Selling a few products isn't proof of a viable business.
‘I went on a wine education course and loved how I felt afterwards; I wanted to share that with other people. I tried to prove Wine List was a good idea – I put together an initial part of the product and tried to sell 50. And because my background is in marketing, I was able to do that. That, to me, was the signal that I should do this, but I didn't really set a success criteria. You can sell 100 of anything. But how fast does that happen in relation to other solutions? How much do people talk about it to other people? How fast does the waiting list evolve organically? Now I'm going to constantly think of ideas and create a framework in advance for what success looks like.’
Realize when a reason is an excuse.
‘Chris, our growth guy, was constantly saying we didn't have product-market fit – and I made too many excuses for it. [Startup advisor and entrepreneur] Sean Ellis' noted framework for product-market fit involves asking customers how disappointed they'd be if you disappeared: if 40% tell you they'd be very disappointed, you've got it. If it's less than 40%, you haven't. We ran this process with our entire customer base four times, and with a dozen cohorts on a monthly basis. We never got above 25%. I said: well most of our customers are British men in their 40s or 50s – how many of them would ever describe themselves as being very disappointed if a company disappeared? Those were signals I ignored.’
Be sure to confront your dependencies.
‘I had this fear about turning off marketing. Most of our customer acquisition came from Facebook, Google or Instagram; I knew deep down that, if we turned it off, our new customer numbers would fall towards zero. If you have product-market fit, you'll have a core customer base who continue to use you over time. We always had churn – and it was always much higher than we wanted it to be. When we got to July 2021 and money in the bank was really low, we turned marketing off and my exact fear happened. We went from £70,000 of monthly revenue down to £50,000 in the space of a month, because of high churn and a lack of new users.’
Don't get misled by future projections.
‘As a founder in a VC-type market, you're selling a future story. In our business, which is, at its core, selling wine to people, when you have 100,000 customers the margins are good; when you have 100 customers they're terrible. Our average margin over two and a half years was 15%. I fell down a path of thinking about the future: if we had future margins based on today's retention and costs, we'd be a really good business. But as the pandemic waned, retention gradually went down and our customer acquisition costs started going up. The state we were in remained similar: customers being too expensive for how much we were getting from them.’
Some hires are worth the money.
‘There were two hires we didn't make because I thought: if we spend that money, it cuts off too much runway. One was a software engineer. Salaries started at £70k to £80k for somebody mid-level, so we decided to go down the no-code route instead. Even though it seemed like a simple product, the back end was complicated and took four to five months to build. We also decided not to hire an operations manager – we thought being lean was good. But it meant that a lot of projects didn't get off the ground as we missed a senior person's shortcuts, learnings and expertise. We could have attacked problems so much faster if we had hired for those roles. Fear of failure was subconsciously paralyzing because it made me prioritize the length of time I was doing this for. I thought: the longer we're alive, the more chance of success we'll have.’
This article was first published in Courier issue 46, April/May 2022. To purchase the issue or become a subscriber, head to our webshop.