#02 The Two Keys to Business Success

If you’ve met me, you might find a pop-entrepreneurship sounding article title like: the “Keys to Business Success” a bit strange coming from me. You’d be right; I try to steer clear of the hype driven, “self development” world of motivational rhetoic and instead focus on understanding the underlying mechanics that create or break businesses and entrepreneurs.

If you’re not into hard-sells from “business coaches” trying to sell you and the rest of the audience on a $3,000 weekend workshop to get “this part of your life fixed” but you love thinking, reading and have an appetite for powerful knowledge and building innovative new things, then you are definitely the type of person I want to talk to.

So here are two things that, to my mind, are the long term pursuits of career entrepreneurs and form the critical framework for success in business: Opportunity and Mechanics.

Mechanics:
Business and clocks (the mechanical type) have a lot of similarities. Clocks are unique, they have a complex set of gears and sprockets that work together to produce a very defined outcome. I like this clock metaphor because it highlights the consideration that the clock maker went into designing and crafting a clock to get it right and also how a small change to the system can stop a clock from operating. Much like a clock, your business has a business maker – you and even small changes to the system can make huge changes to the success of your business.

At it’s core, entrepreneurship is about mechanics; it’s a cause and effect relationship. The study of entrepreneurship and business is really the study of seeing into the future; of understanding “If I do this, that happens”. Those that don’t understand business and the nature of human beings, are at the mercy of an unpredictable world with little mercy for those out of the know. However if you are a student of business and of people, you’re going to have a much easier time getting to sleep at night knowing where you and your business are.

So how does this relate to the two “keys to success”, as I’ve called them: Opportunity and Mechanics? Business is about engineering and designing a reliable and loyal machine. The more you understand about business engineering, the more elegant, reliable and successful systems and businesses you will build.

In this way, your ability to design successful businesses is closely tied to your ability to acquire knowledge.

Mobile app development
Working in mobile app development, I see an incredible range of people with different business and app concepts that either are a new spin on an old idea or an entirely new concept that has never existed before. I’ve seen both approaches create success.

However there’s a lot of inexperienced people attempting to build businesses that don’t fully understand how people will interact with their web application, how they’ll reach their target market efficiently, what problems their business or app solve. Other times I’ve seen entrepreneurs try to  build already existing ideas – nightclub mobile apps are a common one. It reminds me of this scene from the Internship:

I’m not saying that you can’t build a successful business from an idea that’s already “been created” (although there’s a lot of people that will say exactly that). Because there’s a word for it: competition and businesses do it all the time. Imagine if Mark Zuckerberg didn’t build Facebook because he thought MySpace had already built “his” idea. Hard to imagine.

What I am saying is that some people understand when it’s possible to compete and when there’s anti-competitive business landmines like network effects and economies-of-scale that are going to put a torpedo into your battleship. It all comes down to understanding of business mechanics.

The mobile apps I’m excited to work on are cutting edge web applications thought up by sharp entrepreneurial minds that understand business. These are projects I enjoy working on and run by people I’m comfortable to introduce to investors.

Just on that note, the advantage of being experienced isn’t only that you produce great ideas; businesses, projects or apps that work, but people also recognise your experience and believe in you and your vision. Hiring and motivating staff is easier when people see you’re an intelligent person on the way tot success.

Conversely, while it does happen, great ideas generally don’t come from an untrained business minds.

I’m not in any way trying to criticise those who are less capable or have had less opportunity to learn, because I have had my fair share of stupid ideas over the years. However the quality of my ideas and the intricate understanding of human nature and of business that guides the creation, idea evolution and testing of my ideas has only improved over the years as I’ve met more entrepreneurs, interviewed and learnt from them.

One of the best ways I get information and knowledge is by meeting smart people and having private discussions or discussions as part of the Startup50K podcast. I also listen to a lot of podcasts myself and that helps me think about my businesses and projects.

I’ve found many blogs and podcasts like to talk in details about an entrepreneurs “struggle” and how everyone thought they were stupid to be building a business or to labour on about how they built their business to “help the community”. My advice; get away from that stuff and find out exactly what went on to create the company, who the players were and what the deal-breaker was. This is where you’re going to find the tools you need to build an incredible company.

One of the key questions I ask entrepreneurs on the Startup50K podcast is: how did you create your company? What fuels it, what was the businesses first engine of growth? I suggest doing the same and look for podcasts and blogs that provide you with real answers.

[Part 2: Opportunity]

 

#01. Engines of Growth

One of the key things I ask when I’m interviewing an entrepreneur on the Startup50K podcast is; what was the first step they took in growing their company. This is by far my favourite question and where the magic sauce is.

In the life of a business, there are very often different engines of growth and the engine that grew the startup in the beginning isn’t always the same engine that powers the company once it’s mature. An engine of growth is what gives an entrepreneur their break and the resources they need to capitalize on an opportunity.

I want to understand what was the first break-through in getting from no money, no cashflow to a multi-million dollar company. Was it a step-by-step process building on smaller previous successes, was it a large capital raise and selling off equity or did the founder build a business outside their current business and use that company’s cashflow to fuel and kickstart their new business.

In the early stages entrepreneurs are vulnerable and when the cash stops, the business stops. So to understand the engine of growth of these hyper-growth companies is one of the most important things I (and listeners of the podcast) want to understand.

When I ask questions around this, a few entrepreneurs have tried to side-step the question and circle around to another topic, often about the issues they were facing – instead of discussing how they got their start or how the business works.

However some entrepreneurs are completely transparent about how they created their business and when they are, it’s incredible to sit there and listen. So I thought it was worth sharing a few stories from my interviews with successful entrepreneurs. The entrepreneurs below provided a completely transparent look at how they built their companies, so many thanks to these show guests for sharing the full story of their business.

(in interview order)

SpotJobs – 850,000 users, 3rd largest jobs board in Australia
Jake Williams and Lewis Romano came up with the idea to create SpotJobs – a casual / non-career focused jobs board. They were 22 and 24 when they started their company. They spent 12 months pitching their idea to investors before securing $2.5 million to build the company and grow it into a $9million+ company (at the time of interview)

However what was unique about this raise is that Jake and Lewis didn’t have a working product, (obviously) no sales or a website prototype and still managed to raise $2.5 million. The key things they did have; a “really good slideshow”, a unique and well researched market opportunity and the drive to see the business created and an introduction to a wealthy Melbourne family that was a majority shareholder / funder.

These two guys were real gentlemen to work with. Many thanks to them for sharing their stories. Their interview is on the podcast under episode #1.

Vinomofo – $40million in wine sales in 4 years
Andre Eikmeier co-founded Vinomofo – a group buying / discount wine online retailer after a failed acting career, a job in phone sales selling wine and a failed business with his father (“failed” was Andre’s term). Vinomofo went through several pivots and Andre himself went through hard times financially before he and his co-founder Justin came up with the group-buying / discounted wine sales approach that caught fire.

Despite Andre’s previous wine-related business ideas (a wine-review platform) not working, he had built a large community that responded strongly to the cheap wine pivot and the company grew quickly. I’d put this one down to a good / desired product and a listening community.

Andre was another super honest guy that I have personal respect for and I think everyone in the room got a sense of the personal struggles he went through on the way to building his company. See episode #2 of the podcast for more info.

[Part 2 coming soon]