Why entrepreneurs should focus on sales, not funding

Stop chasing investors and focus on your customers instead.

by Gordon McAlpine
Last Updated: 10 Feb 2017

We continually hear success stories of entrepreneurs who, within a handful of years, have grown and monetised their businesses, amassing vast fortunes in the process. But, the reality is that successes on this scale (especially in the UK) are rare and are often the brainchild of ‘geniuses’ who happen to ride the perfect wave and sell at the right time. I don’t think I’m a genius, and I suspect you don’t think you’re one either. Sadly, the statistics for normal people like us are stark:

  • 70% of start-ups never reach a turnover of £300,000 a year
  • Only 1% of start-ups ever exceed £7.5 million in annual sales
  • 90% of business start-ups fail

The current culture for most businesses keen to scale up is to focus on funding, which many entrepreneurs believe is an integral component of a successful growth strategy. This belief seems to have been imported from Silicon Valley, where entrepreneurs tend to focus on product & funding.

But Britain and Silicon Valley are not identical. I’ve recently spoken to several CEOs of ambitious UK tech firms who have confirmed the level of funding available in the UK is generally a lot less than in the US (a few million v tens of millions). In fact, UK augmented reality start-up Blippar moved to California last year to be closer to investors.

Everyone needs some seed/start-up capital, but funding is not necessarily the silver bullet to scale up your enterprise. Serial entrepreneur Luke Johnson warned of an over reliance on funding in The Sunday Times recently: ‘Sometimes it seems that an entrepreneur has arrived if his start-up has received bountiful funding from venture capitalists, even if it has modest revenues and makes large losses. Too much cash leads to waste and permits poor economic models to persist for much longer than they should.

Stick to selling

Instead of spending all your effort on pitching to investors, spend it on attracting customers. My experience is that a clear focus on selling can allow you to take control of your own growth, close sales and grow your top and bottom lines.

This sales focus essentially creates a ‘self-funding’ model which can enable you to:

  • Create a business that’s attractive to investors or potential buyers because it has robust revenues
  • Grow and exit (if that’s your intention) on your own terms and retain control (and your precious equity) along the way; and
  • Sleep well without worries or pressures from venture capitalists (VCs)

Whether you believe you are a ‘natural’ salesperson or not, a first positive step is for you and your fellow directors to step up to the plate up and do some ‘founder selling’. You are the guys with the passion and by using a consultative selling approach combining a strong proposition, good questioning skills and your passion you have the potential to impress prospects and make those all-important sales. Once you’ve mastered this stage and the first few months of high-value sales are in the bag, you can then start recruiting sales people to give your scale up a surge of momentum.

So next time you feel that you need ‘funding’ for the first time or a subsequent round, stop and consider your options. Say you're looking for around £100,000 for a couple of people and some more marketing spend - do you actually need investors to provide that money in return for equity in your business?

Or can you personally go out and make sales to that value? It’s your choice, but if you do go for the latter option not only will you protect your precious equity but you will also gain confidence in your own ability to drive your own scale up.

Scale Up Millionaire by Gordon McAlpine is out now, priced £11.99 from Rethink Press


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