This is the second installment on startup founders making decisions with a deeply ingrained sense of context. In episode one we covered hiring, compensation, cap table, investors, board and governance, and self-awareness. Here comes a half-dozen more.

My previous essay on this topic included references to a New York Times article on Confederate statues that predated by a couple of days the tragedies in Charlottesville. Perhaps the chancellor at Ole Miss will now rethink his mode of “contextualization.” At the time all this is edited into a book, these contemporary references will be altered or removed. Whether it’s fake or real, any news immediately becomes old news in today’s society. And all that is out of context for this blog.

Let’s pick up here:

  1. Customers are choices made by your startup. Yes, early on every one is precious, and you don’t believe you can afford to be choosey. Your investors are pressing you for traction. You want to see your product or service performing in the hands of real users. Customers pay you money so you can keep the lights on. They often get you out of a jam when they magically appear just in time. But, you do have the power to select some over others, and I’m not talking about whether you like them or not. Your business works as intended if you can attract customers that fit into the context of your operation. Can you acquire them at a sustainable cost? Do they perceive enough value to pay prices that create for you a profit margin that matches your business model? Are the logistics manageable? Can you deliver when needed and at what quantities required? Is there a development step that you must take to fulfill demand for a particular use case, and, if so, how does that cost get absorbed? I’ve been guilty of the SNIT method of selling – Sell Now Invent Tomorrow – as have most entrepreneurs in tech businesses. Just get me some orders and let me make something that works. If you treat your customers well and choose ones that have some flexibility, they will be surprisingly accommodating when your overreach. Not that you should make that a habit, but if you do get away with it, make sure you understand how it affects your cost model. Customers that will communicate openly with you provide you highly valuable context for your business decisions. You’ve just got to listen. If you’ve been in the sales game, you know that most customers will sell themselves if you just let them. Listen first, talk later, be happy.
  2. Procedures are a hot topic, right? Not really. But, it’s darn nice to have some clarity in the mundane aspects of administering a business. Adhering to standard rules and processes, no matter how formally they are documented, can keep the machinery humming. Apart from this type of context, you quickly find that it takes 5 times longer to unwind a mess later than it would have taken to have shown a little patience and done it right in the beginning. Many founders assume any flat surface is a filing and storage area. They even create a tangled web of electronic files that are hard to unravel. Sure you can use spotlight on a Mac to find things pretty quickly on your own computer, but you have files you need to share and perhaps sync with others and which are much more usable if organized and labeled in a common sense way. I advised for a good while a founder who did not use electronic files of any kind. He retrieved all documents by searching his email to find the one to which they were last attached, or, more often, he called me to re-send something and therefore move it up in his email stack. That wasn’t exactly part of my job description, but it wasn’t worth complaining about. In the grander scheme of that business, we had much more important issues to handle. Many founders assume employees will just figure out how their jobs work and do what needs to be done next. But, not everyone is a self-starter or comfortable working in an unstructured setting. They can be your finest performers if you spell out some responsibilities and boundaries for them and measure results accordingly. If you don’t, and if you allow your company to be run from the randomness of bottom-up decision making, you’ll be at fault when the results aren’t there. Never underestimate the value of the little do’s and don’ts that keep all your team working in the context that achieves your vision.
  3. Your Product Plan must fit into context of your overall business mission. I’m never surprised when I see product development driven by engineers proceeding at top speed developing the next cool thing. I am very surprised when that cool thing actually meets a customer need or drives revenue. As a founder, you need to install a feedback mechanism that keeps development inside the fences. You value creativity in your engineering staff, but it translates into profits only when pointed in the right direction. From time immemorial, or at least since programming became a profession, the creation of software has been a magical journey. The old aphorism that the first 90% of the project takes 90% of the time, and the last 10% takes the other 90% is still true. It is very difficult for an outside observer to assess progress in the coding kitchen until the completed work is ready for its unveiling on the banquet table. Your best defense against slippage is making the right hires in the first place. Choose the engineers who understand the meaning of staying on task and fulfilling a business requirement. Expose them to live customers whenever practical so they have some grasp of human use cases for what they are building. Don’t distract them with meaningless diversions, like automating your Little League schedule, and don’t let yourself wander in your specifications as you are buffeted from one customer to the next. One of my engineers once told me my favorite color was plaid. Don’t be the plaid guy. (Paisley is OK.) You get the drift. You have a responsibility to be the ultimate keeper of the context for your company.
