One of my favorite maxims is from the autobiography of John H. Johnson, founder of Johnson Publishing Company, which published JET and Ebony magazines. Early in Johnson’s career, he worked for Harry H. Pace, CEO of Supreme Liberty Life Insurance. John was upset that Pace had negotiated a settlement with a man who owed the company money and, when Pace tried to collect it from him, was disrespectful to him.

In that moment, Pace told Johnson something he’d never forget:

If you want to succeed in business, young man, you’ve got to learn how to work with people that you don’t like. And you’ve got to learn how to compromise. After you compromise, you have to forget the past and go on to the future. For in business, you have no permanent enemies or permanent friends—only permanent interests.

This quote is powerful. It stuck with me. I took a screenshot of it, and I look at it periodically to remind me to stay focused on my interests and to work with people and compromise to work towards them—even people who aren’t my favorites. I’ve also shared that screenshot with friends when they’re working with people they don’t care for.

To get anything material accomplished in business, you can’t do it all yourself. You must work with people. Some of them you won’t like. But you must figure out how to work with them anyway, compromise, and keep progressing toward what matters to you.

A friend is starting a new company. He’s got a great vision and a great idea, but it’s been hard to get funding. He didn’t let that stop him, though. He got creative and found ways to get the computers and other things he needed.

He didn’t have any money, but he had hustle. He found a surplus organization that has stockpiles of computers and other technology assets. He worked with the staff to figure out what he needed to do for his new company to qualify to receive surplus assets. And they eventually approved him to get computers, monitors, and other expensive assets. Now, with zero dollars raised, he has the resources he needs to get his company off the ground.

My friend’s journey highlighted to me the difference between resources and resourcefulness:

• Resources – a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization to function effectively
• Resourcefulness – the ability to find quick and clever ways to overcome difficulties

Many early-stage founders focus on getting money so they can buy the resources they need to get their company off the ground. But in reality, what they need is a resourceful mindset. Entrepreneurs who are resourceful find clever ways to get the resources they need to get their company off the ground, even when they don’t have any money. They don’t take no for an answer. They think outside the box. Entrepreneurs who believe they must have money to buy the resources they need are much less likely to have outsize success or overcome the inevitable cash crunch that all entrepreneurs face at some point.

My big takeaway is that lack of money makes things harder, but it shouldn’t stop you if you’re resourceful.

Following up on yesterday’s post (see here) about the back office and recordkeeping. Another huge benefit of having good records is that it means your financial reports are accurate. If your financial reports are accurate, you make better decisions because you understand the current state of your business. Which means you can plan better for the future.

Surprisingly, many entrepreneurs don’t know the true financial health of their business. They don’t have good financial reports, or they don’t know how to read them. They make decisions based on bank balances (see here), but bank balances don’t account for unpaid liabilities.

Having accurate financial reports that provide a full picture of the business’s health is critical for entrepreneurs. And financial reports are only as good as the data and the processes that create that data. Recordkeeping and the back office are boring and seem like a cost center. But it all starts there. If you make them a priority, the trickle-down effect is a clear picture of the business’s health through accurate financials, which empowers you to understand the current state of your business and make better decisions about the future.

Recently, I had a conversation with an entrepreneur whose business is going through an audit by a government agency. He mentioned that a few years ago, he decided to pay a premium to upgrade his back office administration. That decision seemed expensive at the time, and he was reluctant to do it because of the added expense. But looking back, it’s clear that it saved him a tremendous amount of time and money in this audit, and he now realizes it was money well spent. His clean documentation has been a lifesaver in helping him smoothly navigate the audit. Because he has clean files and documents, he’s been able to quickly answer the auditors’ questions and provide supporting documentation.

To entrepreneurs who’ve found product–market fit and are growing their company, a solid back office to keep paperwork organized and create clean accounting records is important, but its value isn’t understood. As a business scales, an entrepreneur can’t be involved in everything. They transition to running the business using data and numbers generated by the business. If the numbers and data they’re fed aren’t quality, their decisions won’t be quality and the business will suffer.

In the case of this entrepreneur, having clean records is helping him run his business more efficiently with a close eye on profitability and navigate what could otherwise be a painful and costly audit.

This week I had a conversation with an early-stage founder who’s building software for micro SMBs. After being at it for several years, he’s finally hit product–market fit. He’s doing over $1m in annual recurring revenue, is cash-flow break even, and wants to raise from VC firms to accelerate growth.

As we chatted, he told me that he’s made it to several final meetings with VC firms where he presents to the entire partnership. They love the product, but they don’t understand how the go-to-market will work for micro SMBs or how big the market opportunity is. So, they pass.

This conversation reminded me of a post I wrote a few months ago (see here). There’s no tried-and-true playbook for selling to micro SMBs like there is for enterprise SaaS, so lots of people avoid it. They don’t understand how big the market is or how to find potential customers.

To me, it’s an obvious white space that people—even some VC firms—are overlooking. And to this founder, the opportunity is crystal clear. He’s dumbfounded that forward-thinking investors don’t get it.

Micro SMBs is an overlooked and great market to go after. The entrepreneurs who get it now will end up building massive businesses with diversified and loyal customer bases. By the time others realize how big this opportunity is, these early entrepreneurs will have a first-mover advantage that will be hard to compete with.

I’m rooting for this founder. He finally found one firm whose people get it. They’ve agreed to be the lead and write a large check in his fundraising round. He’s on his way!

This week, I met with an Atlanta founder who bootstrapped his 18-month-old company to over $100 million in annual recurring revenue in under 12 months, and it’s profitable. He mentioned that Lovable is the only company he’s aware of, as of today, to have reached $100 million faster than his company. They did it in eight or so months and raised venture capital.

