ABSORB #005

ABSORB #005

21 December 2020

It’s been an incredible year that keeps throwing new challenges for development. Our ability to adapt quickly is key to survive and thrive! With this in mind, I’ve curated reads and videos that will help in planning and putting it to practice.

Someone’s sitting in the shade today because someone planted a tree a long time ago.

~ Warren Buffett

Startups

Five ways to build a $100 million business

Christoph Janz from Point Nine delivers a masterpiece for founders. No matter what kind of business you are building, you must read this to know what kind of customers you are going after and build the customer acquisition strategy accordingly. And while I came across this framework a few years ago, it’s a good reminder. He categorises customers based on ARPA i.e. Average Revenue Per Account per year, then comes up with number of customers one would need to hit $100Mn in annual revenues.

Key Takeaways

  • 5 ways to build $100 million business that has been expanded to 8 ways in the last few years.
  • Hunting Flies – 10 million active consumers who you monetize at $10+ per year each by selling ads. In order to get to 10 million active users you need roughly 100 million people who download your app or use your website. Eg: Instagram, WhatsApp, Brainly, Yelp.
  • Hunting Mice – To acquire one million consumers or prosumers who pay you roughly $100 per year, you need to get at least 10-20 million people to try your application. Eg: MailChimp and Evernote.
  • Hunting Rabbits – Most SaaS companies that target small businesses charge something around $50-100 per month, so their ARPA per year is around $1k. To acquire 100,000 of these businesses you need something in the order of 0.5-2 million trial signups, depending on your conversion rate. Let’s assume that your CLTV (customer lifetime value) is $2,700 (assuming an average customer lifetime of three years and a gross margin of 90%) and that you want your CLTV to be 4x your CACs (customer acquisition costs). In that case you can spend $675 to acquire a customer. If your signup-to-paying conversion rate is 10% that means you can spend $67.50 per signup (assuming a no-touch sales model where your CACs can go entirely into lead generation).
  • Hunting Deers – If you’re a deer hunter and want to acquire 10,000 customers paying you $10k per year each, most of the rabbit hunting tactics still apply. An ARPA of $10k per year usually isn’t enough to make traditional enterprise field sales work, and you likely still have to get 100,000 or more leads.
  • Hunting Elephants – Like it or not, most of the biggest SaaS companies derive most of their revenues from selling expensive subscriptions to large enterprises. Workday, Veeva, SuccessFactors, Salesforce.com, you name it. Jason M. Lemkin, another friend and co-investor, once said (I’m quoting from memory) that if you have a good solution for a significant problem experienced by large enterprises, building a $100 million business is relatively straightforward. After all, you only need 1,000 customers, and the $100k you need from each of them is less than they spend on the salary of one executive.
So, what are you hunting?

Development

A Tactical Guide to Managing Up

“People don’t quit a job, they quit a boss.” At Adeption, we’ve found that roughly 40% of the people quit their jobs because of their immediate supervisor.

