The failure rate for new businesses is staggering: about 20 percent of new businesses fail during the first year, while nearly 50 percent fail by the fifth year. There’s no one-size-fits-all playbook to guarantee success, of course, but one thing is certain: Small business owners must reinvent themselves as their businesses grow.
Early on as an entrepreneur, you feel like you need to be superhuman and do all things perfectly. But as your business grows, you realize that’s a foolish way to operate. Success really depends on your ability to hire and delegate to smart people while putting your energy where it’s most needed.
And where you’re needed will be in constant flux. In fact, during year one at Ethos, I recall prioritizing at least five different roles while scaling. Here are the lessons I learned along the way.
1. Raising Capital: Find a Balance
Avoid the temptation to raise as much capital as possible in the beginning. I’ve found that successful founders, time and again, regret raising more money than they needed. My advice: Raising capital becomes less expensive as you grow, so in the beginning, raise as little as you can to get to the next stage of increasing your business’ worth.
Where entrepreneurs raise money is just as important (if not more) than how much money they raise. By seeking investment from a venture capital firm, entrepreneurs are signing up for a long-term relationship that involves regular meetings, late-night calls and texts, and potential disagreements about important decisions. There are plenty of investors who can write a check but few can provide constructive, strategic advice to help scale your business. I’ve found as much value in my investment partners’ ability to help me think about problems or opportunities in a different way than I have in the money that they invested.
2. Product Development: Identify Market Fit
This role has clear challenges at an early-stage company because entrepreneurs often need to sell a product or service that is new and unproven. CB Insights found that 42% of startups fail because they never achieve product-market fit, demonstrating just how critical it is to define your target market and identify (and meet) underserved needs—without burning through cash in the process. Get smart about what resources are needed to build a product that customers want, and as your company grows, ensure those resources scale as well.
3. Customer Service: It’s Everybody’s Job
When Ethos launched in 2016, it was all hands on deck with customer service. I was on the phone every day, speaking with customers to learn what was working (and what wasn’t). This was a critical step to learn about our customers, the market, and to understand how our products fit in. An obsessive focus on customers, after all, is just smart business. Jeff Bezos reads customer service emails to this day.
4. Recruiting: Establish a Culture
Building a strong culture is pertinent to your company’s success; it gives your team a decision-making framework and operating principles. The opportunities that fast-growing startups present can be attractive to prospective new hires, but they can also create a dilemma: Employees drawn in by the promise of a lucrative acquisition or IPO aren’t always the ones who will advance your company. If employees aren’t fully invested in your mission, it can be detrimental to the company’s long-term success. For this reason, I always ask this question to candidates: “Tell me about a culture where you were successful and a culture where you were unsuccessful.” The answers reveal a lot about the interviewee’s personal qualities, how they respond and adapt to various situations, what environments they thrive in, and if they can get on board with our mission.
5. Set Goals: Don’t ‘Set It and Forget It’
As your company grows, it will become increasingly important to regularly articulate and define your priorities. Every quarter, decide what you need and don’t need in order to meet those goals. At Ethos, we set quarterly objectives and key results (OKRs) that inform both company-wide and individual goals, and build teams around these objectives. This process gets the team aligned and helps everybody focus on what will move the needle for the company. As an entrepreneur and business leader, it’s your job to set goals and to keep the entire organization laser-focused on reaching those goals.
And as those goals change, so too will an entrepreneurs’ responsibilities. That’s why leaders need to be comfortable giving away their Legos and acknowledging when it’s time to hand off tasks. Sure, it’s a challenge, but it’s also exciting. Embrace it. And be prepared to constantly re-evaluate what you do day-to-day—and why.
Ethos CEO and cofounder, Peter Colis, highlights his learnings after the first year as CEO. During Peter’s last year, Ethos (the startup building ethical, affordable life insurance) has raised $60M in Series C funding led by GV and is now valued at nearly $500M. He’s shown real results as CEO and this piece tackles 5 lessons he’s learned amongst Ethos’ success. From raising capital to building a culture to flexibility, Peter touches on what every new founder should be prioritizing in the beginning of their journey. With such a large percentage of new businesses failing every year, Peter’s outlooks and insights are valuable to those just starting.