Sweat it till ya' make it - You made the leap and you are now an entrepreneur. Your life is full of high fives, and exuberant cheers from friends and family. You launched, and you did it successfully.
Now what? With six months of sweat equity invested in your new company, and your idea still generates negative income. Do you resign as the CEO of your crumbling empire, or do you "sweat it till ya' make it"?
While entrepreneurs need to hustle and have incredible resilience and determination, I also believe that what separates a good entrepreneur from a misguided one is their ability to measure execution.
We've all read the motivational messages on instagram. One of my personal favorites: "Ideas are pointless without the execution: execution is pointless without the ideas" @bizwomenfeed on instagram.
Six months of flawless execution in the business should enable you to measure Sales, Marketing, and Finance.
The first two measurements are simple, as sales and marketing are both part of the digital customer journey. With sales and marketing activity serving as your barometer for future quota retirement, and tools like Salesforce supporting the sales and marketing technology stack, you will end with a good understanding of the company's customer acquisition cost. The real problem is assessing an accurate valuation on your sweat equity and determining the business's ability to grow beyond startup days.
How do you measure the business? While headlines would lead us to believe that all banks are predatory and Jimmy Carter's Monetary Control Act of 1980 didn't really curve their enthusiasm for strange math, when in doubt, your best friend for critical finance decisions should be your business banking partner.
Perfect example: In 2008, right before tent city and the power truly out of the economy, my business banker called me and said:
"Cecily, something appears to be wrong with the big banks, and building a third store in Wilmington will likely overextend your credit line. I am concerned that the business will not have the capacity to carry that much debt if the economy tanks"
Banks use Capacity for measuring outcomes, and the business's ability to pay for itself, its debts, and continue to create the trust of its investors.
While capacity, capital, and conditions are somewhat easier to assess and quantify, your sweat equity and making the tough decision to "sweat it till ya make it" requires you to consider creating a sweat equity monetization model in conjunction with developing a level of trust with your banking partner.
Taking stock in yourself means you need to create a comparison of what your current options are within your startup and what your fair market value could be working for another company. To get an accurate sense of your sweat equity, you can use the following model, using some broad, round numbers. If, for example, you are leaving a job that compensates you $50K/year to focus on your own business, this means an investment of approx. $4,166/month of valuable sweat equity that you will be putting into your business. You need to take into account your savings as well, and realistically estimate how many months you can survive without pay if your growth plans do not pan out. As you are approaching that time limit, you will most likely want to create a comparison valuation to help you realistically stay in the business.
Comparison Valuations are nothing more than a product marketing exercise. First, it is essential to evaluate the given market to get a better sense of your company’s value. Look for other businesses in the same market or niche and analyze if you can be compatible and coexist with them. Even if there is plenty of space for multiple players, you need to find a differentiator element. Whether you are offering complimentary services, you are positioning yourself differently, or you are targeting a different market segment, see what sets your business apart from the rest in the marketplace.
The work that goes into the launch and ongoing success of a new venture is demanding, however as Mark Cuban said:
"Sweat equity is the most valuable equity there is. Know your business and industry better than anyone else in the world. Love what you do or don’t do it".
Answering the question whether to "Sweat it till ya' make it" is yours and only yours to make. Be advised and be on the lookout for business indicators that could make that decision a little bit easier.