Most online businesses are very clear why they exist – to solve a problem for their customers. If they have raised funds (internally or through an angel/VC) they have convinced their stakeholders of their business model, passion of the initial team/founders and potential of their business/idea. However, the basics of business to thrive remain the same whether online or offline. Below, I’ve attempted to highlight the top 3 measure that must also be considered before deciding to start up or invest in a business.
My first lesson on joining business was that cash flows decide if you will exist in the next financial period. Cash flow from the core business is a vital sign of the health of the business, but if the business requires high capital expenditure every year then it must be weighed against the cash flows from the core business. Despite having low profitability companies like Amazon.com or Tesco UK have large net positive cash flows due to positive working capital and command large valuations.
One of the biggest challenges for companies is to find the right talent to execute plans of growth. Very little importance is given to human capital compared to financial capital. Worksheets have fine details of every financial number, but broad plans of recruitments seem to be missing. In the early days of Microsoft, Steve Balmer’s main job was to get the recruiting machine running for Microsoft to grow at an explosive rate.
Startups can’t afford expensive marketing ideas, the increased use of social media has made it easy for companies to market at almost no cost. Expensive equity must be preserved for product development and not spent on non-measurable advertisements in TV, print or events. Spread the word about the company, take up moon shot projects (the drone delivery project at amazon gave it free press around the world), participate at industry events, visit exhibitions, startup circles, use founder charisma (Richard Brandson, anyone?) to get press coverage.