When starting a business, there are many things to consider. Everything needs to be built and everything seems super important at the beginning. It can be overwhelming trying to prioritize things and choosing what to focus on first. There are your customers whom you have to look after. You must look at your budget, marketing, hire new people and build company culture. All of these issues are important, but there is one that is the most important compared to others: the cash cycle.
Every business needs money to survive and thrive. In the beginning, the cash cycle is unpredictable. We don’t know where the money will come from or how much we will have to cover our expenses. In the book #AskGaryVee, author and entrepreneur Gary Vaynerchuk describes it perfectly:
Cash is the oxygen of your business.
When it comes to the bottom line of any business, only one thing matters. Can you sell your product or not? The most important thing for any business is to have paying customers. The first focus for any entrepreneur should be sales because it generates cash. I don’t need to tell you the importance of having cash at hand because it allows you to do the things you need to do to succeed.
You can have the best product, the most amazing coffee, the world’s best work of art, but if no one is willing to pay for it, your business will not survive.
Startups focus on the pitch and the value proposition. They have interesting stories to tell and claim that their product or service is the next best thing since sliced bread. The tendency to get romantic about their business idea and how it makes money is obvious and understandable. It is important to remember that the only thing that matters at the start is to identify the sources of revenue for your business.
Sometimes, the pitches are flowery with big words and concepts. It makes for good marketing material for potential customers. When looking for investors, it is important to keep all that aside and focus on how the business will make money. The way I understand this situation, an investor is someone who will give you money to run your business in the hopes of greater returns. This is unlike the customer who will buy your product to solve a problem they are currently facing.
Businesses solve problems in exchange for revenue. Essentially, our businesses are answers to a customer’s query or google search. Imagine you search for tips to edit your resume and my website shows in the search results. My business could be the solution to the problem you are currently facing. The key to ensuring sales, especially for a new business, is to have a clear understanding of what problem it is solving and what are the must-haves of your business. Anything else is a delighter and not a must-have.
All this is not to say that the other issues are not important. As a business owner, we can’t ignore customer service, hiring or budgeting. Ignoring these things will definitely cause problems. They will sink your business slower than a lack of cash would, but they do have a major impact.
Once we have a stable or predictable cash cycle, what should we focus on next? This is where businesses get competitive with each other. All of the other operational aspects are where companies differentiate themselves. The best way to do that is to play to your strengths. It is better to nurture your strengths than to try and fix your weaknesses.
What are those areas of business where we can perform like no one else? Once we identify those skills, we must build on them and double down on them. Doing this will define the reputation of your business and inform the company culture, which will be visible in all aspects of the business.
Knowing this will be more important because once we know what we are good at, we can bring in people who are stronger in areas where we are lacking. This will help you grow much faster than those who spend time trying to fix their weaknesses.
Every function of a business is performed to support and increase sales. For example, at its core, marketing is about answering why a customer should buy from my business and not any other. Beyond that, it is semantics, strategy and tactics; everything is done to answer that question. The methods and mediums of marketing will change with time, but the purpose of marketing will remain the same. I can make similar arguments for other company operations, but I hope you get my point.