The first year of your startup is going to be a roller-coaster. There will be intense, exhilarating high points, followed by low points that seem almost insurmountable. But if you play your cards right, make smart decisions, and hustle, the financial and personal rewards will be unforgettable.
Funding is always a large source of discussion around startups. People want to know how to get funded, who the popular angel investor and venture capital firms are supporting, and how much is being given to each startup. One mistake from the startup side of things, is seeing a successful round of funding as a sign that you’ve “made it”.
Don’t get me wrong; celebration is in order if you land a sizeable chunk of funds. However, you never know when the next round of funding will come or if it will come at all. At some point, your business needs to be providing you with the profits, not an investor. So during that first year, you need to keep your business lean and mean. First pick up a copy of “The Lean Startup”, then keep this guidelines around for quick reference.
Make Personal Sacrifices
If you are truly committed to your startup, you need to make personal sacrifices. Your entire lifestyle really should change. Most startups are built by recent, genius college graduates or by highly skilled professionals. For highly skilled professionals, this transition in lifestyle may take some adjusting. Chances are you had a pretty cushy job in the past and that fat paycheck is going to take a serious hit.
While you don’t need to turn into a complete minimalist, you should be cutting back on a lot of personal expenses. This will help eliminate the need to use that funding money as your fat paycheck. For example, if you rent an apartment you should consider downsizing as soon as possible. The savings of a couple hundred dollars a month can go towards more important things like your grocery bill. Don’t worry, you’ll upgrade to that mansion soon enough.
You should also consider sacrificing personal expenses that are necessary such as cable bills and a lot of entertainment costs. Cable is a huge expense and to be honest, you probably only binge watch Netflix anyways. Dining out should be kept to an absolute minimum. If you really need to get your fix of finer foods, learn to cook and invite friends over for dinner. Just make sure they bring the libations and dessert.
Throw the First Pitch
Another key way to stay lean and mean through the first year is to start pitching. A lot of startups have the tendency to wait to make their first big pitch. You know your idea is good and you know you are committed to building it; so why wait? Take your minimum viable product and show it off.
The sooner you start pitching, the sooner you will start getting investors. You also might as well pitch in your early stages prior to having a fine-tuned product because it gives you great practice for later pitches. Making pitches to potential investors could be someone’s full-time job and you should treat it as such.
Hire the “Right” People
It goes without saying that having the right people working with you gives you a huge advantage. When I say, hire the “right” people, I am not necessarily saying that you need to hire the best and brightest. Sure, you want competent employees that will give you the best chances to succeed. Unfortunately, some of the best and brightest also have the biggest price tag. If you are trying to start a business on a budget, hiring the best available programmer may not be the most efficient choice.
Instead, hire talented individuals who share your passion from entrepreneurship and share your enthusiasm for your startup. Those that share an entrepreneurial mindset will understand the need for a shoestring budget and finding ways to get things done. If they also share your enthusiasm for your startup, chances are that they will want to stick around to see it come to fruition. Someone who shares your passion and goals is much more likely to work for less.
Save the Extravagance for Later
We’ve all heard and seen the amazing perks that startups and tech companies have. Delicious catered lunches, cool lounges, the best tech, video games in the office, wild company outings, and extravagant company parties are probably running through your head right now.
During your first year, if you want to stay lean and mean, you should probably avoid the vast majority of these things. The Gatsby-esque lifestyle will leave your startup broke faster than you can say “F. Scott Fitzgerald”. Instead, you should live it up in moderation. Instead of renting out a concert hall and hiring a private DJ for the night, host your company parties at someone’s house. Provide office snacks, not office meals and bring in an old gaming system like a Nintendo 64 if you must have video games in the office. Everyone loves “Mario Kart”.
You also don’t need to rent out the penthouse in a downtown San Francisco building yet. Keep your office space simple or take advantage of one of the many shared office spaces that are specifically designed for startups and small businesses.
If you want to stay lean and mean, and eventually successful through the first year, you should make personal expense sacrifices, start pitching immediately, hire like-minded employees, and run your business efficiently.