In Turbulent Times – 3 Critical Success Factors To Ride The Storm For HR Tech Founders
Keep Focused on Your Core Business
As an HR tech founder you are going to be, by nature, innovative. You are going to like fresh ideas and new things. I know you are going to be constantly looking at your product and thinking that it could be better. You are going to be reviewing sales figures and wondering if adding a new product might solve your growth problems. You are also going to be thinking about your other business ideas and concepts, building on what you have created – you are after all an entrepreneur.
Distraction from your core business however is one of your biggest enemies.
You may not be fully confident with the way things are going, or you may be bored. But you won’t solve it by constantly feeding new little projects to your product team, or launching new business ideas, or running a secret skunk-works project on the side.
Founders who can focus on their core business and drive forward relentlessly and enthusiastically are the most successful. Understand where you want to go – and do it!
Cash is King
Some HR tech founders are so engrossed in top line growth, they forget the fundamental point that without cash you have no business! So it needs to be manically managed. Get the best advanced payment terms from your customers. Keep you own outgoing cash commitments to the minimum. Understand what cashflow looks like this week, this month, and for the next year – worst case as well as best.
One of the most common predicaments I have seen HR tech founders get into is when they realise that based on current sales and spend they only have limited time before they run out of cash. They euphemistically call it a runway. Perhaps the business will takeoff at the end as cash magically appears from the fantasy investor money tree. In reality the runway is the setting for, if they are lucky, an emergency landing and evacuation.
Balancing expenditure with income is key. And the most important time to do this is when you have cash – not when you are running out. Like any well run business, HR tech founders should be forensic about any extra expenditure they need to make. And yes this includes the favourite cost “black holes” of product development and sales and marketing. Nothing and no-one should be sacred.
Customers are your Best Investors
Why are HR tech founders so obsessed with getting cash from investors when the cheapest source of money is from their customers. All their clients want is good software that does what it says on the tin. They’ll pay you without wanting a part of your business. And they will keep on paying you.
Looking for investment is a massive distraction, and one that often ends in failure and dissatisfaction. It is also a long term cost in itself. Management teams expect bonuses and salary increases. NED’s put their rates up. Extravagant plans are developed to use the cash up as quickly as possible. If you’ve taken institutional investment and things don’t work out, then when the cash disappears so may your involvement in the business.
Bringing in new and developing existing customers may not be where founders want to focus – but this is the cheapest and sustainable source of cash.
