Starting a business is hard, and keeping a business going is even harder. But many have gone before you, and tapping into their experience in everything from small-business financing to hiring could spell the difference between success and failure, especially in the technology businesses.
About half of all new establishments make it to the five-year mark, according to the Small Business Administration. Your goal is to go that far and beyond. NerdWallet talked with five successful founders in the tech field to get their best advice for people embarking on a new venture. Here’s what they say:
Understand How to Make Money
Walt Clarke started VendorLytics, a web-based platform that helps hospitals choose and integrate products, in November 2015, but it isn’t his first enterprise. He founded a medical device communications company and currently serves as an advisor and board member to several young companies. He says his initial advice is simple: Understand how to make money.
“Many entrepreneurs see growth and size as their top goals, but haven’t figured out how to become profitable,” Clarke says. He says this focus might work for those that are bought up by larger companies, “but the overwhelming majority of companies have to make it on their own.”
“Figure out how to be profitable on a small scale and then grow, as opposed to growing first and then trying to figure out how to be profitable.”
Stay Small and Monetize Early
BeFunky started as an online photo editor in 2007. Now, under founder Tekin Tatar, the company serves 35 million users worldwide. As a bootstrapped operation for the first 16 months, Tatar believes some of its success came from staying small as long as possible and bucking the trend of “grow first, monetize later.”
“There’s no argument that having a large number of users is critical, but this doesn’t mean you should not be taking the necessary actions to move into revenue generation early,” he says. BeFunky became cash-flow positive as it was raising venture capital. “This is why we were able to survive during the aftermath of the financial crisis, where capital-intensive startups that didn’t have a monetization strategy died due to lack of capital.”
In keeping the company small, Tatar says “bigger teams don’t mean better teams when it comes to productivity. This doesn’t mean that teams shouldn’t grow … growing our team to 10 helped us create a larger footprint in the market.” But, he says, all of the core product value propositions were structured when they were a much smaller team, and today’s growth is happening on top of that initial structure.
The Value of People is More than Meets the Eye
Kris Duggan is the CEO of BetterWorks, a platform used for goal setting by objective-focused employers. But before BetterWorks, Duggan started two successful tech companies. His lessons on the value of people reach from hiring to working with venture capitalists and board members.
“I used to really focus on hiring whoever had the most experience,” he says. “I was basically looking for experts in everything.” Now, Duggan prefers to go for “missionaries over mercenaries,” and isn’t afraid to hire someone for their passion and energy even when their experience is lacking.
As his companies grew and he took on VCs and board members, Duggan says he wishes he had sooner realized their true value.
“When you first start out, it’s easy to see just dollar signs and ultimately choose whichever VC offers you the best deal. I’ve learned now how investor expertise, passion, connections and honest feedback hold greater value for future growth — they should be your greatest allies and resources, not just someone signing the checks.”
Stay Lean, Longer
Geeks Chicago isn’t Mark Tuchscherer’s first tech company, but it is his most successful. He started the web development and design company in 2012 and believes one of his greatest lessons was in being financially conservative.
“When you’re just getting started, do not spend money recklessly, even if your sales are high,” Tuchscherer says. “I’ve seen too many companies — including ours — run out and hire a bunch of people too soon, or upgrade to a bigger office.”
He wishes someone had told him that before he upgraded to a larger, more expensive office space that he later deemed unnecessary. “You’ll probably experience a slow period at some point, and this is when your cash will be helpful. You must think long-term, and be realistic about growth.”
You Can’t Rush Success
In 2010, architect Lori Cheek left her career to launch a dating app. Cheekd aspires to take the “missed out of ‘missed connections.’” Despite team problems early on, the app received positive attention, and for a brief period, Cheek thought success would be a cinch.
“I thought I was going to be a billionaire by the end of the year,” says Cheek, after her app was referred to as, “the next generation of online dating” in The New York Times. It’s five years later, and Cheek is still working.
“It will take twice as long as you’d hoped, cost exceedingly more than you ever budgeted, and will be more challenging than anything you’ll ever try,” she says to new business owners.
There’s no way around the time and the hard work, she says. “You can’t cheat the grind,” but it stands to be the most rewarding journey of your life.