In the previous two blog posts, I discussed the motivation behind creating Drinkizz (Motion) and the fundamental actions my co-founders and I took to increase our chances of success (Engage). Starting a new business isn’t that difficult, but laying a solid foundation for long-term sustainability is both challenging and delicate. Only a handful of entrepreneurs succeed, and it’s crucial to understand why, even though there’s no magic formula. I encourage you to read (or re-read) those two posts to understand my approach as an entrepreneur focused on building a lasting structure rather than making a quick impact, even if it’s less spectacular and less appealing in storytelling.
In the next two posts of this series, I’ll focus on the other two elements of entrepreneurship: Treasury and Assurance. I’ll address the first one now.
If you don’t like money, you shouldn’t venture into entrepreneurship. Why take risks and share them with your team and family if you’re not interested in creating value? Fundamentally, in the field of entrepreneurship, I believe that a business’s value isn’t just measured by money, but if that value doesn’t translate into financial capability, then it doesn’t exist. Know-how, brands, products, teams, tangible and intangible assets all have a financial translation that helps gauge their importance.
Conversely, if you love money too much, you also shouldn’t venture into entrepreneurship. Starting a business solely to become “rich” is a dead end. You won’t control the time needed to create sufficient financial value and will likely burn out before achieving it. It’s better to have a drive to succeed based on your interest in your services, products, customers, and teams. This will give you the strength to persevere through tough times. I’ve already discussed this in the blog post on Motion, which addresses the raison d’être of your entrepreneurial journey.
Between hating and loving money, it’s best to adopt a neutral attitude and set financial wealth goals rationally, without making it an emotional issue.
Determine a level of wealth to achieve—it’s good for your motivation—but give yourself the time to reach it and consider it an element of evaluating your entrepreneurial success.
For example, let’s say your goal is to reach a personal fortune of $5 million in your bank account, and you start a business with three co-founders each owning an equal share of the capital, i.e., 25% each. You’d need to create a company valued at a minimum of $25 million, not accounting for taxes here to simplify. Depending on your business sector, the company’s value can vary from 1 to 5 times the revenue. With a multiple of two, you’d need to achieve a turnover of around $12 to $14 million. This is already a substantial goal requiring several years and isn’t guaranteed.
Are you ready to take on this challenge for several years, not paying yourself a significant salary or dividends until this valuation is reached? And are your co-founders as well?
Once you’ve clarified this point with your co-founders, the delicate issue of funding the company at its start and then supporting its growth remains.
Rather than rushing into premature and risky fundraising or refusing to work with investors, you need to find a financing path that balances all the forces at your disposal. These are as follows:
- Implement a strategy of multiple revenue streams. Specifically, you need a tactical offer to complement your main offer. The tactical offer isn’t meant to scale but rather to generate a revenue source that funds the startup phase of the main offer. If your business plan doesn’t show the synergy between these two types of offers, you’re taking a significant financing risk.
- Don’t push your expenses too fast relative to your capacity to manage the business and make sales. If you’re fortunate to have financial support from friends, family, business angels, or professional investors, use it wisely and explain your strategy to your shareholders to avoid criticism. Remember, your business’s survival depends on your ability to make sales, not on raising equity or debt. While some companies increase their valuation without being profitable, these are exceptions, even if they’re visible in the media. It’s likely you won’t have this kind of success.
- Understand the principle of break-even points by clearly distinguishing revenue, gross margin, net margin, pre-tax profit, and final profit. If necessary, spend some time with your accountant to set up the financial tracking sheets you need. Then, set temporal criteria to gradually reach your break-even points. For example, the break-even point for your startup period should be maintained for at least six consecutive months before considering your situation somewhat stable. Likewise, distinguish the revenue from the tactical offer and the main offer. The break-even point after the startup period should rely on a minimum of 70% of revenue or profit from the main offer. However, these metrics depend on your business model and financial trajectory choices. Seek help if you don’t feel confident in this area, as it’s crucial for managing your business.
- Beyond the startup phase, establish a step-by-step financing strategy with series A, B, C, and beyond if you succeed on a large scale. Since you can’t predict the future, focus first on series A by laying out all the financial negotiation parameters with potential investors. Understand that money has a price beyond interest rates or the shares of your company you’ll concede. This hidden price is the governance of your company. When you bring investors onto your board, you must have pre-established governance rules clearly outlining what they can and cannot do. Thus, beyond calculating your company’s valuation at the time of funding, you’ll also need to spend time developing governance that suits you as an entrepreneur. Here too, if you’ve never done this or feel unsure, get help from an experienced entrepreneur. An advisory board can be useful and should be formed before your fundraising or debt-raising efforts.
- Finally, if you’re operating internationally with a company registered in one country and operations in one or more other countries, pay close attention to the legal entity used for capital increases and debt raising. Ensure clarity and full compliance with the regulatory constraints of all concerned countries to support your financing plan over time without legal challenges.
As you can see, the Treasury element of the META-Entrepreneur approach isn’t the simplest to manage. It adds to the Motion and Engagement elements we’ve already discussed in previous blog posts.
SO, WHAT NEXT?
Stay tuned, as in the next post, I will discuss the final META element: Assurance, which addresses legal and governance aspects. You will then have a 360-degree view of the META-Entrepreneur.
You can also purchase my book, META-Entrepreneur, available in French, English, and Vietnamese, by visiting www.engage-meta.com.
Additionally, you can try the products from the startup Drinkizz, where my co-founders and I apply the principles of the META-Entrepreneur.
See you soon!”
Useful links
Organic Nature Energy drink by Drinkizz: O.N.E Drink (Organic Natural Energy ) – Drinkizz Shop
Training Drinkizz : Training session – Drinkizz
Good Energy without delay!
Pierre Bonnet
