Category Archives: rants

PROCUREMENT STINKS!

Why aren’t you bothered by the smell?!?

If you haven’t been following along, we’ll lay out the top six reasons for you.

1. Case studies are ranker than expired fish in a microwave … and you don’t seem to care.

As per yesterday’s post, Have We Been In The Dank Basement So Long That We Don’t Care If the Fish Stinks?, we’re accepting that case studies are now nothing more than meaningless marketing mush and not even saying anything.

2. Approximately 85% of companies are AI-washing everything.

And the majority of these solutions don’t have any AI, or at least don’t have any native AI and are reliant entirely on questionable AI integrations. AI is hard. Really f6ck1ng hard. It’s not something you whip up overnight, especially if you want a solution that addresses a real problem with a real solution with any reliability. Before the Gen-AI craze, the doctor spent almost two decades here on Sourcing Innovation (and six years on Spend Matters) trying to educate you on the value of (strategic sourcing) decision optimization (SSDO), advanced (predictive) analytics, and proper targetted machine-learning AI that could provide better projections than the majority of “experts” — and the handful of vendors (and he means handful) that had this technology because, at any one time, we’ve never had more than half a dozen or so true SSDO vendors, a dozen or so true spend analytics providers with best-in-class technology, and more than 1 or 2 companies out of every 10 with true AI (and none with AI for more than a few targeted problems, but sometimes that was all you needed to identify extremely significant pockets of value and savings). Now, all of a sudden, we’ve gone from less than 20% to 85% literally overnight, when true AI advances have traditionally taken decades? Not f6ck1ng likely! Not only is AI a buzzword (as pointed out by Sarah Scudder), but it’s a delivery mechanism which, FYI, is a method by which the virus spreads itself.

3. Gen-AI claims that it will deliver Procurement to the enterprise are false.

It will deliver Procurement somewhere, but not the enterprise, unless the enterprise is code for Purgatory or Sheol. Gen-AI, which stands for Generative AI, literally means “AI that makes stuff up“, and, more specifically, since it’s trained to please, it makes stuff up that it thinks you want it to, not stuff that’s true, safe, or even legal. It’s NOT trustworthy, and won’t solve your Procurement problems. And while it may be a bit better at creating natural language responses, we’ve had Natural Language Processing (NLP) commercially for almost two decades, and a few vendors built very good, very reliable solutions, that will provide you with a significantly better chatbot than yet another custom variant of “chat, j’ai pété“. (There are no valid uses for Gen-AI that can’t be accomplished better, faster, and cheaper with existing tech.)

4. Intake / Orchestration is totally useless on its own.

There’s always a bandwagon we have to deal with, but rarely do we have two competing, often overlapping, equally useless bandwagons to deal with, with intake-to-orchestrate now speeding towards the cliff almost as fast as Gen-AI. As we discussed in Marketplace Madness, the days of pure intake-to-orchestrate are numbered because:

  • Intake is Pay Per View on YOUR data. Why are you paying for another view into your data?!?
  • Orchestrate is Solution Sprawl. It’s adding to the problem it purports to solve.
  • Intake-to-Orchestrate is Where’s the Beef? Sure you’re integrating everything and getting visibility into everything, but that’s not Procurement — which is identifying and strategically managing spend. So if the platform isn’t doing that, why not buy a platform that is that supports intake-to-orchestrate natively and allows you to manage strategic spend for risk reduction and savings???

5. Consultancies, purporting to help you, are often more in the dark than you are!

The Big X, which followed the money into tech, and then followed the money into Procurement, did so without any knowledge of where they were going or what was at the end of the yellow brick road. While some of the firms had good knowledge of Procurement from an operational or logistics perspective, they generally had little knowledge in tech and even less knowledge on the ProcureTech landscape (and most would be challenged to name 66 vendors, yet alone the 666 companies in the Sourcing Innovation Source-to-Pay+ Mega Map). And they have no clue how to differentiate the vendors that purport to offer the same (set of) module(s) and determine which one is best for you … and, as a result, all they end up doing is recommending a “best-in-class provider” for which they are a preferred implementation partner (which usually happens to be one they picked from a Market Map, all of which give THE REVELATOR a migraine and the doctor anger management issues because meshing 6+ dimensions on an axis and/or putting a roll-up interface on top of the map that no one understands only adds to the confusion).

But it’s even worse than this … many of the mid-market specialist consulting firms don’t have any more knowledge than the Big X beyond the vendors they have personally worked with. the doctor is sad to say that he’s been talking to quite a number of them and has yet to find one that has a methodology for identifying third party solutions beyond hiring true expert consultants and practitioners with decades of solution (related) experience. And while you will get a good solution from one of their consultants (as they are hand picked by people that know what they are doing), there are two problems here for you:

  • you won’t necessarily get the best solution because the consultant won’t know about it
  • if that consultant retires, which is inevitable as the consultants with the cross-role and industry experience to get this right are closing in on three decades of experience (because you need practitioner/developer, manager, integrator, and consulting experience), and are, thus, a decade or less from retirement, will her replacement be as good?

and two problems for the firm:

  • when the leaders retire, will there be anyone with the necessary depth of knowledge to take their place
  • with not enough senior people to fill the roles relative to the large number of companies that need digitization and Procurement transformation, how will they scale and grow?

