Noah Kagan on Building a Valuable Business

Building a billion-dollar business

By NOAH KAGAN EVER since I was a little kid I wanted to be rich. I think most of us do; however, we might not think about how to get there. I once had a friend who was a child prodigy, highly respected by the Silicon Valley community. His sole goal was to create a billion-dollar business - nothing else mattered. Because of this, he rejected ideas that were either way too small or did not monetise well enough. He took one year to develop different ideas and one idea in particular grew very large. However, at the end of the year, he threw it all away. This was because despite having millions of users, he had no real product, no value, no love and no engagement. His main problem was that he put the business before the users. Having spent a lot of time both failing and succeeding, I have assembled some advice for aspiring entrepreneurs on how to build a billion-dollar business. 1. Focus Focusing on how you can become a big business is the first mistake. Instead, it is better to focus on creating something ultra-valuable to your users. Focusing on large billion-dollar exits only sets your business too far in the future and misses all the details you need to get there. The question you should be asking your users is, 'How would you feel if we were not around any more?' It is when they answer that they cannot live without it, that you know you have a winner. 2. Start small IBM, Facebook, Google, Mint, Microsoft - all these companies started out small and were run by just a few people. They were not overnight billion-dollar companies. They started with a few people who came together to solve a problem. I doubt that the founders planned from day one to make a billion dollars. Large things form from small beginnings. So do not worry if your idea is not immediately worth a billion dollars. Instead, plant the seed and help it to grow. 3. It takes time The vast majority of companies do not create over a billion dollars in value in less than three years. Building a billion-dollar business will take significant time and resources, be prepared for this. 4. Validate It is also best to make sure that before you start building something, you have an idea of the problem that you are trying to solve. Not validating the problem was one of the mistakes my colleagues and I made when we spent six months building up a new company. Time and money wasted then could have been spent on validating the problem. For instance, by questioning potential users, conducting surveys online and putting up advertisements to test the market and identify how likely tentative interest is to translate into actual buyers of your product or service. One of the best ways to validate your business is to ask for an upfront contract with potential users. You could go even further and ask them to pay you ahead of time. 5. Learn The best thing you can do is fail and make many mistakes. However, after doing so, make sure you ask the right questions in order to learn from your mistakes. 6. Organisational behaviour While I would admit to not always being the most-organised person, here are some tips on what organised, successful companies do: Ensure that there are daily check-ins with everyone in the company about what they are doing that day. Have a complete list of all things you are working on, which is available to everyone in the company Keep meetings efficient. Make them no more than 30 minutes long. One good way to ensure this is to hold 'stand up' meetings, and limit the number of people at each meeting to no more than five. 7. Define the objective Once the objective is clearly defined, you can then work backwards to see how to meet it. For example, I had a friend who wanted to be a New York Times best-selling author. When I asked how many books he needed to sell in order to make it to the best-sellers' list, he had no idea. But once we had figured out this amount, it was easy to work backwards through marketing channels, priorities and strategies, in order to guarantee that he would get that specific number of sales needed. And he did! In addition to the above-mentioned tips, there are also a range of different tools out there to help entrepreneurs save precious time. Time which they can then spend on growing their companies. These include: tungle.me, a scheduling application that synchronises with your existing calendar, rescuetime.com, a useful automated time tracking and management website that can help to boost your productivity, and macjournal, which blocks out your screen while you are writing, so that you need not be distracted. And, of course, you should turn off all instant messengers so you can focus on the work you are doing. While it is important to put the users in front of the business, it is also important not to just end up doing things to please only your end users. Remember to build something that you want for yourself. If you create something that you would actually pay money for, then it is hard to go wrong - even if you end up just with one customer. This article was first published in The Business Times.