Here are expressed views of Raghav Himatsingka Entrepreneur and Public Speaker on article written by him on YourStory.
Every entrepreneur starts out with the idea of creating disruption. But very often, the startup runs into failure. The founder of a failed startup lists out his key learnings and how they help him start up again.
Ever since I returned from Stanford in 2009, I’ve been obsessed with the idea of creating something big, something disruptive, something that will change the world. I started my career within my family business where I took my brand new business unit from 0 to $20 million annual revenues. However, I wasn’t satisfied.
I quit that to start Truckola, a tech platform for logistics, with Keshav and Vipul, my two co-founders. After four years of a roller-coaster ride with tremendous highs and the lowest lows, our company ran out of money during the lockdown. Now, I’m here to share my learnings and discoveries.
Strange learning #1: You can’t change the world with a better product!
A great company cannot be built on adjectives like better, cheaper, faster, prettier, etc. You must create something new, something that hasn’t been seen by your target customer before.
When you do something “better”, you’re inadvertently activating all the fears and pains of your customers with their existing solutions and associating them with yours.
Be different; tell a new story.
Strange learning #2: You can’t change the world with a great product either… unless enough potential customers know how great it is!
Once you have a phenomenal new story, you also need your target customers to hear about it. A great product is nothing without a workable distribution channel.
Some of the largest companies in the world – Amazon, Google, Facebook, Netflix, and Walmart – are those that are merely distribution channels for other people’s products. It’s equally important to start testing your distribution models, as it is to test your products, right from the inception of your company.
Don’t assume that customers will come just because you have built something amazing!
Strange Learning #3: Don’t get friend-zoned by your potential investors!
Raising funds is like dating. You have to be available (“single”), they have to be available, you need a trusted introduction with them, you don’t want rumours about you to precede your meeting, and you don’t want to be friend-zoned!
At Truckola, we had everything – the perfect team, the “better” product, smashing metrics. But.. we pitched to too many investors too many times without doing diligence of whether they were the right fit (in terms of their sectorial interest, quantum of money they typically invest, and their culture), without getting proper introductions, and until our story lost its freshness.
Yeah, it doesn’t work. Meet investors, keep them warm, let them know what’s going on in the company, and pitch when you have the sense that they’re now “available” for you.
The more you chase investors, the faster they run away from you.
Strange learning #4: There’s only one way to know your true worth… and to destroy all competition!
The only way to know your true worth is to continually aspire to charge your customers as high as you can. This doesn’t mean that you overprice your product. This just means that you deliver the highest value possible for your customers and then charge them as high as they will pay for that value.
If your customers really care for what you’re doing for them, they will continue to pay you even in the face of stiff competition. If they don’t, it means that you’re overestimating their pains or your own solutions. Either way, you would know your true worth.
The problem with being cheap is that people don’t appreciate things that are free or cheap. As soon as someone undercuts you, your customer switches away, and you can be sure that you’re now on the fastest route to bankruptcy.
What’s the one thing you want to be known for? Being the best.
Strange Learning #5: The only way to bulldoze your operational issues…is via explosive growth!
At Truckola, we decided that we wanted to differentiate ourselves by having robust processes, zero failures, and the highest operational level efficiencies. We spent a year working on this, and we did achieve it. We had the industry leading operational metrics, with amazing profitability, cashflows, and other financial numbers. But, what did we lose in this process?
Say my costs, are Rs 100, and revenues are Rs 140. If we get everything perfect, we may be able to reduce costs by about 10 percent in a year (without pay cuts or loss of revenue), which will increase my profits from Rs 40 to Rs 50. However, if we put the same efforts in sales, we may increase revenues multiple times, thereby increasing the profits multiple times as well. Thus, it is far better to spend disproportionately higher efforts in sales than in operations.
It’s better to tolerate operational inefficiencies rather than compromise on sales.
Strange Learning #6: The only metric that matters in a growing company is this…
If you just have to focus on one metric in your company, it would be the ratio of LTV (lifetime value of customers) and CAC (customer acquisition cost). However, the challenge with these numbers is that they’re not very straightforward to calculate. We had a very high LTV/CAC ratio at Truckola but on retrospective introspection, the numbers were not scalable.
An entrepreneur must pay careful attention to this number with all honesty, and without bias, to determine whether the number would stick as the company scales. Is your customer acquisition cost artificially low because customers were acquired due to past relationships of your sales team, some fluke growth hack, deep discounts, or something else that will not scale? Are you making reasonable assumptions about your LTV?
Make your LTV/CAC ratio your one thing, and a lot of things will fall into place!
So these are my six key learnings I used to start my new venture, Raising Superstars.
We are creating a world-class, never-seen-before product for parents of young babies. We started just as a two-member team, and within the second month itself, using these learnings, we are already clocking monthly revenues in excess of my entire year’s earnings at Truckola. I wish I had the right mentors when I started up the first time, and I’ve thus made it my personal mission to help out as many young entrepreneurs as I can as they enter the world of startups and entrepreneurship.
Read more at: yourstory.com