Whether you operate in the education, automotive, energy, or food industry, your startup will likely face the same central issues as other fledgling companies. There is no denying that the first year of business can be difficult. When I started Varsity Tutors in 2007, there were numerous challenges that needed to be confronted – I soon realized that speaking with other CEOs who had experienced many of the same challenges before helped me to tackle these common challenges head-on and avoid mistakes I might otherwise have made.
Based on those conversations and my own experience, here are four problems your young company might encounter, as well as some practical advice on how to address them:
1. Remaining true to your mission and vision
Strategies and tactics change but your mission can serve as a driving force behind what you are trying to accomplish. For my company, everything we do, from an online tutoring platform to native mobile apps to our content strategies, is oriented around our mission. Your mission serves to cement your long-term objectives. In our case, we are attempting to improve the academic achievement of all students by providing high quality individualized educational solutions that foster intellectual and personal development. We may have 20 different strategies in motion, but they all need to be consistent with that mission and vision. If you vary greatly from the core focus of the company, you risk chasing every opportunity that comes your way and failing to build a cohesive, unified, and meaningful series of products and services.
Google is a perfect example of a company with dozens of different business lines. Though they can seem unrelated on the surface, each business serves to help Google organize the world’s data and make it more accessible – its mission as a company. That mission will dictate which strategies and business lines make sense and which don’t. That level of focus can ultimately determine the core competencies you develop and how successful you are as a company.
2. Establishing a company culture
Try to establish your ideal business culture as early as possible. This culture starts with the organization’s leaders and permeates to your entire team. Your corporate culture sets the tone for what behavior is appropriate and what is not. It guides how you approach operational problems, and it ultimately has a large impact on your company’s ability to recruit, retain, and develop your staff. Do you want a company full of people who work hard, are analytical, and solve problems on their own? Lead by example and specifically alert all team members to your expectations as well as why the attributes that your organization values are important. If you tell your team that you have an entrepreneurial culture where self-starters are rewarded, that behavior is much more likely to follow than it would be if you had never discussed those key attributes and subsequently left new hires unaware of what sort of behavior the organization values.
For new companies, hiring values-compatible people is critically important as those first few hires will significantly shape the company culture (for better or worse). Settling on someone who may have the skillset, but whose values and personality aren’t aligned with the vision you have for your company, could inhibit your ability to establish the sort of environment you hope to create. Your first few hires will meaningfully impact how your company’s culture takes shape, so hire wisely.
3. Raising brand awareness
People need to know your product or service exists before they can consider making a purchase. For startups, raising brand awareness and establishing a degree of credibility can seem like a big challenge. Develop brand awareness by approaching it in ways that align with your mission, strategy, and resources at hand. Consider Under Armour, the athletic apparel company that is competing with established industry titans such as Nike. In Under Armour’s early years, the company didn’t have a large advertisement budget. Rather than splashy magazine and TV ads, the company built up grass roots connections with collegiate and professional athletes. Now, Under Armour has grown to eclipse Adidas as the #2 sportswear brand in the U.S.
Fortunately for today’s startups, it is easier than ever to quickly establish an online presence. Your challenge is to grow that presence and make your company stand out from the crowd. Leverage technology to increase the ROI of establishing a strong online footprint. Invest time in researching and implementing Search Engine Optimization processes that help your business gain visibility online. Again, invest the time and resources into online initiatives that align with your company’s strategy and model. For example, if you are a local pizzeria, take care of the fundamentals and list your store’s location by creating a business listing for Google search.
4. Managing cash flow
Develop cash flow projections for three months, six months, and one year. In your projections, do scenario simulations and set thresholds for worst case and best case outcomes. Revisit your projections as the year progresses to compare it to your budget. As you experience increases and decreases in the actual cash flow, compared to your projections, adjust your strategy as needed.
Startups often have to exercise fiscal discipline as they attempt to grow their products, services, and client pool. There can be many opportunities that present themselves, all seemingly offering the ability to quickly grow your company and increase profits. Take the time to analyze which strategies make sense for the vision you have laid out for your company. Avoid throwing resources at any and every marketing service, technology tool, or new business idea. Most marketing endeavors won’t be profitable, so focus only on the most promising options. Once you have your mission and business strategies in place, prioritize investing your resources. Chasing the latest services, tools, and products for your business simply because they are popular at the moment is not the prudent financial management your business needs in order to achieve its objectives.
If the day-to-day operations of your business quickly become overwhelming, remember that other CEOs have traversed this same path. Seek their suggestions, and adapt their advice to your company to help it grow and flourish through its first years.
Chuck Cohn is the CEO and founder of Varsity Tutors, a technology platform for private academic tutoring and test prep designed to help students at all levels of education achieve academic excellence.