COVID-19 upended so many aspects of our lives, including where we work. Now, one of the biggest questions on many startup leaders’ minds is what to do about their commercial office spaces.
Thanks to advances in teleconferencing technology, many businesses have learned they don’t need to operate out of a building to succeed. Employees are still productive from afar, and many people enjoy the flexibility that comes with working at home.
On the other hand, there are benefits of having your team in one place. It’s easier to build relationships, brainstorm, and communicate. In-person interaction is often less exhausting than sitting on Zoom for hours at a time.
So, how should we think about the future of the workplace?
Should startup leaders plan for remote work...forever?
Or, do we wait for a full return to the office?
These are tricky questions that we’ll try to tackle in this post.
Although several companies have embraced work-from-home arrangements forever (e.g., Twitter and Facebook), it’s highly unlikely that the physical workplace will disappear for several reasons.
First, many people thrive and feed off the energy of being in an office. They enjoy engaging with coworkers and maintaining separation between their working and personal lives. Meetings and brainstorming sessions are also more fluid when people can work off one another’s verbal cues and body language.
Second, we’ve learned that working from home is isolating and lonely for a lot of people. As the novelty of remote work wore off, depression and anxiety increased during quarantine for those who otherwise leaned on the daily social contact provided through their workplaces.
Furthermore, working from home is difficult for parents when children aren’t in school. They either have to hire outside help or enroll kids in extracurricular activities, which can be hard depending on the social distancing mandates of a particular region.
For these reasons, it’s hard to imagine a permanent transition to remote work. Many leaders and workers have come to appreciate what they once had in the physical workplace. Consequently, what we’re likely to see going forward is a hybrid model in which commercial office spaces serve as a central hub for workers to gather when needed.
Companies like WeWork, Industrious, and Knotel set the stage for flexible and shared professional workspaces. Before COVID-19, many startups leased offices from these coworking vendors to take advantage of shared infrastructure, such as high-speed WiFi, bathrooms, and common spaces, without having to invest their own capital.
In a post-COVID world, we’re likely to see many companies downsize their commercial real estate holdings and convert to a coworking-like model where offices are reserved by employees who need to come into work. Workplaces will be more fluid and serve as physical spaces for those who want access on a part-time basis.
Additionally, some predict that companies will swap their expensive, downtown real estate for smaller satellite offices as workforces spread out to the suburbs. Rather than ask all employees to commute in every day, companies can instead provide regional hubs that workers may visit when they want to be in a more professional setting.
The new “normal” will consist of a hybrid of approaches in which workers are given flexibility over where and when they work. In many cases, this will mean smaller commercial footprints and in-office workforce rotations. Fast-growing startups need to keep this in mind as they grow.
Of course, the right answer depends on your specific needs and business. If you value having a globally diverse workforce, you may never need to lease physical office space again. You can embrace remote work and invest in practices that help you ensure success along that path.
If your team values in-person engagement and appreciates having a unique work environment, it may still make sense to lease commercial space. Be mindful of your growth projections and how your employee count needs to ramp over time.
When you become big enough to justify developing or buying your own building, remember that you don’t have to have desks for every individual. Thanks to modern technology and shifting expectations, you can plan to host only a proportion of your company at any given time and implement a reservation system to manage who comes in.
Ultimately, the decision is yours. We trust you’ll make the right one for your startup!
How to Think About the Future Workplace
Fall is in full swing, which means the end of the year is fast approaching! Although it may feel far off, 2021 is right around the corner. You and your team must finish strong, which can be hard with holidays, vacations, and end-of-year celebrations.
In this post, we share a few strategies to help you accelerate, rather than decelerate, towards December 31st. By taking these to heart, you can capture key learnings from 2020, despite all its challenges, and set yourself up for success next year.
Many business leaders want to treat 2020 as an outlier marked by exceptional circumstances. While this may be true, there is still a lot we can learn. Resist the temptation to dismiss the hardships you have faced since the spring. Instead, dig in and study how you managed your team throughout the pandemic:
Getting to the bottom of these types of questions will help you grow significantly. Depending on the size of your group, it might make sense to set up one-on-one meetings with every person to gather feedback. Or, you can host a series of bigger meetings to reflect as a team on successes and failures that were specific to the year.
