An Ode to Startups - A Public Letter to Founders
Your decision to start a company is commendable, as it requires immense dedication, perseverance, and a willingness to overcome numerous obstacles. Many businesses that have exceptional products never become viable. You need professional marketing and sales support.
STARTUPSFRACTIONAL SERVICESMARKETINGGROWTHFOUNDERSMARKETING/SALES SUCCESSSALESFRACTIONAL CGO
Dear Founders of Startups,
Congratulations on embarking on the challenging journey of building a startup. Your decision to pursue this path is commendable, as it requires immense dedication, perseverance, and a willingness to overcome numerous obstacles. In 2024, if you want what other people cannot achieve, then you need to do what they are unwilling to do, which is hard work, honest dealings, and a commitment to the future of your company.
Success is not a guarantee. Prosperity is not a given. I know what it takes to climb that mountain: endless days and sleepless nights. You gave up a comfortable 40-hour work week that gave you a predictable life for 100 hours of stress, turmoil, and toil for a “job” that is barely paying your expenses; yet you wouldn’t trade it for the world. Welcome to the life of a startup entrepreneur.
As you start the new year, there are a few facts you need to come to terms with. There is no cavalry coming to your rescue. As hard as you thought it might be, it will become 100 times harder. You have chosen one of the hardest ways to make your path in this world.
But understand and appreciate, there is nothing better than starting your own business. While the future is in doubt, your commitment and dedication to growing your business is not. You are exactly where you should be. I have been in your shoes. I understand the fear, the hard work, and the doubt you experience. Every night at 3 am, you wake with fear. That is good. It is motivating; it will fuel your soul and your commitment to work harder each and every day.
In five years, whatever the outcome of your business, you will look to these times as the “good old days,” where you gave everything you have, and more, to try to be one of the few who was able to cross the rubric and create a business that can provide for you and your family. A business that has clients who respect what you offer. Employees who are proud to be a part of your organization.
It will be the hardest and most rewarding journey of your life.
Here is the cold hard truth that has caused many exceptional ideas to fail: you can’t do this on your own. Many businesses that have exceptional products never become viable, not because they were not based on a sound business. Not because the founders were not smart and driven individuals. Most businesses fail due to the lack of resources or the organization's lack the knowledge on how to grow.
The startups that I have seen fail are led by some of the most brilliant people. The founders have found a need that is not being adequately addressed by the market. They have spent countless hours, often years, designing and developing a solution that solves the problem. They have spent all their time, energy, and money to develop a solution that really works.
They are then faced with the reality that if they build a better mouse trap, people will NOT beat a path to their door. They become perplexed that, although they have a best-in-class solution, other inferior products are growing and taking market share.
The reality is that if you build it, they won’t come, no matter how brilliant your solution might be. The race is often won by the company that has the best marketing and sales team. Just because you sold the idea to family, friends, and a few investors, does not mean you have the skill set to obtain mass adoption.
As you navigate through the ups and downs of entrepreneurship, it's crucial to recognize that one of the primary reasons startups fail is the lack of expertise in marketing and sales.
In today's competitive business landscape, marketing and sales play a pivotal role in the success of any venture. Without a solid understanding of these domains, startups often struggle to gain traction, attract customers, and generate sustainable revenue. However, with the right strategies and approaches, you can backstop the lack of experience in marketing and sales and increase your chances of success.
We know that often the reason you don’t have a professional marketing and sales team on staff is simply the lack of revenue. To get the revenue, you need a professional team and to get a professional team, you need the revenue.
We may not be the cavalry, but we are here to help. Since simply going without a trained marketing and sales team is really not an option, we want to offer a number of solutions that can help solve this vicious circle of trying to grow without revenue or professional support.
How to Afford Professional Help
Trying to hire the quality of professionals who can make a difference can be expensive. An experienced professional, who can really change your stars, is out of your price range. If you look toward hiring an agency, that can be equally as expensive.
So, most founders, if they hire anyone at all, will bring on a young and inexperienced person. We all started somewhere, but being the foundation of a startup should not be where a marketing or sales professional cuts their teeth. While they may have more practical marketing and sales experience than the founder, there is more that they don’t know, and that lack of knowledge can kill the business. Besides, most founders will not respect any young inexperienced person, so even if the marketer is right, chances are the founder will do what he/she wants to anyway.
