It is a very exciting time for you. You made the plunge and have started your own company. You have pulled away from the crowd and decided to focus on something of your own. In itself it is a very difficult and brave decision, make sure to be proud of that. However, after some time the reality sets in. You are far in the ocean on a small dinghy rowing towards your grand vision while trying to avoid the unpredictable storms. What should your priorities be? What should be your concerns? I have been through a few journeys like this before and I wanted to share a way to think about these problems. I also throw in a few mitigation suggestions that I hope will help you along the way.
There are typically a few major risk categories that you should be concerned with: end of the runaway (Runway Risk), personal burnout (Burnout Risk), not reaching product-market fit (GTM Risk) and being isolated from reality (Isolation Risk). Each of them is important and as an entrepreneur it is crucial that you regularly inventory and assess these risks in order to remain sane and able to make sound decisions.
Runway Risk
is defined as a probability of not hitting your proposed milestones and running out of the money, time or other limited resources. Usually reaching the end of the runway without accomplishments spells doom for the start-up. Carefully monitoring this situation however, will keep you abreast of your project’s potential. There are few ways that you can mitigate this risk to keep it low.
Know what your runway actually is and assess it weekly
It is easy to get lost in the minutiae and numerous financial transactions and various accounting terminology. While at times complex, finance is responsible for answering a very core question - How much do you have left to burn? That probably means how much cash you have left in your bank account and how many more months, weeks, days you can operate your company with that. Have a simple spreadsheet that you update daily with your personal projections. It will keep you organized and let you have more restful nights.
Reduce burn to almost nothing
While practically really hard to do, consider what are the absolute essential expenses for your circumstances, without compromising you as a person. For living quarters, do you need a house, an apartment, an RV or a couch? For eating, do you have easy access to meals, do you require fully nutritious food for a long period of time, do you need to have fancy dining out on a regular basis? And as for entertainment, vacation and sports - are there ways to delay this type of gratification indefinitely? If you are in need of affordable healthcare, is it possible to conduct your business in a country that is friendlier to the care you require?
Reduce your business model iteration costs
While maintaining focus on reducing personal burn, don’t forget to pay attention to the burn of the business. Evaluate what are your most important, existential business expenses and only prioritize them. At this stage of a start-up, unless you are in the luxury industry, you don’t need a fancy office, fancy furniture or an executive assistant. You probably also do need engineers and legal until you can solidify your business model. My recommendation is to question at the root your core necessities and what you will find out is that many of them are absolutely not important to your success and survival.
Product/Market Risk
dictates whether there is a low or high chance that the market will accept your innovative product or solution. Reducing this type of risk requires a lot of conversations with the customers, understanding market dynamics and being incredibly flexible when adapting to the demands of clients and business circumstances. This risk can be broken down into more fundamental units of inquiry - product experiments. The more of these you can run at the same time without reducing quality and collecting necessary data the more likely that you will stumble faster on the proper alignment.
Run Well-Designed Experiments
It is essential that you approach designing your experiments with utmost care. When you present these to the world, the internal mechanism of the experiment(not product) should be flawless. It should test the right group of customers, ask/test the right questions, enable incisive workflows and most importantly collect all of the possible data. Data will be the key for your understanding of whether the experiment failed or whether it brings you closely to the market-fit with a unique nugget of information. Your process of executing these won’t be perfect at first, but it is crucial to flush out the imperfections after a few interactions.
Run many and run often
For the greatest risk reduction, you should be optimizing for the largest simultaneous experiments as possible. This will permit the maximum number of variations to work with the market. Having said that, it is crucial to be realistic too, unless you have fully automated your experiment pipeline, you will most likely be able to run at most 3-4 various approaches while collecting quality data.
Burnout Risk
is concerned with your personal ability to execute on the roadmap that you have set for yourself. Chances are your vision is more ambitious than availability of your resources. That is usually how visions are. It is important to be true to yourself and to recognize your own capabilities and bandwidth. When your expectations are mismatched to your reality the risk of burnout is great. You have all the willpower to tear yourself apart and you probably don’t want to do that. You should channel your energy in healthier ways.
Focus on what’s urgent
As I have written in my previous post https://mentorcruise.com/blog/urgent-vs-important-how-to-keep-the-company-afloat/, it is important to understand which decisions make things better and which will fundamentally keep your business alive. Always focus on those fundamental priorities and reduce attention on the rest.
Optimize bandwidth
Discover what your true bandwidth and cadence is and when your best work happens. Ask yourself some of these questions to narrow down your preferences - Are you able to pull off 14-hour days for months? Are you more productive in the morning or evenings? What is your optimal level of distractions? Are you optimizing for a marathon that start-up building is or are you optimizing for a sprint? Can you re-organize your calendar to group similar types of work together or to keep it apart? Keep conscious of how you are processing, thinking, analyzing and conversing, these activities will generate patterns that will help you narrow down your working style and proper working environment to sustain that style.
Isolation Risk
grows when the founder loses touch with the market and the world and pursues a vision that is only true in their mind and is not supported by any experiments of customer feedback. To reduce this risk it is necessary to keep your “feelers” out to different kinds of people in your life that you can check with on the sanity of your approach.
Socialize and double check
How often do you perform reality checks with others on your ideas? If you have a receptive client or a customer, they are an ideal feedback panel for this kind of check. They are the ones that will end up paying for your product and will provide the most valuable advice. Opinions of others will be useful too, but be concerning whether or not they are relative to your clients.
Who are your experts?
You can save a lot of time running up the learning curve if you make friends with accountants, lawyers, recruiters and other business experts. They can usually answer a question instantaneously and save you hours if not days doing your research online.
Mentors and coaches
Find someone who has been through what you are going through and ask them thousands of questions. Their experience is especially great if they are just a few steps away from where you are. This type of experience will be most relevant to your business. Additionally, explore more coaching and mentoring in general. These relationships will help you explore your own thinking bottlenecks and you can also be exposed to recurring business frameworks that easily can be leveraged in your venture.
While there are hundreds of types of risk for each entrepreneurial adventure, some have appeared more frequently and are the subject of this article. Let's schedule a mentoring session to find out about your situation.