Get started on this now, as it only gets harder to make the time for such conversations. End-of-the-year goals can be all-consuming!
Separately from evaluating performance in 2020, you need to develop a game plan for 2021. Don’t enter the year without clear goals and well-articulated strategic priorities. You may feel like such efforts are pointless, given how fast things can change with COVID-19. However, going through the process will ensure your entire team is aligned and rowing in the same direction.
Reiterate to everyone why your startup exists and what value you bring to the world. Remind the team of what makes your business unique and why it’s so critical that you succeed. Furthermore, make sure everyone understands the key performance metrics and quantifiable goals you are chasing over the next 12 months. It’s important to assimilate these tangible goals into the broader vision you have for the startup.
Another way to inject your team with energy before the end of the year is to bring in exciting talent. Now is actually a great time to recruit and plug any gaps you have on staff before sprinting into the new year.
At a time when productivity typically dips, new team members can provide a jolt of momentum, even when they are still ramping up. The right hires will bring fresh ideas and perspectives with them, freeing your team from any ruts that developed over the last few months.
Additionally, you may find that you have enough time to properly train and onboard recruits if your business generally slows down the holiday season. Keep in mind that such a luxury vanishes as soon January hits, so it’s vital to get this done while you can.
Need Help Finding Your Next Great Hire?
At Funded.club, we work with startups all over the world to help leaders find the perfect hires for their businesses. While you focus on preparing for 2021, our team can identify and vet high-quality talent from all over the world who would fit right alongside your existing team.
Want to learn more about our fixed-fee recruiting services for fast-growing startups?
Schedule a free 30-min call with our founder and CEO, Ray Gibson, today.
How to Push Strong to the End of the Year
Use Sprints for Much More than Software Development
As a startup leader, you’ve likely heard of “sprints” and “scrums” before, especially if you operate in the tech sector. Both are related to agile methodology, a project management process by which nimble, cross-functional teams complete tightly scoped projects. In agile development, rapid iteration and constant feedback are key.
Fortunately, the agile approach can be valuable outside of software development as well. By creating short sprints around specific business problems, you can manage non-tech employees in a similar way.
For example, your marketing team could use agile methodology to design a new funnel for an untapped customer segment. Your business development team could plan a sprint around identifying which market to enter next. You could even use a sprint to choose a new CRM or plan your annual company outing.
Sprints work so well because you can quickly incorporate feedback into whatever process you’re running. And when something doesn’t work, you can easily move on or pivot. As a startup, this type of flexible project management can help you respond to trends and organize limited resources around open-ended questions.
Below, we provide an example of how a startup might organize a week-long sprint. Of course, you could adapt this model to your unique needs, team dynamics, and business.
An Example Business Sprint
For a week-long sprint to work well, the problem you are trying to solve should be small. Don’t bite off more than you can chew. Otherwise, your work will be difficult to assess and progress will be hard to appreciate.
For example, only dig into one niche industry that you are considering entering or evaluate a single customer segment you are trying to win over. Anything more will feel overwhelming and impossible to dissect.
Orient your team to the new goal or objective. Encourage everyone to conduct research and familiarize themselves with the problem you’re trying to solve. Search for case studies or stories that highlight how other startups have approached a similar issue. Set clear boundaries and expectations around what you are hoping to accomplish by the end of the week.
On Tuesday, ideate around possible solutions. By now, your team has had time to think about what your startup could reasonably accomplish. Continuing with one of the examples above, if you’re trying to find a niche market to enter, have individuals present one idea each, choose a frontrunner, and go with it. Don’t try to evaluate several niches at once.
With your plan of attack set, build a draft prototype, presentation, or proposal. Invest an entire day in creating something sophisticated enough that you can reasonably study. If you are trying to build a business case around entering a niche market, gather the most important data points first to get an early sense of what the “right” answer is.
Test your ideas, solutions, proposals, and prototypes with the team. Run through different scenarios, pressure test assumptions, and fill in apparent gaps with collective brainstorming. Acknowledge what information you are missing and what you would do if you had more time.