There are other solutions that can bring a highly qualified person to the table:
Equity-Based Hires – Many startups solve the problem by hiring marketing and sales professionals on equity-based compensation. The promise is that once they get funding or start making sales, that position will also have the added component of a salary. So, if you’re a founder, how do you go about finding a highly qualified person who is willing and able to work for no income for a long period of time? We recommend that you place an ad on LinkedIn. To avoid confusion, be upfront that this is an equity-only role. When you advertise the position, have the role clearly state it will have no revenue, (e.g., Marketing Head - Equity Only). It will ensure that your time is not wasted by the throngs of people who are looking for a paying job.
Be prepared to hire a senior (older) person for the role. Most individuals, who can afford to take an equity-only role, are going to have already had a career that allows them to work for free. If the person is still in their youth, chances are they are building something for themselves.
Co-Founder Roles - These are going to be the most experienced individuals who can bring more to the table than just marketing or sales expertise. Often, they have grown their own companies or managed a business and can help you avoid a myriad of mistakes.
Equity Required - How much do you need to give up in equity depends on the role and how soon revenue might be forthcoming. If it is going to be an extended period before you are able to pay, expect to give up more in equity. The same holds true if you are looking for a co-founder, as opposed to a simple hire. Depending on these factors, the equity you may have to give up will range from 2-10 percent of available equity.
Commission-only Hires – Another avenue to explore is providing a commission-based hire. If you already have a viable product that can be marketed and sold, many marketing and sales professionals can be obtained by offering commissions on what the company sells.
If you are going to hire the most experienced C-Suite executives, expect the commission payments required will be on ALL revenues that the company generates not just their individual sales. The reason for this is you want them to make the right moves and decisions that benefit the organization and not just their pocketbook. If the company can benefit by bringing in younger less experienced professionals, you want the C-Suite executive to not only suggest this but also train and support the younger talent.
Commission Required – If you are going to have a commission-only position, you want these individuals to put their heart and soul into growing your company. We recommend you offer a 20% commission on the sales. Don’t get greedy and try to skimp, or you will only find you have created a revolving door with professionals only staying around until they find another position. Often, these positions carry a small equity component as well (e.g., 1-2%).
PRO-TIP – We have seen companies try and pass off 20% of net revenues as an alternative to 20% of ALL revenues. The professionals you need will know that the “net” can severely reduce their take and will find other ventures to help grow.
Fractional Chief Growth Officer – Another approach, if you are hell-bent on not giving any equity, is to hire a Fractional Chief Growth Officer (FCGO). You will notice we did not suggest you hire a Fractional Chief Marketing Officer. As a startup, with limited resources, you probably can't afford to hire a high-level professional for both Marketing and Sales. A Fractional Chief Growth Officer has been in charge of both departments and can equally serve you in a dual capacity.
An FCGO will bring to the table an expertise you could not begin to afford. They will be able to jump right in, and be immediately effective, because they have been there and done that role and have experience growing similar organizations. As far as their cost, because you are hiring them on a fractional basis, they can be extremely cost-effective.
A Fractional CGO can do much more than bring you exceptional marketing and sales results. They bring C-Suite experience and can offer an objective view on many business issues. They are also ideally situated to help you find and sell investors. We have worked with several young startups whose only request was to position them so an investor saw them as a suitable investment. Besides driving revenue and brand management necessary to be seen as a fit candidate, we have identified investor candidates and helped pitch the opportunity to them.
To learn more about how a Fractional CGO can help your startup, read our blog on their role.
Cost of FCGO - How much a Fractional CMO/CGO costs depends on the capabilities of the individual and who you ask. We have found that many CMOs/CGOs price themselves out of the market by asking two hundred to three hundred dollars per hour. Startups and small companies simply cannot afford this, even on a fractional basis.
At Prevail Marketing, we established our CMO/CGO program so that we sit on the same side of the table as the founder, owners, and senior management. We have established pricing that is affordable and fair. Our pricing can be done on an hourly or a fixed fee basis. While we typically charge between $100 - $150/hour, this can be significantly reduced through a commission component or a small equity position (e.g., 1-2%). We also have structured a fixed monthly fee and have reduced the hourly rate for a guaranteed monthly retainer.
Founders of startups face numerous challenges, but the lack of marketing and sales expertise should not be one of them. Don't let your hard work and countless hours spent fall short, because you failed to backstop the lack of expertise in these areas.
Remember, building a successful startup takes time, effort, and a willingness to adapt. Stay focused, stay motivated, and never stop learning. You don't have to venture this path alone. Come back to Prevail Marketing often, as we will share with you strategies, campaigns, and ideas that we are implementing for our funded startup clients.
If you are ready to discuss hiring a Fractional Chief Growth Officer, we are also here to help. We can be very adaptable in finding a compensation equation that works for both parties. Just click on the CTA below, and we will contact you.
Wishing you all the best on your entrepreneurial journey!