Tech, Startups, Capital, Ideas.

It’s all too easy in an environment of uncertainty and paralysis to focus on cost-cutting to the exclusion of all else. As the old saying goes, “you cannot save your way to success.” Making cash last is critical, but the reality is that startups – even the most capital efficient ones – burn through capital every day. Eventually, no matter how much you save, cash runs out.

The answer is growth.

Why are companies that just announced new rounds of funding cutting 10% or 15% of their workforce? Because the environment gave them – and every other startup – the reason to do so. Run lean and mean. And if your product isn’t selling, cut the burn way, way down. But startups must exit the next 18 or 24 months with growth under their belt. Otherwise they will have tread water while their competitors leapfrogged ahead.

The Myth of CFBE
The great myth of cash flow break even (CFBE) is that few, if any of tech’s successful companies saved their way to success. Certainly, many of them were incredibly capital efficient. As a boot-strapped entrepreneur myself, I recognize the value of running a lean and mean company, and I have been drawn to other highly capital efficient entrepreneurs as an investor. In this environment, as in any, it’s critical to take the pulse of the business, and especially new hires and sales, monthly if not weekly. But simply put, those companies found ways to grow even in the most difficult of environments.

From speaking with portfolio companies and my partners, here are:

10 Ways For Companies To Grow In Rough Times

1. Focus – put all the wood behind one arrow. Have the courage of your convictions to pick one.

2. Be brutally honest with yourself about how compelling your product/service offering is. It must be a must have, and if it’s not, fix it. But don’t kid yourself. It isn’t what you think, it’s what your customers think.

3. All hands on deck. Get the most out of your company. Make sure everyone understands the strategy and plan and what their role is. If they aren’t fully signed up and motivated and part of the team, let them go.

4. Qualify the heck out of your leads. Be brutal. Don’t waste time with customers or users who won’t close or a sales process that doesn’t converge.

5. Make it really easy to try out your product or service. Make sure it delivers very short time-to-value.

6. Ask your best customers or users to help you find other prospects or users within their “network.” They want you to be successful. It’s in their interest. So asking them for introductions and referrals – have them “sponsor” you into new opportunities.

7. Equip your best customers and users to be evangelists for you, and reward them for it. They can tell your story like no one else.

8. Make sure you’re delivering a “whole product.” If your customers or users don’t have time or resources to do integrations or customize your product to meet their needs, then make it easy for them to buy those services from you.

9. Be bold – be larger than life. Don’t be afraid to make mistakes. Startups are about risk/reward and in rough times, people decide that playing it safe works. It doesn’t.

10. Be totally transparent. Communicate more often. Fight the urge to hide bad news. Stand on a table every week and look your employees in the eye. Make this the most important meeting of your week and never skip it.

What Makes A Winner?
In good times, most companies don’t focus as much as they should and aren’t maniacal about their value proposition and religious about strictly qualifying leads early. They “waste a lot of calories,” so to speak.

In tough times, the winners have a combination of perfect execution and a compelling value proposition for the time – whether it’s “cut costs and do more with less $,” “drive the top line,” “provide peace of mind,” or “entertain” (to give people a break from a harsh reality) – they help the customer with the particular pain he has.

Know your customer, personally and often. Don’t take anyone else’s word for it. It doesn’t matter what size you are or what you already know. The world changes too quickly in these times. It’s what your customers think that really matters.