Follow the laws of business building to ensure the success of your startup

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In the business-to-business (B2B) startup world, there is an abundance of capital, renewed interest and many new players who want to be active in the space. This is an area we know very well. We have always been B2B and we have always believed in the global depth of talent and innovation ability. It is from this background that I share some of what we have observed in successful B2B companies.

The big question for startup founders is this: How can they increase the chances that their startup will succeed and not become one of many that fail each year? I dig deep into seven common causes of startup errors in my book Anticipate failure. But beyond that, there are certain laws for corporate construction that have long existed and must be followed. They can make the difference between a fast-paced, successful startup and one that never really reaches the speed of flight.

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Let’s take a look at these business building laws.

It starts with observing a problem

To begin with, every good B2B company starts with an observation about a significant customer problem that exists or a space in the B2B ecosystem that has not seen innovation and that really needs to be reinvented. What we find is that there is a product-oriented founding team asking, “How can we revive space?” or “How do we solve this problem and express the solution in a product that many people would be interested in?”

There is usually a contractor who is not permeated by a particular area, but who makes an outside observation, and the founding team has the relevant talent to build the product that needs to be built. They identify a pain point, design a new product to handle it and then put together the right team to build it. Getting the original product and product market to fit is important. Even better is to secure product market adaptation in a market that has many product limitations. This will enable the second and third acts.

Then comes the founder-led sales phase

Then comes the founder-led sales phase of the product – matching your product with the customer’s needs. This has to be done by the founders. A common mistake is when the founder is deeply technical, and the founding team hopes it can make a salesperson who will have customer calls and sell the product to them. Unless it’s another founder, that formula almost never works. This is the time when you need to get the first set of customers right, which of course is the role of the founding team. It is very important to lay the strong foundation for a B2B business.

Then, when the time is right, there is a transition from founding-led sales to recruiting your first one or two missionaries or professional sales people who can then take over that role and reach a much broader customer base. A founder will usually not know how to scale a sales team to reach $ 1 billion in revenue. This is where you need to bring in an experienced manager to lead the assignment – whether it’s about building the sales team or an engineering team with several products that can deliver on time with high quality. If you’ve never done that before, it’s not time to try to learn at work now.

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The transition to execution-oriented sales leadership

After you get this sales team up and running, there is a very important transition in going from the first salespeople to building sales leadership that is execution oriented, have marketing that can fill the funnel and then put systems and processes in place to be executed. At that point, it will be an execution game to know which customers to go after; to have the right marketing in front of it; create the right kind of funnel management and sales leadership; recruit, hire, train and enable salespeople on the product; very clearly expresses the sales proposal for the product so that the next incremental sales rent can actually get it right; and so on. These things and more must be done in a perfect way. Fortunately, these are very teachable, doable and repeatable patterns.

Over and over again, we see founders who have not done this part of the scaling before making the wrong sales pitches; they do not activate them or spend their precious marketing money on the wrong things. They do not have the systems in place to know if their sales are predictable or if the sales funnel is qualified. In the end, this is a phase where you still take very expensive capital, but you make the same mistake over and over again. It is better to make new mistakes than to repeat old ones.

When everything seems to be going right

And then you are in a phase where you have made many things go right: you have calculated the customer’s pain point, the product, the first sale and the expansion part of it. And then, once you hit the escape rate – a $ 10 million running rate – there’s a huge amount of cheap capital available. This is a very important phase in a business where you go from founder-led sales, to early sales, to repeatable, scalable sales. You have to get it right before you go out and raise a lot of capital which is just very cheap and completely practical.

Yes, plenty of capital is selectively available to breakout companies. But there is still a lot of hard work and business building left from a company’s start to its outbreak. And if you do not do these steps right – if you have not followed the company building laws – you may well end up in a situation where you do not have the right people around the table to take you to that breakout level. And you’re probably just raising capital, but that capital that does not understand how B2B companies are created, built and placed on a path to success.

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The laws of business building still apply, and they must be followed if you want to guarantee your startup’s long-term success. Cheap capital is widely available, but you need to use it at the right time. And until you know it’s a breakaway, do not settle for cheap, stupid capital. Hard work, the right people and discipline all play an important role in getting a company to breakout status.

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