Leadership teams that recognize that "it takes a village" to build a sustainable, well governed business – are increasing the probabilities to be successful. In my experience, there are three core indicators of a sustainable business led by a high performing leadership team: 1. Revenue 2. Governance 3. Time Management transcript: 01:19 Hello, it's Brenda at Next Act Advisors. I'm here to read the third and final of my evergreen posts that you can find at my website, www.nextactadvisors. um My consulting firm is um dedicated to entrepreneurs. 01:46 and entrepreneurs and my mission is simple. I want to assist them to build scalable, well-governed and resilient businesses. And I want to help to commercialize business ideas that are coming out of the bench, the sandbox, oh and to bring them to uh enterprise companies to make a better world. 02:16 This last um post is actually quite short, which I think some of you listeners will be thankful for. It's titled Poised for Growth from the Sandbox to It Takes a Village. In my work with over 20 companies in the last 12 years, I found 02:43 that leadership teams that recognize that it takes a village to build a sustainable, well-governed business are increasing the probabilities to be successful. Success could be that exit. 03:01 to the capital markets through an IPO could be a sale to another large enterprise. And it could be actually, the surprise of some founders, a failure in the decision to dismantle the company and start again. 03:20 In my experience, there are three core indicators of a sustainable business led by a high performing leadership team. And by the way, from NextAct advisors, these leadership teams are the ones that I work with. 03:39 The first core indicator is that there are revenues. The revenues don't have to be in the millions. The enterprise must have some paying customers. These customers are willing to pay something in exchange for a product or a service that meets an unmet need or sometimes creates an entirely new product or a category. 04:08 like blockchain or services wrapped around a product. The paying customer sends a signal to investors that there is an inkling of a product that will evolve over time. 04:25 A paying customer is the surest sign that there is an initial product market fit. Traction is the ability to sell it again and again, and there is a revenue flow. The top line for enterprise value, because you're not a lifestyle business, can be expressed in recurring revenues, customer retention, repeat business. 04:54 upselling to new features and cross selling to actually different business units. One of the other things I try to work with founders is the addressable market, a large market, because the road to success as a startup founder is long, it's arduous, and the larger the market, 05:24 the higher probability for success. So that's the first core indicator and probably the most important. The second is around good governance. And I'm all about increasing the enterprise value while retaining as long as possible the ownership among the founding team and the early investors, family and friends, angel funds, before you go to VCs. 05:54 Governance documentation from GitGo is very important. It can be adapted to the business model as the business grows. It is largely around protecting core assets like your IP and the team that you're going to be bringing on board. That is in the product development and the sales. 06:22 These often annoying back office contractual elements, because it does come down to good contracts, enable the team to scale in a really fast paced environment. It shows early on business acumen to those investors that are writing large checks. And it provides safety assurance around the moat, protecting the enterprise's assets, including 06:52 intellectual property, the talent, who would you like to retain to grow the business? Who's really critical? Your cap table is probably the most important asset. The clients that you have that come back and produce recurring revenue, those partners that you've brought along the journey. 07:16 And these policies that are kind of the cornerstones behind good governance include everything from non-disclosure agreements, proprietary information. 07:32 employment agreements. 07:36 your information and security policies, your terms and conditions, and the employee stock option plan, among many others. The third and last core indicator of a sustainable business is kind of soft, but it's becoming ever more important in the times that we live where we're constantly pressed for time. And it's ruthless time. 08:06 management. Scarcity is part of early stage companies and time is the scarcest resource of them all. bet you thought I thought I would say money. It's actually time and how you spend it. Ruthless time management can be managed when measured and when observed. Track it on your outlook calendar on your Google calendar. 08:36 Use tools. There's many applications out there. Know where you spend your time. At the end of your work day, just go back and think about what you've done and just hardwired into your digital calendar. 08:54 Track it, know where you spend your time. Put it into buckets around customer discovery. Ultimately, your customer is tied to your revenues. How much time do you actually spend doing customer discovery? That's with new business development as well as your current customers. Recruiting. How much time, CEO, do you spend on recruiting? 09:22 I oftentimes ask founders, let's develop the organizational chart, what it's going to look like in five years. You've already told me what company you try to emulate or that you truly admire. Let's work backwards. And oftentimes you might not have the money to bring on a chief revenue officer, but have that bucket within the organizational chart. And as you meet people during the first years of your business. 09:52 you have those people in mind and keep engaged. So recruiting is second very important element of your time. Product development, of course, is important because without products, you're not going to have customers and you're not going have revenues. 10:10 Because I work in clean tech, enterprise software, digital health, and med tech, I oftentimes work with founders that are very technical or scientific. And they're very enamored by their product. But as you are growing in enterprise, the softer elements, sales, marketing, and building a team 10:39 are as important as the product development. 10:44 Every quarter, do inventory of where you're spending your time. Are you spending it in the right areas? Talk to your C-suite. Ask them where they spend their time. The good thing is you can always course correct if you hold yourself accountable. 11:10 And also priorities may change. You might have an early offer to purchase a company. How does that work into your schedule? All right? 11:22 Those three core skills or indicators around a sustainable business, revenue, governance, and ruthless time management will drive the outcome, ultimately, of enterprise value. The definition of enterprise value is a measure of a company's total value. 11:52 It's often used as a more comprehensive alternative to equity market capitalization. Enterprise value includes in its calculation the market capitalization of a company, but also short-term and long-term debt, as well as any cash on the company's balance sheet. Enterprise value is a popular metric used to value a company for a potential takeover. 12:20 With my work with founders, I always ask them which companies do they consider their competitors. Those are called your comp comparables. There are lots of metrics out there in the public markets. While you're still an early stage company, you can start modeling what ultimately your enterprise value could or should look like for that potential takeover or that potential. 12:50 In my work at Next Act Advisors, I have had the privilege of working with founding teams that are unafraid to say that they are not knowledgeable about a certain matter. They are willing to learn. They are also willing to unlearn. They are willing to bring in the expertise, either through talent hire, fractional hires, 13:20 the use of advisory boards before you create your former board of directors, and ultimately at a later stage, your board of directors that will take a seat at the table and will ultimately have voting rights. 13:36 The high-performing leadership team is better positioned to realize the enterprise value of the company when adopting a mindset that it takes a village to be poised for rapid growth to create a large enterprise. 13:54 There is a follow-up blog post that walks you through different paths to revenue discovery. It's called 15 Questions That Lead to Revenue Discovery. And I look forward to reading to you this additional blog post. But stay tuned. And thank you for joining me in the Founder's Sandbox. If you are authentic, willing to learn and experiment, I would absolutely be honored. 14:23 to serve you. Thank you, signing off.