Now, eight years after I graduated, I was asked to share my thoughts and experiences with the students – to explain the obstacles and challenges, the opportunities and the risks of starting your own business.
Back when I began, I was told that the key to success was to work hard. I work harder than most people I know, but I realize it’s not the key to success.
It took me eight years to understand and eight hours to write down the top 10 lessons I have learned along the way. It might take you eight minutes or so to read. I hope this is a good investment of your time.
Make a difference – not moneyAs an entrepreneur, you don’t start a business to make money. At least, I didn’t. Of course, you have to make money; if not, you don’t exist. But it’s not what drives you most. You want to make a difference. You want to matter, to have impact. Change something for the better for your customer. Offer solutions. Surprise the market. That’s what really creates value. Make a difference – and the money will follow.
Affordable lossWhen you want to start a business, you begin by writing a business plan. There is a line between what you can gain (your turnover, profit) and what you can lose (your investment). The only thing you can be certain of is what you can lose. No one knows for sure whether they will make one euro, 100,000 euros or a million, and in what timespan.
What you do know is what you can lose when things go wrong: your reputation, your self-image, your full investment.
Now, what are you willing to lose? That is hard to answer and can be different for everybody. For me, I was willing to risk my personal savings and one year of my time: no salary paid in the first year. Had things gone wrong, I would have learned a lot during a year and that’s what it was worth to me.
What I was not prepared to risk was bankruptcy: having personal bank debts for another 15 years or so, or taking a loan from my parents and then having to explain to them that the money was gone.
When we founded EcoNation, we found a bank that was willing to give us a loan. We did not give a personal warranty, yet we promised to work one year for free – that was our investment. The Belgian/Flemish government was willing to give a warranty to the bank to cover 75% of their risk – it is a mechanism which runs through PMV (a government-based investment company) and is really a great tool for start-ups.
Eventually, we made money and were profitable. Yet it’s just something you don’t know for sure upfront. The question is not how much money you will make; the real question is what are you willing to lose?
The pizza experienceIn a start-up, everything is new, much is disruptive. Often you are inexperienced and surprises are everywhere. It is crucial to get your team right. You will have so many tough decisions to make and you don’t want to lose friends along the way.
Imagine it like this. You are working late (you will do this a lot in the first few years) and you want to order pizza. If you want to order pizza for all the founders of your business, and you need to order more than one pizza, then your start-up has too many founding members.
Two or three founders works great. Four or more often means misery, especially when it comes to making crucial decisions.
Listen first – speak laterThis is something I really had to learn. You want to go fast, because you want to grow big, but you can’t grow before you learn. And you learn through listening. Listen to your team, your experts, your board – but most of all, your customers. They are the ones who really drive and define your business. Listen to them. Understand them. Learn from them. There is more than enough time to speak later.
Cash is still kingBooks always tell you that “cash is king”. Yeah, whatever, I thought, cash can never be more important than profit. Well, it is. It always is.
In order to really understand it, just take this example: you set up a company to develop your idea for a new product. You and the other founders contribute all your savings (let’s say 60,000 euros) and a bank lends you another 60,000 euros. You also receive some turnover, another 60,000 euros. That’s your cash coming in.
But you have some fixed costs. And in order to turn your idea into a prototype and then into a real product, you need to invest a substantial amount in research and development. The result is a cash shortage. And now your product is ready but your pockets are empty. You can’t pay next month’s bills any more. There is a letter about tax on your doormat.
This is the moment when you really understand the difference between profit and cash. Cash is king, and queen, and everything else. Never forget it.
You can sell a share only onceAnd you always sell too cheap, too soon. As a start-up, you are in need of money. So you look for help from your friends, family members or business angels. The thing with business angels is: you have to make sure they are angels and not devils in disguise. And you don’t know it up front.
If you sell your shares too soon, you lose control of your company. It’s that simple. Even if you think you don’t have a choice, you always do.
If your idea is great, you will find the money without losing the shares. And if your business works well, you will have to go through so many rounds of equity raising (and dilution), that you don’t want to distribute your shares already on day one. Because once they are sold, forget ever getting them back. It just doesn’t work like that.
Far too many entrepreneurs start a successful company and end up empty-handed. You need to avoid business angels and talk to government agencies instead. It will make your life much easier.
People, people, people!All good things come from people. They change the world, and companies. I had the privilege of being able to work (first at EcoNation and now at EnergyVision) with some of the greatest people I know.
As an entrepreneur, a team does not work for you. You work with them, you are part of the team and you love it. It’s one of the differences between being a start-up entrepreneur and being a manager in a big conglomerate.
If you can handle it, the start-up culture is a great thing to experience. You really become one, united, a team with common goals and common values. You spend so much time together, have so much fun, put yourself on the line, and get so much energy from one another.
Think big – spend smallThink big, for sure. We were very, very, very small when we signed Amsterdam Airport Schiphol as our first customer and Scania as our fifth.
We wanted to conquer the world, to make a difference and we weren’t afraid to think big. At the same time, we were conservative in terms of spending. I waited a long time before hiring extra employees – probably too long. You can only spend what you have and, in our case, that was not much. Yet that should never, ever prevent you from aiming big. Be naïve enough to take that leap of faith, and smart enough to learn fast along the way.
Get some sleepStart-up entrepreneurship is like going from one misery to the next and trying to manage in between. You have to solve a lot of problems. You have to overcome all kinds of obstacles. It always goes slower than you want and it always costs more than you expected.
Many of my classmates chose jobs in consultancy, investment banks and conglomerates. They were sure of their salary and enjoyed a clear view on their career path for the years to come. They work 60 to 80 hours per week and have between three and six weeks holiday per year. In a start-up, you work 24/7 and you don’t know how to spell “holiday”. If you don’t work, your company suffers. There is no such thing as a work-life balance.
And yet it is the best job in the world, because you are living your dream. You get to create your own company, work with great people, for great customers, on great projects. You are your own boss. Your personal values are what define the company.
Indeed, you can look at your situation from different perspectives and all of them are equally true. Whether you see it as a nightmare or a dream, just make sure you don’t forget to sleep. It is a long road and a tough one, and you need to stay focused yet relaxed.
Sales fix everythingNever forget: when things go wrong, when your board is driving you mad, when your back office is lagging behind, when media is reporting bad stories, when you can’t sleep, can’t breathe, can’t stop thinking any more… sales fix everything. They really do. Your investors shut up, your cash position improves, your team can smile again, you’ll find the tools and the resources to fix other problems. Having sales means you exist. So stop reading: go out there and sell. Spread the word and spread your passion.