It’s all about Revenue – Continuously Scaling Revenue

This is an obvious one, but a point too many startups forget or ignore in early stages.

The purpose of a for profit business is to generate revenue, period. Avoiding this fact and/or not planning on it, focusing on it In most cases, the goal is to increase revenues continuously over time, i.e. scalability. It’s even more desirable to never have a dip in revenues, but this rarely happens.

There are tons of articles about many things about the startup world these days. Equity discussions, how to pitch, what’s hot, success and failure stories, etc. But very few articles about how to begin, grow and sustain revenues, what that process looks like or what to do when they stall.

There are also almost as many startups as the number of people I meet these days. Everyone has their own startup, which is usually little more than a reserved url, a $10 commitment and an idea. But can they produce revenues, increasing revenues over time profitable revenues? Can they create jobs? Stay in business for 10 years?

Google just announced their most recent quarter numbers: 26% increase in revenue year to year to $9.7 Billion. Now that’s a revenue focused company, pretty incredible for a 13 year old company to be growing that fast in a bad economy. Google’s original business plan didn’t even include their current main source of revenue – advertising. But they adapted quickly and haven’t looked back yet. Their admirable amount of revenue allows them to do so many powerful things their competitors can’t as well as contribute enormously to philanthropic causes. Not every startup will be a Google of course, but if you figure out how to continuously scale revenue or even maintain zero growth revenue, you can provide viable employment, profitability, benefits and even give back to society a bit.

So how do you do it? There are several components that must work together like a system that incorporate your products, your values, your people, outside advisors, investors and more. Having a great idea of course is key, but that alone won’t sustain you. This is where many startups trick themselves. “We have an amazing idea, so we will succeed. You must monetize properly, plan for hiccups, see the future. Most of all, Revenue has to be nurtured and protected  priority #1.

I’m happy to discuss this more, just send me a DM at @tomnora or post on this blog.

Responses: Santa Fe Friends + Cali Friends + +

Responses to my Santa Fe Friends + Cali Friends + + letter. In chronological order.
So you and Rich Murray became friends? how long did he last at NMCC?LOL
peggy
Hey Tom Baby!!! Im HERE!!!Patsy

Lets get together soon

Loved this message!
Thank you.
I have some good ones for you to meet.
Can you send more info on your social media (or otherwise) focus?
Peter

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> * **@tomnora* <http://twitter.com/tomnora>* |
> *@cowlow<http://twitter.com/cowlow>
> * | *LinkedIn <http://linkd.in/qwVquV>* *
Tom,Thanks for the thoughtful note. We miss you and look forward to seeing you soon.The NM Green Chamber of Commerce wants a ‘buy local’ app. Does such a thing already exist?Would you be interested (or know someone) in creating it? Alex works with the chamber and I know the folks involved.

Don’t get shot out there.

Joe

Sent wirelessly via BlackBerry from T-Mobile.

yeah very good friends. he runs the poker game! Not long with Jarrett. He barely remembers him.
Tom Nora ✆ to MeiMei
show details Sep 16 (3 days ago)
I missed the excitement of the real business world and the water.
I made amazing friends out there and enjoyed small town life very much, but needed to plug back in and wanted to launch a startup here.
New Mexico is a weak startup location – missing many parts and move too slowly. The best of both worlds is to have both, but I can only live in one place at a time.

Napa is probably similar to Santa Fe in many ways, I could see you living there. Hope all is well for you, have a glass of wine for me.


Tom: Congrats on your move, I wish you the best.

Enjoyed our discussions and adventures. Hope we can stay in touch and please let me know when you get back this way.

Best personal regards,

David

yeah just say when. lunches are pretty open. will you have a car?


T
Yes I’m interested, building up a strong little team here of app developers. Tell me whom to connect with. 
Also interested in Teres Kids progress. Did u guys get funding yet?

I’m sure 9/11 was a thoughtful day for you. Take care.
Tom,Wow, what a great letter, what a great way to catch us all up on your move.
As someone who still hangs on to her LA area code, I love your new city and consider it still “my city” even though after seven or eight years here,
I have to admit I’m not living there anymore.

I’m going to be out there in early October to attend Indiecade…do you have a free couch?

You should see my paintings!  I am making major progress!

I wish you all the possible best in your new environs and really do hope to stay in touch.

Note my new phone number and I cc’d you on my go-forward email address after I leave EPIC in January.

BE WELL!

Big hugs,
Stephanie


Good luck Tom, thanks for staying in touch.
Stephen Hadwin

Hi Tom. Thanks for your soulful update. Gotta get tough if you’re gonna stay in LA though! Just remember, compliment everyone on everything and you’ll fit right in. – JB

yes i’m back in the groove, moving faster, no mo “manana”, headed to Arrowhead today to catch up with OC friends.
Good luck, Tom. Let’s try to keep in touch.

I had a great weekend in San Francisco and I’m trying to figure out how to get back more often.
Need to start generating some income so I can afford a small apartment in the city.
Trying to figure out how to schedule a trip to India with my new partner in our social enterprise.
Anyway, give me a call when you get a chance. Enjoy the urban life.
Gary
Thanks for the official welcome – i’m stuck in town this weekend but could go next wkend if ur still painting. Are u painting walls or canvases?


