Sam Altman wrote a post about the Post-Y Combinator (YC) slump – a state where companies on a trajectory to multi-billion dollar valuation stop growing and end up going out of business.
The reason for the slump is not clear to Sam and the YC founders, but (I believe) some of the reasons are lost focus, missing goal, no peer pressure, and no accountability.
Y-Combinator is an incubator of startups, funding a batch of 100+ teams with ideas for three months before throwing them in front of Venture Capitalist’s on demo-day. YC invests a small amount for a small percentage of ownership of the company and gives intense guidance during these three months. They have been involved in DropBox, Reddit, Airbnb and many smaller, successful companies like Gumroad, Reschedule Med and many more.
When you look at what is taken away from a founding team when they are leaving YC and what they have gained it becomes more obvious why so many companies are failing to keep growing.
Funding, in exchange for parting with a smaller or larger part of the company.
What they lose is:
Their goals: for many founders getting into YC is the most pressing goal, overshadowing whatever it is they are building, and after being accepted the goal becomes “doing good on demo-day”, again overshadowing whatever business goal they have.
Their singular customer focus: when you get funding from a Venture Capitalist, they become part of the customer base – someone you have to keep happy running your business.
Their accountability: for most founders, having Sam Altman or Paul Graham peek over your shoulder will make sure that the first thing on your mind whenever you wake up will be “I have nothing to show and I have done nothing to show at the next meeting with Sam. I HAVE TO DO SOMETHING RIGHT NOW!”
These losses lead to what Sam Altman calls the slump, a state where you start doing “fake work” that does not move your business forward and does not help gain new customers. The reason for this is that fake work is “both easier and more fun than real work for many founders” as Sam Altman writes.
The thing is that most “normal” people are in the slump more or less all of the time. And after being self-employed for 17+ years and having worked with many IT consultants, companies and hundreds of employees, I realized while reading Sam Altman’s post that this is where everyone gravitates towards if they do not put up a conscious fight, because fake work and the slump is inherently easier and more fun to do!
Leaving the slump?
First of all, you have to ask yourself if you want to leave the slump. This will require that you start doing work that is harder and less fun, but much more rewarding.
If you do, then you have to learn to classify work into real work and fake work. I define real works as something that:
- Makes your current customers stay / buy more.
- Gets more customers now.
- Creates long term value for the company.
When running a SaaS app as TimeBlock, one of the killer statistics that you have to keep an eye out for is Churn, defined as people leaving your app.
However, churn is not only relevant for SaaS apps; it is just as relevant for people selling knitting supplies, tires, handkerchiefs and everything in between.
Another way to look at this is that it is usually 10 times harder to get a new customer than to sell to an existing customer.
So, whenever you are answering support, writing blog posts that help the customer get more value from the product they have purchased, updating product images, adding features and functions that will prevent churn etc. you are working on retaining customers.
I believe that around 50% of your energy must be used on retaining customers.
Whenever you are working on retaining your customers you are automatically also working on the next item, getting more customers, because your existing customer base is the best source for new customers through referrals, sharing etc.
Get more customers
While the indirect referral customer is a great source of growth, it is normally necessary to also work on getting customers from outside your current reach. These kinds of activities look like many of those in the list above, like blogging, but will have a different angle, that educates new users instead of adding value to existing users’ lives.
This could also be link building, SEO, or (online) marketing.
Create Long-term value
The last activity is creating more long-term value. For many founders this is the most fun work, where they work on their vision and long term goals. Sadly, this is the least important work because there is no sense in using all your time on the long-term business goals if all of your customers have churned!
Working on creating long-term value is, for example, developing features in your software that are essential to your product vision but that no one has requested. If you are a knitting supplier it is creating your own recipes and building a brand.
Both are necessary for the long term success of the company, but not for the short term survival.
Getting the balance right
To keep moving forward, both on the short term and the long term, it is necessary to work on both the short term items (keeping customers, getting new) and the long term in a balanced way.
In my experience you have to work 50% on keeping and selling to existing customers, 30% on getting new customers and 20% on creating long term value.
An important note is that this 100% is not of your total work week. No, this is percentage of the amount of hours left after you have done the unavoidable stuff. As a business owner that is paying invoices, leading employees, packing and shipping goods etc.
The scary truth is that most will only have a few hours left every day to do the most important work, and because of the energy drained from doing the unavoidable stuff, most will gravitate to doing “fake work” because it is easier and more fun.
Keeping focus on staying out of the slump
Luckily, there is a way out of the slump and onto safe ground that will start moving you forward.
It’s not easy, not (always) fun, and it is certainly hard.
The result is a higher sense of accomplishment, better sleep, happiness, progress, and dreams coming true.
To do the switch you must first find an accountability partner, someone who will use half an hour every week listening to your progress. This can be a spouse, a co-worker or someone you know. They do not have to know anything about your field, only about the goals of staying out of the slump.
The first thing you have to figure out is how much time you have left every day to do this important work. Again, my experience is that it will be somewhere in the range of 2-6 hours a day depending on how many customers, employees and partners you have.
Then draw 10 squares the size of a post-it note on a piece of paper (or print this pdf). These will be the 10 times during the week (to blocks per day, one before lunch, one after lunch) you will work on one of the three areas above.
Now it’s time to write out a list of important tasks across all three areas; all those things you would like to get done.
After writing them out, categorize each as 1, 2 or 3 – If I guess correctly, you will now have enough tasks for many weeks work?
Now for the hard part: take the most important, or two most important, task(s) from your list of 1’s and estimate how many timeblocks of those ten you have available you will need to complete them – if it is below 5 keep adding tasks.
As soon as you have five timeblocks write them out on the paper, one task in each square.
Do this with 2’s and 3’s as well, but only allocate 3 squares to getting new customers and 2 squares to creating long term value.
When you are done, you will have a week’s worth of important work.
During the week, start each day by doing the important task before anything else – this includes before opening the email, checking the new orders, etc.
Nothing but an inability to process customer orders should hinder you in doing the task.
After you have worked the allotted time (1-3 hours?) stop working and appreciate that you have moved yourself and your business and actually done something that you know will matter.
Most of the 1’s and many 2’s will be tasks that can be done in one timeblock, most threes will take many timeblocks to accomplish. This is the nature of the game and another reason that “fake work” feels so much better – because you are accomplishing something, getting something done that gives you immediate feedback.
The last thing to do is to meet up with you accountability partner once a week and show what you did get done and what you did not get done.
For each block you did not accomplish, explain what the reason was and what you will do differently next week to make sure that you will accomplish your blocks.
Rinse and repeat.