The below is a guest article for the LSE blog.
I had a call today with someone who’s in her final year at university, coming to doing an internship with GS this summer, but also working on her start-up venture. She was offered £50,000 for 20% of her company (which is pre-revenue) and asked me what my thought was about the situation.
I think she should follow the money.
NOT the investment money, but to follow the sales.
The idea I prompted was for her to get as many sales as she can until hitting the next growth hurdles, without taking any outside help, and trying her best on her own to validate the product first. I’m not at all in the position to preach anyone about their business philosophy; (See my previous blog post); however, that advice comes from the fact that mine has always been “In Sales, we trust”.
At Vietnam Inbound (vietnaminbound.com), we create amazing experiences for our travellers whom we bring to Vietnam and South East Asia. We focus on finding sales wherever we can from the most unlikely, creative channels that are free. We work around the clock, across different timezones to find the customers, speak to them, and support them – because every customer wants vastly different activities, and more so, Vietnam and South East Asia is capable of accommodating a variety of desires. Aside from being my business philosophy, the reason why sales are so crucial for us is because in the travel industry, the more significant the sales are, the better are our volume-driven rates from our suppliers, and the more competitive we become.
With improved sales, we need to make an important decision whether we should prioritise profitability or growth. In the age of abundant fund-raising news, everyone I know seems to focus on growth. A countless number of unicorns, even current public companies, have not, or only recently, become profitable. My personal belief is that although financing can be used to sustain a company financially for an extended amount of time, it is ultimately a liability, not an asset. This consideration is not only from a technical balance sheet point of view but also for the long-term development of the business. As a business owner with a long-term vision, it’s borderline irrational to keep on acquiring and attracting more liability to the company. For us, determining and focusing on profitability at this beginning phase of a company is essential, because profitability is a telling metric that always points us to the right direction and ensures that we keep ourselves lean.
To become profitable at such early stage, as well as keeping ourselves profitable, we’ve been following three principles:
1) Keep fixed costs as low as possible, or close to zero preferably: We do not pay for any fixed costs unless absolutely required.
2) Find free customer acquisition channels: When mentioning customer acquisitions, most people think about having the budget of thousands of pounds on ad spend, but that is not necessary if you have creative, low-hanging fruit ways to obtain customers for free.
3) Use available, free resources to its maximum potential for lead and sales generation: Whenever we can, we try to use freely available resources that we can leverage to create, convert and fulfil a sale.
These are not secret as any entrepreneur can apply the same principles to become and keep themselves profitable. However, for most, profitability has, in the past decade and especially in the last few years, been neglected and has not considered as a measure of success. That is never the case for us. Profitability has been, and will always be our North Star for us to follow where the money is.
I have collected over 100 of myself and my friends’ cover letters and published it at Cover Letter Library to help you. This member-only library includes successful cover letters from people who secured jobs at all major investment banks, big 4 firms and other. Check it out 🙂
Illustration by my friend Karl.
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