One Plus Anything Equals Zero
In football, the quarterback is the undisputed leader of the offense and the bell cow for the entire team. The quarterback calls the plays, touches the ball just about every play, and perhaps most importantly – dictates the successes or failures of the team based on his performance.
So what happens when you have two quarterbacks that are both good enough to play? Maybe Jimmy is a better passer and Joe is a better runner? Perhaps Connor throws a better deep-ball, while Tyler has laser-like accuracy on underneath routes. It’s even possible that the coach sees the two quarterbacks as carbon copies of one another, each with equally good skills across the board.
Here’s the harsh reality in football: When a team claims to have two quarterbacks, it means they don’t have one. It means there’s no quarterback that’s shown the intangibles to truly lead the team and the coaches are hedging their bets.
Here’s what I say: Pick a leader, coach. Have the fortitude to make a choice and allow one quarterback to get in rhythm with his teammates and benefit from the focus and energy of the coaching staff. Stop having your quarterbacks look over his shoulder wondering if someone else is going to take his spot. Stop tipping off defenses as to what type of play you’re likely to run. Defenses are smart enough to prepare for the long-ball when Connor is in the game and to prepare for the run when Joe steps under center.
I also say: Pick a revenue model, Mr. Entrepreneur.
As a start-up guy, I’m really exhausted seeing companies try to start out with multiple revenue models. I’m tired of hearing that we’ll get a cut from our <<insert sport here>> athletic trainer AND we’ll charge the user a fee of << insert dollar amount here>>. I can’t help but smile when I hear the elaborate plan of both collecting a fee from the manufacturer and charging the retailer.
As a mentor and investor for start-ups, I often ask “What’s your primary revenue stream?”
The response from start-up founders that really scares me goes something like this:
“The beauty of our product is that we have 3 ways to monetize – ads, subscriptions, and charging businesses based on the traffic we bring to their store.”
Or sometimes it’s like this:
“We charge users a monthly fee and restaurants pay us a cut of the traffic we send them.”
Someone please make it stop. Pick a quarterback. Give this quarterback the reins to a single revenue model and design your offense around this strategic choice.
You may ultimately have 6 revenue streams. I get it. Just start with one. First-time founders often struggle to truly grasp this concept:
The way to be successful across six different revenue streams is to focus on one revenue stream.
Can you imagine what LinkedIn would have looked like on Day 1 if they tried to charge companies to place job postings, charge users to see contact information for 2nd degree connections, and charge advertisers for banner ads?
I can tell you: a whole lot of failed revenue streams.
By first concentrating on acquiring users, and creating something that users wanted to engage with, LinkedIn unlocked the door to generate revenue. The company continued to earn the “right” to focus on another revenue stream after they carved out an initial successful revenue stream.
Right or wrong, most start-ups, especially those outside The Valley, don’t have the luxury of focusing exclusively on customer acquisition during the early days of the company, which means focus startups must focus on a clear primary revenue stream. And regardless of whether the start-up is focusing on customer acquisition or a single revenue model, they key word here, as always in the world of start-ups:
Focus.
You have a million things you need to do when you’re leading a start-up. Don’t compound the challenges by scattering your focus on multiple revenue models. Multiple revenue models means that you’re trying to be everything to everyone. That’s virtually impossible to do. Skip it. Pick one revenue stream and make those paying customers love you.
Be careful, however, since this advice is commonly misunderstood.
While testing is the right general philosophy, there’s a big difference between testing multiple customer segments and testing multiple revenue models. Testing customers segments at once is healthy and you can get answers to questions like this:
Do Big Ten alumni like my product as much as Ivy League alumni?
Are locals or tourists willing to pay more for my offering?
Choosing a revenue model is totally different. Choosing a revenue model is a strategic choice that determines who your primary customer will be. The customer is the person or group of people that pays money to your start-up. It’s foolhardy for start-ups to try and be successful with multiple revenue models out of the gate. If you’re a restaurant loyalty program, don’t try and charge both users and restaurants. If you’re a fitness app, don’t charge both trainers and users.
You’re the coach of the team – pick a revenue stream and put the team in the best possible position to succeed. Ultimately, this will make your team and your investors happy. Very happy.
Now start dreaming of your quarterback as he holds up that MVP trophy.