Key Takeaways

  • Like any relationship, that of the manager and their report is a two-way street, and the task of navigating the often bumpy road along a startup’s course falls on both parties.
  • Managing up is a rather amorphous category, encompassing everything from developing rapport and trust, decision-making, communication style, conflict management and goal-setting with higher-ups.
  • Make sure you and your manager have the same answers to these two key questions: 1) What is success for me personally? 2) What is success for my manager’s team? If you aren’t sure your manager knows what you care about, or you don’t know what your manager cares about, ask in your next 1:1.
  • Make an effort to understand what is important to your manager and why. When you make this investment, you can provide them with a steady drumbeat of the things they care about — whether it’s metrics, milestones, progress reports, testimonials from your cross-functional partners, and so on. 
  • Often people are so focused on solving their own problems, they don’t think about how their proposed solutions create more problems one level up. What are your boss’s problems and how can you solve them?
  • Early on, share with your manager what motivates you and drives you to do great work — including what’s important to you outside of work and what your long-term goals are. This will help keep your morale and productivity high and ensure your long-term happiness and retention. Great people can easily falter or burn out if their manager doesn’t know their ‘work love language’.
  • Observe how your manager listens.
  • For the micro-managers, she leans on concise-but-full updates detailing everything she’s working on (and then some) to make sure they’re always in the loop. When I have a manager who’s more hands off, I share with them my team’s wins and challenges, with a focus specifically on the latter when I need their support.
  • There’s nothing managers hate more than surprises. At the first sign of something not going according to plan, just be upfront and communicate clearly.
  • Don’t save up a big topic until you feel you have all the answers — anything worthwhile takes time to build. 
  • When asking my manager or a senior stakeholder for their feedback on an idea, I come up with two-to-three options and create a table that outlines the lift and resources needed, pros and cons, and other stakeholders that need to be brought in.
  • If you need more time for strategic thinking, help getting unblocked, or just a thought partner on a thorny problem — ask for it. Your manager is busy and not a mindreader, so they likely don’t know what you need unless you are explicit about it.
  • Sometimes feedback can feel like a personal attack, because our identities can be so closely intertwined with the work we deliver. Do your best to decouple yourself from the work, and try to understand what your manager is struggling with. Hear what they want to be different, and make intentional steps towards correcting that behavior. Listening well the first time can help ensure that the constructive feedback turns into praise the next time around.
  • If you ever find yourself wanting to ‘talk shit’ to someone else about your manager, it’s something you should bring up to your manager in a productive way.
  • You cannot add value to your manager if you don’t believe your manager is treating you well. So it’s important to ‘train your manager’ from the very beginning. For example, I did not answer partner emails after 7pm on weeknights and weekends (except for emergencies) because I didn’t want them to believe I was available 24/7. I never told them this explicitly — I simply used my actions to shape their expectations.

Investments

Watch Peter Lynch, one of the greatest investors of all time, on the Stock market in a lecture back from 1997. Over the Covid-19 lockdown, I read couple of his books that I found immensely insightful and useful to come up with my own way to analyze companies and build conviction.

Key Takeaways

  • Know what you own – explain it to an 11 year old why you own the company.
  • It’s futile to predict the economy, interest rate and inflation. Covid-19 has pretty much shot down all predictions across the board. Know and deal with the facts.
  • You have plenty of time. If you bought Walmart 10 years after it went public, you’d still make a lot of money.
  • If it went down this low, it can’t go down any further. Well… it can!
  • If it has gone this high already, it can’t go any higher. Well… it can!
  • It’s $3/share, how much can I lose? Well… all of your money!
  • It is always darkest before the dawn. It can get worse… It’s always darkest before pitch black!
  • I’ll sell on the rebound to $10. Just saying that you will buy when it goes down to $6 to sell at $10, the stock doesn’t know it so it may not go back up to $10.
  • You cannot lose money on stock you don’t own (even if that stock goes up a lot).
  • Avoid long shots. It doesn’t work.
  • Management is the single most important thing about a company. But it very hard to know. Buy the story.

Wealth

Your Financial Services A-Team

Saul Muscardin from North Coast Wealth Builders shares how to create a support system – a team of advisors – to help manage personal finance. Research who all should be a part of your A-team.

Key Takeaways

  • Where your partner, friends & family provide the emotional support you’ll need, your professional advisors provide the specific know-how, and with the right combination, you’ll be unstoppable!
  • A financial advisor is the equivalent of your builder, and a good one will make your life a breeze. A financial advisor will help you qualify & quantify your financial goals, design and execute a strategy to help you achieve them.
  • A good accountant is absolutely indispensable. The amount of ‘hidden’ tax benefits I’ve uncovered over the years through working with my accountant has been amazing.
  • For the purposes of financial planning a solicitor will largely be used in the areas of wills & estate planning. This involves ensuring that wills & powers of attorney are in place, and that your financial assets can be passed to your nominated beneficiaries in the most safe and tax effective fashion.
  • If real-estate forms part of your investment strategy, then you’ll no doubt need to work with a mortgage broker (or directly with a bank) at some stage to secure finance. Mortgage brokers help clients find the right finance for their particular purpose.
  • If you’re buying or selling real estate as part of your financial strategy, get a reliable real estate agent.
  • Conveyancing is the branch of law that deals with property transfer and ownership. A good conveyor will make what can be a complex and stressful transaction a breeze. 

Sports & Fitness

The Terminator

Some legends walk among us. They’re not born, they’re built. Legends are made from iron and sweat, mind and muscle, blood and vision, and victory. Watch one of the greatest bodybuilders of all time – Arnold Schwarzenegger’s Blueprint Training Program.
About the Author
I am curious about startups, investments, and development.

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