innovation without execution


A startup without innovation is a small business. But innovation without execution is a great way to earn a doctoral degree.


The trap is worrying innovation before the product is manufactured. Then, I raise my hand because I have been guilty of this many times, just not anymore. My advice is something I have halved about my career: if you want to do something new on a product, you need to sell the product first. If you have a new way to mow lawns, start by selling lawnmowers regularly. If you cannot sell to a lawmaker, you cannot sell a future law.

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