At the end of the week, gather feedback from others in the company. Bring together a group of diverse teammates outside of the sprint who can provide a wide range of perspectives on your work. They can point out issues you may have overlooked or validate the potential of what you are pursuing. After Friday, you should know whether to start fresh the next week or press on with whatever hypothesis you want to test further.
Experiment with Sprints Today
Before the end of the year, try a few week-long sprints to see if approaching other business problems in an agile way works for your startup. You have little to lose and a lot to gain by applying agile methodology to tackle ambiguous problems.
You may discover that you and your team like working in such a manner where iteration and feedback are paramount. After all, your software developers shouldn’t have all of the fun ;)
Worried About Building a Company During a Recession? Don’t Be
The current pandemic has upended the lives of millions of people across the globe. Companies of all sizes are struggling to stay afloat as governments aim to strike a balance between containing COVID and keeping businesses open. Unfortunately, there is no playbook for how we should navigate such uncertain waters.
However, history tells us that there is ample opportunity for startups in times of crisis. Those who survive turbulent seasons tend to emerge stronger and more resilient overall. You can still accomplish great things over the next year, though your success might look different than how you originally anticipated.
In this post, we hope to encourage you and reinvigorate the optimistic spirit that initially pushed you into the startup world. At Funded.club, we sincerely believe you can overcome this pandemic.
Many of Today’s Strongest Companies Were Born in Recessions
We often forget that many of the most successful companies in the world were founded during major crises. According to this Business Insider article, General Motors, Burger King, Trader Joe’s, Microsoft, Uber, and Airbnb, to name a few, were all born during recessions. Most of these companies have now survived multiple worldwide crises.
Companies that get through recessions have tremendous staying power because they learn how to fight through adversity. On top of that, those who make it to the other side have fewer competitors to outmaneuver. The playing field opens up significantly, leaving plenty of room for survivors to innovate and grow.
Furthermore, recessions create attractive buying opportunities. Real estate, office equipment, and acquisition targets tend to get less expensive as companies shed inventory and grow more desperate. High-quality talent is also available at a discount because people are willing to accept less money in exchange for job security.
Over the last 100 years, we’ve seen so many examples of smart and savvy leaders taking advantage of recessions to build foundations upon which to grow great companies. Keep this in mind as you battle anxieties related to running a startup under COVID.
Trials Force Leaders to Innovate
“Necessity is the mother of invention.”
This quote rings true across many areas of life, including in business. It is times like these that force leaders to be creative, efficient, and careful - a curious combination of traits that often yields positive results. Those who recklessly push forward without adapting quickly to changing circumstances are the ones who often don’t survive to see better days.
When cash flow is tight, startups have to hunker down and find ways to create the same or more value with fewer resources. Rather than take on additional debt, think first about how you can achieve your startup’s objectives without borrowing more money. You might be surprised at what you come up with when you’re backed into a corner. You’ll also be much more thoughtful about every dollar that you spend.
Keep in mind that your production doesn’t have to slow, even if your team shrinks. Consider how you can automate manual tasks that currently consume too much of your team’s energy, and drop activities that aren’t absolutely necessary. Say “no” often and focus intensely on your most important goals.
In doing so, you may realize that you were stretched too thin when times were good. When you look back on this season a year from now, you may discover that your most innovative and important ideas surfaced out of such dire circumstances.
Remote Work Is Effective
One of the biggest revelations to come out of COVID is that remote work can be highly effective for many types of businesses. Although remote work can’t replace every element of the in-office experience, it is keeping many companies alive. Embrace remote work while it’s here and cut ties with expensive commercial real estate. You will be able to find another office space that you love.
What matters most right now is your ability to conserve cash and maintain productivity with your workforce scattered all over the city, country, or world. Take the time to study what experts say on how to keep employees motivated when they can’t share physical spaces. No matter how unnatural they feel, implement these strategies.
Of course, there are startups out there that don’t have the luxury of working remotely. But for those who can, remote work is a luxury that many businesses in the past could not take advantage of when they were struggling through past crises. Lean into remote work.
