Monday, November 30, 2015

Prevent Spreadsheets from Strangling Your Startup

Entrepreneurs are the lifeline of any economy, and high-growth start-ups in particular are responsible for the great majority of new job creation. It’s worrying, then, that according to several reports the number of new businesses being created in the U.S. has been stalled since the end of the recession.

As a mentor to many start-up entrepreneurs, I find this slow-down concerning, and I see one reason that’s rarely spoken about and needs a closer look: what I call spreadsheet asphyxiation. I repeatedly hear from young entrepreneurs that, as fund managers come in, they introduce too many controls for cash flows, income projections, budgeting, risk analysis, financial modeling – the list is endless.

Start-ups can’t be assessed using conventional business metrics. Yes, they require diligent oversight. But in my experience, this can be achieved without an excessive emphasis on controls if a start-up entrepreneur has clarity at all times on four simple questions.

First, what specific problem are you solving? Building a new product or service in itself is not adequate, even if it’s a brilliant innovation. The litmus test is whether it solves a unique problem or offers a unique solution to an existing problem.

Second, who will be willing to pay a premium for your product or service? Be crystal clear about who your customer is. Once you drill down to this target group, the question is what they want to buy, not what you want to sell. Is the thing that differentiates your product critical to the customer? Why would they be willing to pay for your service?

Read more at:Harvardbusinessreview

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