“To create a successful business, it’s crucial to understand the human condition in the buying process.”
As an investor and operator, I’ve discovered a pivotal truth: any business holds the potential to generate $10M in revenue. Yet, a significant portion of enterprises stumble before reaching this milestone. The common pitfall? A scattered focus, attempting to address numerous problems simultaneously instead of zoning in on a singular issue that deeply resonates with their target audience.
Unleashing the full potential of a startup hinges on having a product or service that not only solves a pressing issue but also triggers a powerful reaction from potential customers. It should incite sentiments like, “I need this, and I needed it yesterday.” This requires a profound understanding of the human condition in the buying process: identifying what truly captivates potential customers and decoding the core behavioral drivers that propel them towards purchase.
The presence of a captivated audience paves the way for optimizing pricing and demand, allowing you to command a premium price for your offering while considering competitive market dynamics. Moreover, it enables you to structure your delivery in a manner that creates margins and generates sufficient free cash flow to fuel business scaling. The challenge then evolves into building a scalable business where margins progressively increase with scale, truly leveraging the advantages of economies of scale.
Before setting your sights on economies of scale, it’s crucial to ensure the fundamental unit economics of your business are sound. It’s understandable that innovative endeavors require substantial investment for experimentation before arriving at a scalable product-market fit. However, there’s a vast chasm between businesses that necessitate investment for pursuing product-market fit and those where fit remains speculative with a slight chance of market ignition.
As you contemplate the path to becoming a $10M business, the initial step is to ascertain whether you have a captivated audience for your product. Subsequently, determine if you can construct a scalable business that consistently generates free cash flow. It’s essential to understand the difference between a profitable, successful business and a venture-backable one. A business generating $10M annually in free cash flow and paying dividends can be successful without necessarily being venture-backable.
Not being venture-backable doesn’t equate to being unbankable. Entrepreneurs should always envisage their strategy for achieving a meaningful net worth exit, which isn’t always tethered to the journey of venture capital funding. At GetFresh Ventures, our focus is nurturing businesses into high-growth, profitable, and sustainable entities.
In conclusion, to construct a successful business, one must concentrate on a singular problem that deeply resonates with the target audience, decode the human buying process, optimize pricing and demand, and build a scalable business that generates free cash flow.
Don’t be swayed by the “grow or die” narrative at the expense of profitability and sustainability. By adhering to unit economics fundamentals, you can establish a successful, high-growth business that aligns with your objectives and provides a meaningful net worth exit.
Diraj Goel is a serial startup entrepreneur and executive in scaling profitable, fast-paced, high-growth tech-enabled companies. Ex-cyber security expert, ex-Hootsuite executive, ex-Vision Critical executive, tech founder, and growth advisor to over 200 high-growth startups. He founded GetFresh Ventures with a vision to help purpose-driven founders build profitable businesses that can drive global change with strategies that allow them to deliver on investor and community expectations.