By Dalip Jaggi, co-founder of Revive Real Estate, a PropTech with a goal to democratize house flipping.
Attending a startup mixer and meeting other founders and entrepreneurs is energizing. When attending these events, I find that most people are young and hyped up. And even though everyone is secretly exhausted, you wouldn’t know it, as they’re having the time of their lives. As an entrepreneur and founder of several startups, I find these events invigorating.
However, during a recent meeting in Vegas, the most common theme I heard was of startups distracted by “shiny object syndrome.” Many of these companies have only been around for 12 to 18 months or so and are building products from the top down while also building out new offices with all the employee perks and high-end amenities.
They’re spending a ton of their VC funds on big hires, extravagant campaigns and events designed to capture “mindshare” instead of building a business that plays the long game: capturing market share. That’s not necessarily a bad thing, but is it the best thing?
My favorite question to ask at these events is, “How do you like running a business?” Unfortunately, much of the time, the focus is almost singularly on product development instead of business management.
Know That You’re Going To Plateau
Having built and sold a few startups, I can personally attest to the fact that the growth cycle is almost universally the same. You create business momentum, often hit a hockey-stick growth spurt—and then plateau.
Smart businesses find a way to break out of the plateau, enjoy another hockey-stick jump, and then flatten again. It’s a rinse-and-repeat cycle.
The problem for many startups is that they don’t have the patience to go through these cycles. They want glamorous offices—now. They make big hires way too early. Many rank-and-file team members are brought on too quickly.
When my latest venture was in its infancy, my first instinct was to hire an executive assistant. I needed one, right? But I realized that I didn’t. A better business decision was to take on those administrative tasks myself. We were at a stage where every expense or hire needed to generate an immediate ROI.
The Plague Of Over-Systemization
Now, this may go against startup conventional wisdom, but way too much time is spent systemizing processes in a startup. When you’re a brand-new company, one of the first decisions you may make is deciding whether you want to automate the marketing funnel. The problem is that you are focused on building rather than doing. There’s a big difference between these two things.
One of the greatest weaknesses common among startups is rarely discussed: spending too much time on building. When you’re starting out, you need to figure out how to make the phone ring—today. It’s not sexy, and it’s not a fancy funnel. It’s your own actions, like picking up the phone, creating a connection and making the deal happen.
When we first hire someone, they often come to me, and the first thing they want to do is to try and automate whatever task they are assigned. Don’t start with automation. If you do, you will spend the next four weeks automating instead of just doing the task today. Right now, you probably don’t need automation to get good work done.
Knowing When Not To Automate
Today, in the startup world, it feels like we want to automate everything. But I worry that this approach is where we can lose quality. A better way is first to show that it works with a manual process. Yes, it is more tedious. Yeah, you must spend many days doing it. But if it works, you can focus on efficiency afterward instead of beforehand.
We have a theme at our company: We build technology from the bottom up, not the other way around.
I’ve learned the importance of doing this the hard way and have made several mistakes in my entrepreneurial journey. Building is the easy part. Building a new app, creating a new website and developing a new marketing campaign are all easier than the execution it requires to make these offerings a real business. It may feel to you like you’re moving the needle of the company, but to me, it feels like busy work—unless you’ve proved its worth. Then it’s time to find those efficiencies.
Investing In The Right Stuff
Good spending decisions have two sides: being mindful and being purposeful. Finding the right balance is the key. While you need to be acutely aware of how you spend, by the same token, don’t be afraid to invest in things that can make an impact.
For example, startups often spend heavily on industry trade shows, like on huge exhibits and top sponsorships. But how closely are you tracking the ROI?
If you have one dollar and you’re building a business, I believe most of that dollar should go to the sales department, hands-down. Sales is the backbone of any business.
The Danger Of Growing Too Fast
If you have been part of a startup, you have probably tried to serve too many markets too quickly in an attempt to accelerate your growth. It often begins with a feeling that you are racing against the clock and trying to beat competitors to the punch.
We all know that “more” doesn’t mean “better.” Focusing on quantity versus quality is often an Achilles’ heel of startups. But building out slowly and methodically to lock down quality is better than racing to create impact with a quantity-based strategy.
It’s much sexier to expand and grow your reach, but profitability can be far more elusive if you do this rather than hunkering down and putting quality before quantity. Once you’ve nailed quality, then it’s time to expand. Let’s not forget that we’re building a business for a profit at the end of the day.
That’s why one of the biggest lessons most startups need to learn is to avoid shiny object syndrome. Building a business takes patience. Be patient.