in Startup

3 Rs of a Startup Business

When you are running a startup, which opportunities to pursue can be a difficult task. Even though, one may want to take on all opportunities, it would be very unwise to pursue them all. Since the resources are limited a structured qualification process that is easy to understand by all, yet quick to execute goes a long way.

Over the years, I’ve developed what I call the “3 Rs” and I share it with others in my company as well as others in the entrepreneurship community.

Here’s what they stand for, and the blended output is subjective, yet very helpful in the qualification of a prospect.

Revenue: Cash is king, especially in a B2B business, so a customer bringing in revenue matters.

Reference: Depending on the stage of the business, the quality of the customer reference is very advantageous.

Resourced: The product the prospect wants is already built, which means incremental cost is zero or very low. Or do you need to go out and build it?

The ideal of course is a very good quality customer wants to give you lots of cash for something you have already built. That’s an easy case.

The harder cases are:

  1. What if a high quality prospect (good Reference for future business) wants to give you little or nothing in cash (low Revenue). This is where, if the reference is really good and you already have it sitting on the shelf, you may want to do the deal.
  2. What if a high quality prospect will give you a lot of Revenue, but you have yet to build it (not yet Resourced)? This is where you need to decide if the product to be built can be resold many times (e.g. licensed software) or is it a “work-for-hire” custom product just meant for the larger entity (i.e. one-time revenue potential)

In a software business, in a B2B environment, if the use-case or application is right down the middle of the Resourced product, the other two will help you decide whether to take on the opportunity or not.

Not all comers are your future customers, choosing wisely can be the difference between a thriving and dying business.

Write a Comment

Comment