It’s too bad that, unlike the next generation of Procurement Providers (like Zip, who realized they needed a Head of Research in-house to help identify what their market was looking for so they could develop the right solution), it would appear that none of these consultancies have realized that they need an internal consultant to keep tabs on the market and help them not only manage technology partners, but qualify the solutions and figure out which clients those technology partners are most appropriate for, so that they can ensure the success of both their clients and their technology partners (and be the consultancy of choice for that partner who will prioritize their deals because they are confident the consultancy vetted the potential client before dangling a “deal” in front of them). (Or, if they are just starting to think about the issue, realize that they can’t just give an existing consultant this role as the background required is different than that of the consultant who works with the clients day-in-and-day-out.)

(FYI: the doctor is not the only one thinking this or saying this, although me might be the only one willing to state it publicly. He’s talked to a number of growing technology solution providers in our space that literally have “consulting” firms tripping over each other to be the provider’s “partner” as a result of the downturn many of these consultancies are experiencing [as qualified by THE PROPHET in his piece on the Consulting Bloodbath], but many of these consultancies are unable to qualify what unique value they would bring to the provider or joint clients. What these consultancies are failing to understand is that providers who are offering real, sometimes almost immediate, value with their SaaS solutions are getting a lot of traction in this down market and don’t have time or personnel [due to budget cuts when the funding taps turned off] to chase poorly qualified deals or deals with little or no profit for the provider. So when all the provider saw in the past from some of these consultancies was poorly qualified deals, they are wary of working with the consultancy that didn’t take the time to understand the potential customer, the necessary solution, and what the hot provider actually did.)

6. DEI is being misused to push agendas and, in some cases, commit fraud!

DEI, which was supposed to be about “equity” (which is supposed to be “fair” and “impartial” and “freedom from bias or favouritism”, as defined by the Oxford and Webster’s dictionaries), somehow became all about “equitable outcomes*, and now that is being used to push agendas and, sometimes, commit outright fraud as we have numerous examples of not only universities, cities, organizations, and countries mandating a lead Procurement role be filled by a minority (whether or not any exist with the required qualifications), but sometimes firing the person in the role to place a more junior person into the role under the guise of “DEI” so that the leader can ensure that all Procurements go his way (which can include purchases to organizations he is invested in, or gets campaign funds from, and so on). The most recent example is the city of Chicago, with the ramifications laid bare by THE PROPHET in his recent article on Why Would Chicago’s Mayor Fire Its Top Procurement Executive and Bring in Someone With a Fraction of the Experience?

* which is not at all equitable because that is not “fair”, “impartial”, or “free from bias” when you insist a minority be hired; equity is supposed to be about “equitable opportunity”, but apparently no one in DEI knows how to use a dictionary anymore

Now that you understand this, why are you putting up with it? Why aren’t you demanding more? You have every right to demand more, and you should be demanding more of your vendors, consultants, and Procurement leaders!

Because if you don’t, The Prophet‘s April Fools Day joke on how we must #EndProcurement might just become reality!

More Valid Uses for Gen-AI … this time IN Procurement!

Some of you were upset that my last post on Valid Uses for Gen-AI weren’t very Procurement centric, arguing that there were valid uses for Gen-AI in Procurement and that the doctor should have focussed on, or at least included, those because why else would almost every vendor and their dog be including “AI” front and center on their web-site (about 85%+)!

Well, you’re right! To be completely fair, the doctor should acknowledge these valid uses, even if they are very few and very far between. So he will. Those of you following him closely will note that he mentioned some of these in his comment on LinkedIn to Sarah Scudder’s post on how “AI is a buzzword“.

AI is a lot more than a buzzword, but let’s give Gen-AI it’s due … in Procurement … first.

With Gen-AI you can:

1. Create a “you” chat-bot capable of responding to a number of free-form requests that can be mapped to standard types.
This is especially useful if the organization employs one or more annoying employees who always waits too long to request goods and then, after you place the order, insist on emailing you every day to ask “are they here yet” in reference to their request, even though you flat out told them the boats are coming by ship, it takes 24 days to sail the goods across the ocean once they are on the ship, typically 3 days to get them to the port, 3 to 14 days to get them on that ship, 3 to 7 days to get the ship into a dock, 3 to 4 days to unload the ship, and 3 to 4 days from the fort, for a minimum delivery time of 35 days, or 5 weeks, and asking week one just shows how stupid this employee is.