Heather: Now that Tom is living in Los Angeles, it would be a real favor to my friend if you would drag him along to some events there so he
can get integrated into the social media and tech scene there.Stewart
wow.  Life changes, the one thing we can always count on.  Back in LA, must feel strange in some ways,
exciting in others. . . curious Tom, as we haven’t talked in awhile, what prompted the move?  And, did you rent a u-haul?
I know you like Nascar and all, drive fast and all, but somehow you and Frieda in a u-haul?  Nah. . .
I may be in LA to look at some projects there, so maybe we’ll connect.
Texas is unreal, even for me, but here I am.
Brazos y besos
Kathy


Iim at district 13 right now u gotta check it out.

Gonna miss you! I had no idea that you left to the bigger city.  I do get out there as my sister lives near you, in the West Hollywood area and my son, is enrolled at Claremont McKenna College.  

So, I’ll be sure to give a call when in the area.  Let me know when you are visiting NM and I’ll make a point of taking you for drinks.

 

Have fun and make a difference out there!   Lillian

  

Hi Tom—

Wow I had no idea you were moving!!! We are definitely going to miss seeing you and hearing about all your entrepreneurial experiences at our events.

Best of luck in California and next time you are visiting in NM let me know. J

Take care! Shandra

Absolutely.
Tom, please feel free to email or call me. Social Media Week LA is happening right now and I believe there’s some events
(looking into it). If not this week, there’s a few good events every month. Would love to connect.Heather

From: Stewart Alsop <salsop@

Replacing The CEO

The vast majority of early stage companies will companies replace the CEO in the first 2-3 years.

A person or group peers starts with an idea and turns a spark into a flame. Once that flame is s going they don’t want to let it die. They often conclude that a more seasoned, well connected, well rounded CEO will attract money, partners and revenues, taking the company to “The Next Level“.

All this will hopefully help the company grow in the right ways and produce cash flow. Cash allows small companies to fulfill growth and other objectives; cash generated organically helps do this without giving up ownership and control.

But t’s a bit more complicated. Introducing a new leader, whether internal or external, voluntarily or forced, s a delicate process. I’ve been the incoming CEO a few times, and found that acceptance happens quickly or usually not at all. Most startups have no experience doing this, are not prepared, and cause their company damage by not doing this correctly – they accidentally blow out the flame.

There are some basic guidelines that can help make the new CEO stick.

1. Choose the New CEO Very Carefully. This is where most startups make the wrong choice. They base their choice on the wrong criteria and/or a limited pool of candidates, or peer pressure, or using one of the investors, etc. Be methodical and objective here. Engage experts if possible.

2. Put The Egos Away – mMake sure everyone is on board and understands that the new CEO is the right answer, including the outgoing CEO. Outgoing CEOs who can’t let go are one of the top reasons early stage companies fail at this process.

3. No Sacred Cows – Allow the new CEO to make the changes he/she wants mmediately. This requires trust on the part of the extant management team but you must let them manage the whole puzzle, not just parts of it (see #1).

f these things are done correctly the succession process can actually be a great experience for all involved. If you would like to discuss further please contact me. @tomnora

Google vs. Facebook – Part I Who will win?

Long Term Stable Growth

There is much fascinating debate these days about Google(GOOG) vs. Facebook, reminiscent of some of the greatest battles in Silicon Valley over the past 40 years. In these two we have a classic Silicon Valley clash of the titans, meaning we can’t predict a winner, or even if there will be one. This battle has very high stakes for both. Googles current valuation is $200 billion; Facebook is estimated at $50 billion – both big numbers that have continuously soared since their early days. History says the eventually one or both of those numbers will go down, based on which of these two has the leadership to maneuver through the battlefield into more stable, balance long term growth.

First, Google

Google is the older, more mature of the 2, with a much wider footprint, domination of the Internet users life, a new way of thinking by maximizing freemium and claiming karmic high ground. The New Silicon Valley. They have also sustained growth for a decade, distinguishing them from 99% of Silicon Valley startups.

Of course, google has all the inherent problems of many years of success – bloat, too many products, too many markets, too many layers of management, too many employees, too much employee turnover, major fixed expenses, bureaucracy, fading of their “hipness factor”, aging architecture and growing insecurities about their position as King of the Hill. Classic. As long as net income continues to grow, they can overlook or rationalize these problems, but the negative effect of the above issues will eventually hit them; it hits everybody. The magic trick is to come out the other side better. Swapping out their CEO could be a good or bad thing, but that’s often a nervous reaction on both sides of the boardroom table. Google is also too dependent on one source of revenue, ads, taxing one of the oldest rules in the book “Don’t get too much revenue from one place”.

So I believe Google will hit a wall and wobble over the next 3 years. They will make changes, restructure, sell some toys, start looking at numbers very carefully. The first phase will no longer work.

