Lots of discussions recently with founders on how companies grow and how they grow within them. A daunting topic for first-time founders who may not really know what they want out of life. But also daunting for repeat entrepreneurs, who mostly tend to know what they do not want.
In this case I think it is important for people to look in the mirror and be honest about what exactly is the size of their ambition. Which may determine the preferred approach to starting and building out their business. If ambition and business model do not fit then you may be in for rude surprises.
If you look around you will find that there is a only small number of business model options available. Go ahead and pick one that fits your ambition.
- Systems integrator or consultant: Has a small number of customers that they are very close to (in terms geography and/or in terms of vertical domain expertise). Build some technology, buy some technology, make sure your customer gets what they need. Make money on margin, more importantly on billable hours. Make sure not to grow beyond at most a dozen people. End-game scenario: Fat salaries for the founders and a nice company car. Nothing wrong with that. Just make sure you stay really really close to your customers.
- App boutique: Has an app or a tool. Very small team, one or two would be best. Solution is distributed widely. Monetization through voluntary contributions, freemium conversions, and, of course, app store purchases. Make sure not to hire any more people. End-game scenario: Pull in a couple 100K p.a. and milk it for as long as you can. Preferably develop the next app in your spare time, if you have any. Instapaper my favorite example, but there are many others.
- Product vendor: Has a product of some complexity which is sold or rented. Product is significantly better product for an existing market (needs to better because otherwise you couldn’t enter the market in the first place) or creates a new market (good luck to you). Early adopter customers buy first version because they need something now and because they believe in your roadmap. You now deliver on your roadmap. Meanwhile, if the market you serve or create is of any interest at all, there are dozens or hundreds of market entrants nipping at your heels. Some of them smarter than you, some of them with more funding, some of them active in larger markets. So your mission is simple: Win or go home. There is no place for a middling competitor. You are now condemned to grow or die. The bad news is that you can never sit back and take a breath. The second you do that somebody will have outperformed you, mostly by just giving away what you were charging for. Which means that your company will either die or grow to be 8, 15, 35, 70, 120, 200, etc. people. Make sure you’re comfortable with that and make sure that you can envision your changing role in such an organization.