Congratulations on closing your funding round. Sure, it was a long and hectic process… Finally, you are here… You are funded for the next 18 months. Some of your fellow “startuppers” are still trying to convince the Angel Network, Accelerators, Incubators, VCs… but you have passed that stage. Maybe it is a validation of your sales skills, your business model, your team or a combination of some of these qualities. But, before you start to celebrate let’s have this conversation…
I am not sure what you told your investors, but one thing I am sure of; it’s not the time to change your house address from Ojodu Berger to Lekki. Neither is it the time to buy a new car. Definitely not the time to marry a new wife! You might be wondering if you should get a bigger office at a prime location, please don’t!
Closing a funding round to me sounds like admitting new investors into your business. These investors are hoping to earn a return on their investment sometimes in the future. If this is true, then I guess your focus as an entrepreneur is to ensure that you deliver value to these investors who took a bet on you!
Talking about delivering value… Investing your capital on “tushing up” your office space is destroying value! For every year you make a loss, your shareholders’ fund is being eroded! That is destroying value. Depending on your industry or the stage of your business, if you are not growing your revenues at a certain rate, you might be destroying value!
Before you make any expenditure, ask yourself — “How will this assist me to drive revenue or reduce cost?” If your new office space & furniture, artwork, and other aesthetics will not assist you either increase revenue or reduce cost, then you don’t need it.
Your job is to focus on driving up your revenues in the most efficientmanner. Focus on your key business drivers. Revenue is simply “Quantity * Price”, hence your job includes increasing the quantity of your product or service at the optimum price.
This is simple you might think, however, let’s have a rethink… Revenue growth means you are either snatching some of your competitors’ clients or you are opening up an entirely new revenue source or a combination of both. This implies that you must consistently grow your revenues irrespective of what your competition does. This also means that you must continually innovate, challenge the status quo, bend over backward to always deliver excellent value to your customers and other stakeholders!
Talking about efficiency, you should increase your revenues at the lowest-cost possible. Revenue growth is not enough, you should think about being EBITDA (Earnings Before Interest Tax Depreciation and Amortization) positive! Positive EBITDA means that revenues from your business are sufficient to cover the cost of running the business.