Page 133 - 6 Secrets to Startup Success

112 6 SECRETS TO STARTUP SUCCESS

DEVELOP YOUR CORE CONCEPT

Good startup math rests on a business concept that makes sense for
you and for the marketplace. Keeping it simple, you can think of your
core concept as having three parts:

1. Your definition of success

2. Your strategy and business model

3. Your required capabilities and resources

These elements will be driven by, and grounded in, who you are as a
founder (covered in Chapter Three) and the nature of your market
opportunity (addressed in Chapter Four).

DEFINING SUCCESS – What’s the point in knowing your numbers if they
don’t help you reach a compelling destination? Mountain climbers
are fueled by an image of themselves on the summit, and successful
founders are pulled toward an envisioned future that outperforms
their current circumstances. What future state would prompt you to give
up what you have now and take on the risk and challenge of starting a business?

An example of a fundamental choice you will face in defining suc-
cess is how large a business you want to build and how you want to
spend your time building it. J.C. Faulkner faced an early decision
about D1’s size that was driven mostly by his personal needs and goals.
He launched the company with a five-person management team, in-
curring a significant expense that meant the new business would have
to generate $8 million per month in loan volume to break even and
would require $700,000 in upfront capital to become profitable. Al-
ternatively, he estimated that he could start with a two-person man-
agement team, break even at $3 million in monthly volume, and spend
only $300,000 to get there. “The reason I didn’t choose that route,” he
said, “is because I didn’t want to be on a two-person management team
and have to live that way. I would have been doing twice as much work
once we were up and running. I knew I would enjoy working with a
bigger team a lot more, and I would be able to spend a lot more time
with my family.” What many would see as a greater risk, spending
$700,000 in upfront capital instead of $300,000, J.C. actually saw as

American Management Association • www.amanet.org