How can an entrepreneur can master the art of execution?

(This was my answer to a question on Quora)

Execution or good quality implementation of a concept in the marketplace is not something that you can learn in books. It is something that will have to be done on the ground in the marketplace.

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The key to good execution is to first be able to have a very, very clear and comprehensive view on what all needs to be done. I ask my startups to ‘see the film in their mind’ … to visualise every activity, every process.

When you visualise it and see it as a film playing in your mind, you will be able to get a clear view of the complexities that will be involved in managing that process. It will give you clues on the resources, infrastructure, processes and people that will be required to implement that well. And as you estimate the infrastructure, people and resources well, the better the quality of the execution will be if you have a process that is planned well and has built into it the tools for feedback, measurement, analytics, tracking and adjustment.

Let me illustrate with an example. : If your startup is selling something to schools, then don’t just make assumptions that “my sales person will be able to convert 3 schools in a month”. Even if that is an accurate assessment, how you arrive at that number is critical in panning the operations so that the on-ground execution is flawless because it was designed practically.

In this example, I would imagine the following scenarios:

  • So, schools are closed for holidays say 2-3 months in a year (in some schools while the students are off, the staff may be available during some vacations too).
  • I would imagine that one sales person will spend 1-2 hours in each school, including waiting time outside the procurement person’s office or the principal’s office.
  • Hence, I would imagine that at best the sales person can meet no more than 2-3 schools a day… assuming that he goes on a sales call 5 days a week, then the sales person could meet 10-15 visits a week, and therefore about 40 – 60 visits a month
  • Assuming that the success rate to proceed to next level of discussions is 10%, the sales person is likely to have 4-6 hot leads in a month.
  • Even if the principal likes your solution, he/she is usually not the decision maker… and you may need to meet a committee (i.e. if you miss this month’s committee meeting, it may be a month before you get an audience)
  • If the committee approves it, then the cost negotiations may be done again by the chairman/owner or someone representing the chairman/owner. And for this negotiation, the sales person may need to also take along someone more senior in the company.
  • If it takes 4-5 meetings to convince different layers of decision makers, given the difficulty in getting meeting times coordinated, this may be a 1 – 3 month long process, depending on how much the client is interested in the solution.
  • Given all of this, in the initial period, the sales person may be able to close barely one client in the initial months till such time where more hot leads are getting added…. and at that stage the company may need a two-tiered sales process – one to generate leads and the other to follow-up on and close hot leads
  • In this situation, apart from the sales person planning his target customers, the startup may need someone in the office to collect a database, perhaps it may be more efficient for someone in the office to centrally call up different schools and set up meetings for the sales persons, the startup will need someone to do the sales report collation activity….. and certainly someone to track leads so that follow-ups with warm and hot leads are happening regularly.

Startups falter in execution primarily because the fail to assess the complexities that are involved in rolling out their concept in the market place. There is an enthusiasm that makes entrepreneurs believe a more rosier outcome than that is likely to be the case. They assume more efficiencies in people, they estimate that they can stretch their infrastructure more than others can, they believe that they are smarter than others and hence can do it with limited resources… and because they are fighting different wars everyday, they usually tend to ignore processes. As a result many startups end up delivering on ‘current situations’ without planning processes for scale and growth.

At the startup stage there may be no processes or some loose processes, which eventually will have to get firmed up. However as the team grows the absence of processes creates inefficiencies and chaos as each team or person attempts to manage their part of the operations in a manner that they feel appropriate. Even with the most honest intentions, such chaos cannot be good for the company.

When you company is growing is almost always the wrong time to plan for growth. You have to plan for growth to the next level when you are at a level below. Else, you will always be in the operational challenge of managing operations instead of driving growth.

Suggestions: Once the initial challenges are out of the way, the CEO has to focus on creating the processes. It has to be someone’s key responsibility area.

Also, as the startup grows, the founders have to switch roles from doers to managers. Their focus has to change from managing the day-to-day tasks to hiring the right persons to do the job. Often startups fail to do this and therefore are unable to manage the growth. They either then stagnate or become inefficient and whither away.

Suggestions: Keep looking for good people. Plan for growth before you reach the growth phase. Let go. Delegate.

What should pre-seed money be spent on?

Generally, the reason for raising funds at any stage is to be able to take the company to the next ‘phase’ of its evolution.

Most startups would go through the following phases in their journey:

  1. Concept stage – i.e. when the idea is not yet developed into a product or service, but the founders may have done a fair bit of thinking on the concept and understanding the business dynamics surrounding that idea. This is the stage where the business case is being evaluated and assumptions are made and validated – hopefully by understanding the market and speaking to customers, etc.
  2. Prototype development stage – when the concept – either a product or service – is ready for testing with a limited audience – the startup may have a few initial employees.
  3. Early-stage – when the product or service has started gaining some traction – there are a few early customers/consumers, the product and processes are being refined and fine-tuned and the building blocks for growth are being built – a small team is getting formed
  4. Growth stage – when the startup has started getting more customers, processes are getting developed, an organization structure is getting into place and the company is in an expansion mode – this is probably the time when most companies would start getting profitable

Pre-seed money would typically be raised at concept stage, and should ideally last a little beyond the prototype stage. In most cases, pre-seed stage money is used for the things that will prepare the company to attract seed capital from angel investors or from early-stage VCs i.e.

  • Understanding the business case by validating assumptions
  • In building the prototype or the first version of the product – what is called the MVP or Minimum Viable Product which will allow you to test your assumptions in the market i.e. check if your customers find the value proposition meaningful, if they feel that this product / service does fulfill their needs, etc.

At pre-seed funding stage, a startup should keep capital expenses very low – i.e. rent ACs, furniture, etc. rather than buying. Operating expenses should also be kept low – take lower salaries, work out of a shared office, multi-task, etc. This is also in your interest because the valuations are likely be very low at this stage, and hence the lower the amount you raise, the lesser your equity dilution at this stge.