Now baby brother Facebook

Facebook, on the other hand, is the classic up and comer, the position Google was once in. Not just a lucky little brother, but an extremely competent, precocious adolescent that has invented something totally new from what existed. They have thus far methodically monetized and structured their revolution for long term growth better  than pioneers like Netscape did in the 1990s. they discovered something that everybody wants, and Mark Zuckermann is proving to be a true long term leader.

But they are a revolution currently, and revolutions eventually end, settle back into normal life. Facebook’s challenge will be to make that transition without stumbling. How will they diversify past their main product once it gets a little tired and some day surpassed? Can they? Facebook’s success has come from a multi-year rollout of membership to their club, one product. Brilliant product. Nothing has grown around the world like this since Coca Cola. There is still plenty of territory to roll out to, but the clock is ticking. What is the follow-on act? This is a tough one to pull off. They may do it, I don’t underestimate Zuckerberg and his team, but it will be very difficult not to become another MySpace or Yahoo.

Google vs. Facebook = Expansion vs. Rollout

So who will win the growth war here? Even if they’re smart enough not to harpoon each other these two companies will be very busy over the next 2-3 years surviving and continuing to grow.

They both have a strong chance, but if I had to pick one it would Google.

Here’s why: Google has a diversified platform with many market leading products (because they are better products) in very competitive markets – Search, Mail, Mobile, App Dev Tools, Image, Storage, Video, Statistics, and Advertising. Google had to overcome existing leaders in every one of these markets.

Facebook, on the other hand, invented their own product and market, and nobody has been able to catch up, not even Google. But in many forms their piece of the pie chart will decrease over time as different services reinvent their market for them. They must shift from rollout to diversification, or face the bell curve.

Like Google, Facebook also is overly dependent on ad revenue, breaking the same rule of growth and stability, and we don’t actually know how stable their revenue/profit curves are. Whatever the numbers, Facebook will have to reinvent itself and break some molds soon without hiccups in their revenue growth. I’m rooting for them, but this seldom happens. Unless you’re Google.

Who’s The Boss? What is a CEO?

I had dinner recently with a former colleague and good friend, let’s call him Al, who has recently transitioned from CTO to CEO of an early stage company he founded; he’s struggling with every aspect of his new job. Al was originally the de-facto leader through his first funding round, then at the urging of many around him recruited an experienced CEO to “take it to the next level”. Potential investors, former bosses, and current shareholders felt this was a critical step in for them to invest more time or money. The common line was “You’re not a CEO”. The new CEO was performing well, hitting milestones, preparing new funding and building the business, but he and Al couldn’t get along.

So now Al is now back in charge. This happens often in the early stages, sometimes because the new CEO is a bad match, but that’s usually just an excuse. Usually the CEO leaves for good or bad reasons, or the founder can’t let go of control of the company. In this case it was the latter. Als investors and employees are quite unhappy and he’s not sleeping much.

In hearing his frustrations I figured out his main problem –  he’s having serious problems making decisions and sticking with them, which is why he brought in a professional CEO in the first place. He has no reference point for many key decisions so lacks the confidence to execute decisions. His frustration is that this doesn’t happen to him in technical matters – he’s brilliant at those decisions. Technical leaders frequently underestimate the job of the CEO or business leader in a fledgling startup. They use the logic – hey, I’m extremely smart, so marketing, sales, and business development can’t be as hard as developing an entire software platform. This is a big mistake, and a common reason why startups never get out of the gate.

I’ve been the incoming CEO several times in early stage startups, taking over for the founder. This transition is difficult to pull off, but necessary for many companies to scale. Emotionally it’s very hard for a founder to “let go” and trust an outsider to care as much as he/she does about their baby. There are also others around the founder that can feel ownership and impede the new CEO – a spouse, other early employees, a displaced senior manager who thought he/she had a shot at the job. I’ve experienced all of these situations, but I’ve also had many good experiences where I did have sponsorship and support, and succeeded.

In Al’s case, he never really committed himself to stepping aside, even though he said the words. He admits that now. In his actions he inadvertently sabotaged his new partner, changing the CEOs decisions without discussion, etc. He felt that the new CEO was making “too many” decisions. He obviously wasn’t ready. I realize that he still isn’t ready.

The reason for our meeting was to see if I was interested in the job – he feels that our long term relationship would provide the foundation for a successful transition, but I know it wouldn’t work. I explained to him what CEO means to me – the final decision maker in a company, answerable to a real Board of Directors, of which the founder is a member but not the only member. The E in CEO stands for execution, making things happen, responsible for the results. The CEO must communicate clearly to everyone involved what he/she is doing, especially if taking over the reins from a founder, but should be supported by all as the final major decision maker. If that process works, the company works. Without that authority they become ineffective quickly and are only doing portions of the job, and can’t take full responsibility; then they leave and you have to start all over.

I explained to Al two reasons why I wouldn’t join his company: 1) With all due respect, I don’t feel that he’s any more ready to let go than he was a year ago, even though he respects my abilities and has comfortably worked for me before, and 2) the company is distressed now, unhappy employees, unhappy investors, delays in both the business and technical initiatives, messy equity stakes and a decrease in trust all around. Like I said, a Big Mistake. I told him his best chance is to try to learn how to be a CEO or merge his company as fast as possible. But this one is most likely kaput.