You Can Do It
To be clear, we aren’t dismissing the difficulty of building a startup right now. We understand how hard it is to stay motivated and encouraged. But, we are all fortunate enough to be able to look back at history and see how today’s most impressive leaders were able to get their companies through various trials and tribulations. And you can be someone others look back on one day for inspiration. Keep fighting.
What are the Most Important Metrics for a Young Startup to Track?
For any business, understanding revenue, expenses, and profitability are crucial. However, there are more nuanced metrics that companies should track.
Early-stage startups, especially, should measure themselves against certain benchmarks to ensure they are progressing in a positive direction. Many times, founders will focus only on one or two statistics and lose sight of other critical parts of the business. As a result, they discover major problems in their operating or financial model after it’s too late to pivot.
Below, we discuss the 8 most important metrics for early-stage startups to track regularly:
Each of these can be calculated in a slightly different way, depending on the nature of the business. Startup leaders must ensure their teams understand exactly what to measure, what the goals are, and what levers to pull to be successful.
1. Total Addressable Market
Total Addressable Market (TAM) is a measure of how much revenue opportunity exists for a particular product or service. Calculating TAM is important when going into fundraising conversations, as investors want to estimate their potential return on invested capital.
TAM can change over time due to disruptive competitor offerings, new technologies, or government regulation. For this reason, it can be valuable for startups to revisit TAM often.
Anyone with a basic understanding of business knows that monitoring revenue is essential. In the startup world, there are several helpful ways to measure revenue.
Leaders can calculate recurring revenue on a monthly, quarterly, or annual basis. They can track revenue per customer or dig into deferred revenues to ensure cash flow is stable. The most important takeaway here is to fit revenue calculations to fit the underlying business model.
Margin is most commonly calculated by subtracting cost of goods sold (COGS) and operating expenses from top-line revenue. If your startup’s margin is not positive, you either have to increase revenues or decrease costs. Otherwise, the long-term sustainability of your business is in jeopardy.
4. Cash Burn Rate
The Cash Burn Rate (CBR) is a reflection of how quickly a startup uses its cash and cash reserves. In other words, it shows how much money a company loses (AKA “negative cash flow”) over a defined interval.
The burn rate is crucial for early-stage businesses that have yet to turn a cash flow corner. It helps founders understand how much time they have left before they run out of capital.
5. Customer Acquisition Cost
Customer Acquisition Cost (CAC) measures how much money a startup has to spend to win a new paying customer. Businesses typically calculate CAC using the formula below:
(marketing + sales spend) / new customers gained over specified period
Generally, the lower CAC is, the better. For early-stage startups, keeping track of CAC is important because it helps founders quickly assess whether they can attract new buyers easily enough to justify the cost of delivering a product or service.
6. Retention Rate
Retention Rate calculates the proportion of customers that stay with a business over time. Determining retention rate depends on the startup’s business model. However, one broad way to think about the metric is with the following formula:
(total customers - new customers) / customers at the start of the measurement period
Calculating churn may also make sense for startups to measure how frequently the company loses customers. By increasing retention and minimizing churn, startups can boost the lifetime value of their accounts, which is the next metric!
7. Lifetime Value
Lifetime value tells leaders how much value they can expect to earn from a customer or account throughout the entirety of a relationship. “Value” can take on different meanings. Some startups prefer to look at how much revenue a customer generates, while others prefer profitability.
Understanding lifetime value can inform decisions around how much a startup can spend to acquire new customers (re: CAC). Additionally, lifetime value may be an indirect indicator of how much customers value your product. A low lifetime value relative to the product’s price might mean customers don’t think they are getting enough for what they pay.
8. Viral Coefficient
The Viral Coefficient is used to measure a startup’s organic growth. It captures how excited and satisfied users are by quantifying their willingness to share a product or service with others.
Startups that want to calculate the viral coefficient can do so by taking an initial pool of customers, counting how many invitations they send to others, and tracking what percentage of those invitations convert into new customers.
Overall, there are many other ways to measure the financial and operational health of a young startup. However, these eight are essential for founders to understand. Customize them to your unique model and make sure your teams have everything they need to track them successfully!
Ray Gibson is founder and CEO of Funded.club. He brings 20 years of experience in recruiting across Europe, North America and Asia and 5 years running his own startups.