Having a front-row seat for this founder’s journey over the last year has opened my eyes to what was once unimaginable: reaching $100 million in revenue in a year or two. Seeing how he’s been able to scale his company rapidly has expanded my thinking around what’s possible. It’s one thing to read about $100 million-in-a-year growth stories (there are more and more every week). But it’s another thing to know someone who’s doing it and hear about the ups and downs of their journey. The latter makes it real and feel obtainable.

Rapid growth on this scale isn’t a smooth ride. It’s a nonstop fire drill with stuff breaking and a chase to try to get ahead of the growth. How many of these hyper-growth companies will endure? Time will tell, but my gut tells me that founders like the one I talk to this week are smart and will find a way to not only take their companies to $1 billion in annual revenue but be around for the long haul.

I’m working with a founder on his pitch deck, and his market-size slide was one we agreed needed work. Lots of founders use a top-down approach to sizing their market. For example, they estimate the market to be $10 billion and assume they’ll capture, say, 20% of it, resulting in a total market share of $2 billion. Coming up with this is easy, but it’s not the best approach. It doesn’t add much value to the entrepreneur who did the exercise, and investors won’t put much weight on it either.

The better approach is one that’s bottom-up. I’ve written about this before (see here), and I won’t rehash everything in that post. But for entrepreneurs looking for an example of how to do a bottom-up sizing of their market, I like this blog post from Bling Capital. It’s detailed and includes a link to a market-sizing template that’s very helpful. (Note: Its site has been updated, so I’m linking to the post on Internet Archive.)

This week, I had the opportunity to catch up with an entrepreneur who has an idea-stage company. He and his cofounders have built an MVP and are now looking to raise money from investors and acquire customers. When a seasoned entrepreneur and I chatted with him, both of us zeroed in on a material issue: he couldn’t quickly and concisely articulate the problem his product solves.

We brought this to his attention, and he agreed that he and his other cofounders need to get specific about the problem. When I talked to him a few days later, they’d spent significant time debating the point. He presented the new problem statement to me. It was better, but still not clear. They’re back working on it again.

A business exists to solve a problem for customers. If the solution is good, it creates value for customers by resolving their problem and the customers pay the business for the value it created. It’s that simple.

If a business isn’t clear on what problem it’s solving, customers won’t be clear on how the business can help them. They’re less likely to buy.

My point is that clarifying the problem is a crucial step. The problem is the entire reason the business exists. It’s the foundation of the business. Without clarity about the problem, the business is built on a weak foundation and everything about building the company becomes significantly harder (it was never going to be easy).

If you can’t articulate the problem you’re solving in a way anyone can understand—in one sentence—ask yourself, What problem am I really solving?

This week, a founder wanted feedback on her sales pitch deck, so I sat in on her pitch. The company has hundreds of thousands in revenue from enterprise clients and product–market fit. The pitch deck was visually impressive, and the value proposition made sense. But I noticed a glaring problem with her pitch: her messaging wasn’t clear. Specifically, when I asked questions, it became apparent that the problem she’s solving is slightly different than what’s in her sales pitch. So the pitch isn’t as effective as it could be.

You might be thinking that your messaging and your sales pitch are the same, but they’re not. Your messaging is a clear articulation of what problem you solve, how you solve it, and why your audience should care. It quickly explains why your company exists and how it adds value. Having a clear message is important because it becomes the basis of lots of critical fundamentals of the company: the recruiting pitch, the investor pitch, the sales pitch, etc. Without clarity, everything built on top of the messaging is less effective, which is what this founder is experiencing.

I think there’s something to be said for founders working on their messaging independently, before beginning to use it in other collateral. Many founders start working on their messaging when they begin building a pitch for investors or customers. But I think messaging is so critical that founders should get clarity on it far in advance of building a pitch. They should clarify their messaging to gain clarity in their minds. If a founder has clarity on the messaging, they’re more confident, which permeates everything else they do. It makes many other facets of company building easier (not easy). For example, it’s easier to close deals with customers, recruit the right talent, and raise growth capital from investors.

This week I chatted with a founder about his fundraise and his longer-term goal. He told me his goal is to build and sell his company. I thought, his company will be built to sell. I asked him a few clarifying questions and learned that his true goal is to have a large enough cash position that he can pursue his other passions and ideas.

Selling a company isn’t a guarantee. A lot of external factors determine if (1) a transaction is possible and (2) if it’s financially feasible to sell the company.

Since 1981, we’ve been in an environment heavy in acquisitions, and it’s all some founders know. However, I’d argue that this is largely a function of interest rates on 10-year U.S. Treasuries, which dropped from almost 16% to 0.5% in 2020 and have since risen to about 4.25% today. Said differently, interest rates were falling, or historically low, for roughly 40 years, which contributed to more borrowing, which led to more acquisitions. People borrowed money, and some of them bought companies with it.

I can’t predict what rates will do going forward, but 40 more years of declining rates seems highly unlikely.

That having been said, I believe that building a company that’s self-sustaining and that generates positive cash flow is a more effective strategy. If customers love the product and it’s generating cash flow, the owner has several options. He can keep the company and reinvest the profits inside or outside the company. If the environment is right for acquisitions, the company likely is more attractive and can command a premium from a buyer because the owner doesn’t “need” to sell.

When you build a company focused on creating sustainable value for customers and cash flow for the long term, your decision process is a lot different. You’re more likely to build something that can withstand whatever external factors the world throws at it. If you build something to sell, you can do everything “right” but still fail to sell simply because outside factors, such as interest rates, create poor market conditions and timing.