  4. How about your Marketing Plan? I have spent a lot of time wrangling the topic of messaging in several recent projects. Some products are very simple to message. How about a grenade: grip the lever, pull the ring, throw a long way, duck, listen for Boom! Many tech products are hard to condense into a line or two, or even into a manageable deck. More complicated enterprise software applications are a good example of that. They may even be very difficult to demonstrate. There’s no Boom – just reams of data and a long list of features and use cases. Some take a day to explain. If that’s your case, you had better have a fat startup with lots of funding and lots of staying power. And, you had better hope your messaging is no more complicated than your nearest known competitor’s. If you have something intended for SMB or consumer usage, you must have an accompanying message that is easily communicated in the elevator. This is a recursive process. There’s no point in building something that is too complex for your target market to comprehend quickly. You’ll just never create the sales momentum you need. The marketing plan requires many decisions at the inception of the business, and it sets the context for other choices. If you watch any broadcast television, you’ve surely seen the “Hotel? Trivago” commercials with the appealing male or female spokespersons. That’s about the best messaging I’ve seen; it makes me want to find the lowest cost room even if I don’t need to stay anywhere. They air lots of different commercials, but they all use one of those two people to hammer home a very simplistic and unforgettable message. It behooves you to strive for similar succinctness and to carry that across all your communications, from web to social media to presentations to just casual conversations at your country club. You never want to hear the dreaded request: “Explain to me again what your company does.”
  5. Service Providers, more particularly attorneys and accountants, can be a high value added component of your venture if you are careful to use them in proper contexts. If you have a straightforward organizational and seed funding project, you have plenty of options in smaller law firms that specialize in such areas and who are cognizant of cost pressures. There’s no need to go to a Wall Street legal team unless you are rolling the dice for a Unicorn with a truly fat startup. Those firms will welcome you when you get to their scale and will be happier for others to handle your needs on the way up. If your startup is in a highly specialized area, say wet-lab life sciences, then you will want to look for lawyers who know the regulatory ins and outs and can keep you out of trouble. Both your lawyers and accountants can provide warm, qualified, and recommended leads to investors from seed through multiple lettered series thereafter, and that’s an area where you should ask some questions in advance. If your own network isn’t adequate to generate the funding in a highly specialized sector, make your service providers part of your strategy to offset that shortfall. If you’ve got patent or other IP needs, you may want to engage specialists in those areas. Many founders I know are happy to use legalzoom, and, according to its website it has helped start over 2M businesses. It’s a good product, but I personally will always choose a trusted expert to make sure everything is in order when I’m trying to create a business of any consequence. Early mistakes, especially on securities matters, can complicate or even thwart exits some years down the road. My decision is always to spend a little money on protection at this stage and keep my focus on running the business.
  6. The World will conclude this list for today. You see the same news I do, so there’s no point elaborating on the many threats to our society and to our economy. Many of us suffered in the 2000-2002 dotcom crash and/or the 2007-2009 Great Recession; others hardly noticed a blip. If you’re in the oil business today, you’re down; if you’re in the transport business you’re quite happy with lower fuel prices. You may be starting something that will ride a new technology wave and be impervious to general economic cycles, or the opposite may be true. The owner of Waffle House told me he has a very counter-cyclical business; when times are bad, he gets a better class of customers and can hire better help. It’s still an extraordinary business at all times, however. The point is that you should making decisions from the onset in the context that, over your first five years, world events may radically alter your possibilities. A Korean war could bring about a technology industry winter on top of the enormous suffering to those directly in its path. There are many externalities that will make choices for you. Just don’t make a really dumb decision like building your business model around Sears as your primary customer. Keep your antenna up and be aware of all that is happening around you. Those could be good events as well as bad, so we’re not ending this essay on a sense of doom. The prevailing wisdom now is to approach every day with a sense of gratitude and make the best decisions you can. The rest will take care of itself.