The Top 10 Lessons in Entrepreneurial Strategy I Learned from Sam Hamadeh
In cleaning my apartment…
and looking through my notes the other day, I came across notes taken from a conference workshop led by the late Sam Hamadeh. For those of you not in the know, Sam founded PrivCo, the financial date provider and self-proclaimed “Bloomberg of privately owned companies,” in addition to co-founding Vault.com. He was a noted thought leader in finance, investments, entrepreneurship and leadership.
Unfortunately I never had the opportunity to sit down and talk to Sam one-on-one. But I was able to sit through a one hour briefing session at a 2014 Small Business Expo event at Pier 94 in New York City on startups and what it takes to succeed. During this session, Sam imparted several lessons from launching and managing his successful ventures. This top 10 list is a compilation of the wisdom he imparted to those of us in attendance that day. Not that most of what he mentioned was radically different what I heard before, but it was good to have it reinforced in this manner.
Here are the Top 10 Lessons in Entrepreneurial Strategy I Learned from Sam Hamadeh that afternoon:
1. “IDEA = Industry Knowledge is Key”
With limited exceptions, the most successful people leaders and innovators create ventures in industries they’re familiar with. Often times, one or more co-founders of a venture have worked on the front lines of a company in the same vertical in various positions. If you are interested in launching a company in a particular industry, but don’t necessarily have the experience, you should find a co-founder that worked in that field. That way, you’ll be able to complement your knowledge with the industry skill set needed to build a solid foundation.
2. “FOCUS = Before you conquer the world, maybe just try to conquer Jersey (as in New Jersey)”
Most people don’t start out with a multi-million dollar valuation company. Instead, as Sam suggested, you should try to become number 1 with modest funding and grow from there. He used the example of The Princeton Review, the popular standardized test company. They initially focused on just preparing students for the SAT as their first market and spent much time and effort to establish their expertise. After earning their reputation there, they moved into helping future MBA’s (MCAT prep), lawyers (LSAT prep) and doctors (MCAT prep) among others.
3. “VALIDATE = First hand observation of behavior, not market research”
One of the most impactful statements he made during the one hour session was that as founders, you must “make the cold calls and set up the sales meetings.” You shouldn’t leave business development and customer feedback to third parties or even employees in those early interactions.
4. “LAUNCH 1.0 FAST = Get that minimally viable product out”
Sam’s definition of “minimally viable product” was simple: “the fewest features your prototype needs to work.” This simple definition should guide all entrepreneurs towards how they bring a product to market and every intermediate level in between. After receiving initial feedback from the first iteration of the product, most likely from friends and family, you should go right back to the drawing board with those lessons learned to launch version 2 and so on. Sam placed the initial development budget to be less than $10k at maximum. Bottom line: founders shouldn’t be married to the results of any one result, but rather the feedback and impact each result creates.
5. “SCALING (Sales and Marketing) TOO SOON is the Biggest Startup Killer”
Going off the validation lesson, founders have to be their own salespeople. “You don’t hire for marketing and sales right away,” he said about managing a scaling business at the earliest point of some success. Founders have to be hands on and knowledgeable about where every single dollar comes from and where that hard-earned revenue goes. Customers always need someone they can turn to in case of any issues. When starting up, that person should be you, as “only customers that pay will take the time to tell you what’s wrong.”
6. “FUNDING AND VCs = Only when necessary”
Sam mentioned that one of the biggest pitfalls of early stage companies was going for VC money too early. “You need a reason to raise VC capital,” he said during the session at the Small Business Expo. For companies looking to grow according to their vision, they need to set out to establish benchmarks and a roadmap to accomplish that vision. This lesson cuts both ways as well, as most VC’s not only look for potential and personality but hard data too.
7. “COSTS KILL STARTUPS”
Probably the biggest takeaway I got from Sam’s discussion was that “cash buys you time.” By keeping your fixed costs low (i.e. rent, utilities, salaries, etc) until such point where you can absorb that extra costs and justify it in your bottom line, you keep yourself afloat longer. You should also think hard about every purchase decision you make and it’s relevance to your mission. Perhaps you can skip that Mocha Frappachino and marketing ad buy for the time being.
8. “HIRE SLOWLY, FIRE QUICKLY”
According to Sam, founders should “only fill a position when you’re bursting at seems.” His assertion highlights a big mistake that startups make involves their hiring process. Many entrepreneurs use the need of a position to dictate the way they go about adding to the team. However, the process and the design of that process is just as important. Hiring tests should be implemented covering not just the skills and personality of the applicant, but also how they react to questions and situations. You never want the situation of someone looking good “on paper,” but not working out in the long run.
9. “WHEN TO SELL & HOW”
What is worse for an employee than knowing you might lose your job? How about the limbo of not knowing what’s going on regarding company ownership? That situation underlines the point Sam made to, “wait for buyers to start approaching first and never negotiate with one buyer at a time.” It’s preferable to negotiate with multiple buyers at the same time not only to drive up the total value, but to place yourself in control of your own destiny.
10. “WRITE DOWN IDEAS IMMEDIATELY”
Quite frankly, this is the most overlooked part of the process. Sam addressed this perfectly when he said, “the key to productivity in business is to keep lists and reminders.” It’s not often that you get an idea worth saving, so it’s better to write it down somewhere than to regret not remembering it later. Sometimes all you need is one “moment of brilliance” to propel yourself forward.
This post was transcribed from notes taken by Brian Antolin at Sam's workshop session at The Small Business Expo NYC in June 2014. What do you think of this “Notes From” post? Let us know what you think by emailing us at info(at)linerun.co!
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