Let’s face it: launching a startup is easier said than done. While it’s easy to look at successful entrepreneurs and assume that they had it easy, this is very rarely the case. If you want to achieve success, reach your goals, and make it to the top of your industry, it’s imperative to acknowledge the hard work that awaits.
Get this: Johnson grew his first company’s revenue to $100 million in less than two years. That’s the kind of stuff that dreams are made of.
From the outside looking in, it appeared that Johnson had made it. However, he soon found that the health of a company is not always what it appears to be. In other words, there is more to success than revenue.
When the deep, dark days of 2008 rolled around, Johnson’s business was in trouble. Faced with bankruptcy, he had no choice but to make a big decision: tear the company down and build it back up in a manner that would be more sustainable.
When doing so, he devised three golden startup rules to govern the company in the future.
While these golden rules are far from earth-shattering, they are things that many startup founders overlook. Let’s review each one in great detail:
1. Cash Flow
You start a business with the idea that you’re going to make a lot of money. You want nothing more than to see your cash flow takeoff.
While this is important to a certain degree, remember this: early cash flow is no guarantee of future success. In fact, focusing too much on this could lead you to overlook what it really takes to build a solid business.
According to Johnson, it’s imperative to leave yourself enough time to reach your cash flow goals. If you think it will take you one to two years to get on the right track, double this timeline.
This approach allows you to make more informed decisions regarding capital, all the while avoiding the stress of a timeline that you probably won’t meet.
2. Team Transparency
In the early days of your startup, you may be the only employee. This means you are responsible for everything. It also means you never have to interact with employees.
Hopefully, this doesn’t last too long. You want to bring employees on board as your company grows.
While it’s a good feeling to watch your employee count rise, keep this in mind: team transparency is a must.
In his first company, Johnson made the mistake of putting up barriers between him and his team. This lead to a variety of problems, including employees who were afraid to speak their mind.
Team transparency is a key to startup success. Everyone from the bottom up should be free to speak their mind, share their thoughts, and ask for feedback.
3. Expense Reporting
If you don’t have the right expense reporting system in place, it doesn’t matter how much revenue your startup generates.
It’s never fun to log expenses and make changes based on your findings. It can be even more frustrating to set a budget and stick with it, day after day.
However, if you want to achieve financial success, you need to record every last dollar that the company spends.
Johnson found out the hard way that small expenses can add up over the course of a month. So, while that $10 purchase doesn’t seem like a lot right now, doing this every day can have a negative impact on the company’s financial health.
Johnson’s success today is direct result of learning from his past mistakes. With his three golden startup rules guiding you, you’ll find it much easier to make informed and confident decisions regarding the future of your startup.
What are your thoughts on these golden rules? Could one or more of these change your company for the better?