2. Similarly, you can create a “you” chatbot for RFP Question Response.
More specifically, you can create a bot that can simply regurgitate the answers to sales people who won’t read the spec and insist on emailing you on a daily basis with questions you already answered, and which they would realize if they weren’t so damn lazy and just read the full RFP.

3. Create meaningless RFPs from random “spec sheets”.
Specifically, take all those random “spec sheets” the organizational stakeholder downloaded from the internet just so you can check a box, send it out, and make him happy. (Even though no good RFP ever resulted from using vendor RFP templates or spec sheets.) Which is especially useless if you have a subscription with a big analyst firm that includes helping you identify the top 5 vendors you are going to invite to the RFP where you will focus on the service, integration, implementation, and relationship aspects as the analyst firm qualified the tech will meet your needs. (After all, sales, marketing, human resources, and other non-technical buyers love to be helpful in this way and don’t realize that just about every “sales automation”, “content management”, and “application system” has all of the same core features and you can usually make do with any one of a dozen or more low-cost “consumerized” freeware/shareware/pay-per-user SaaS subscriptions.)

4. Or, do something slightly more useful and auto-fill your RFPs with vendor-ish data.
You could use the AI to ingest ALL of a vendor’s website, marketing, and sales materials as well as third party summaries and reviews and auto-fill as much of your RFP as you can before sending it to the vendor, and then approximately score each field based on key words, to ensure that the vendor is likely capable of meeting all of your minimum requirements across the board before you ask them to fill out the RFP and, more importantly, spend hours, or days, reviewing their response.

5. Identify unusual or risky requests or clauses in a “ready to go” contract.
Compare the contract draft handed to you by the helpful stakeholder to the default ones in your library that were (co-)drafted by actual Procurement professionals and vetted by Legal and don’t have unusual, risky, or just plain stupid clauses. For example, an unvetted draft could have a clause that says your organization accepts all liability risk, you agree to pay before goods are even shipped, you’ll accept substitute SKUs without verification, etc. (because the helpful stakeholder just took the vendor’s suggested one-sided contract and handed it to you).

6. Automatic out-of-policy request denial.
Program it to just say “denied” for any request that doesn’t fall close to organizational norms.

7. Generate Kindergarten level summaries of standard reports for the C-Suite.
Got a C-suite full of bankers, accountants, and lawyers who don’t have a clue what the business actually does and need simplified reports translated to banker-speak and legalese? No problem!

Of course, the real question is to ask not what Gen-AI can do for you but what can you do without Gen-AI because the doctor would argue that you don’t need Gen-AI for any of this and that the non-Gen-AI solutions are better and more economical!

Let’s take these valid uses one-by-one:

1. You could hire a virtual admin assistant / AP clerk in the Phillippines, Thailand, or some other developing country with okay English skills to do that for 1K a month!
Furthermore, this full time worker could also respond to other, more generic, requests as well, and do some meaningful work, such as properly transcribing hand-written invoices (or correcting OCR errors), etc. And give your employees the comfort of a real, dependable, human for a fraction of the cost of that overpriced AI bullsh!t they are trying to shove down your throat.

2. Classic “AI” that works on key phrases in the hands of the admin assistant will work just as well.
It will find the most appropriate data, and then the admin can verify that the question can be answered by the paragraph(s) included in the RFP, or that the sales person actually read the RFP and is asking for a clarification on the text, or a more detailed specification. The sales person gets the desired response the first time, no time is wasted, and you haven’t p!ssed off the sales person by forcing him to interact with an artificially idiotic bot.

3. When they said the best things in life are free, they weren’t referring to vendor RFPs.
In fact, those free RFPs and spec sheets will be the most expensive documents you ever handle. Every single one was designed to lock you into the vendor’s solution because every single one focussed not on what a customer needed, but the capabilities and, most importantly, features that were most unique to the vendor. So if you use those RFPs and sheets, you will end up selecting that vendor, be that vendor right, or wrong, for you. The best RFPs and spec sheets are the ones created by you, or at least an independent consultant or analyst working in your best interest. No AI can do this — only an intelligent human that can do a proper needs, platform, and gap analysis and translate that into proper requirements.

4. Okay, you need AI for this … but … traditional, now classic, AI could do that quite well.
Modern Gen-AI doesn’t do any better, and the amount of human verified documents and data you need to sufficiently train the new LLMs to be as accurate as traditional, now classic, AI, is more than all but a handful of organizations have. So you’re going to pay more (both for the tech and the compute time) to get less. Why? In what world does that make sense?

5. Okay, you need NLP at a minimum for this, but you don’t need more. And you barely need AI.
All you have to do is is use classical NLP to identify clause types, do weighted comparisons to standard clauses, analyze sentence structures and gauge intent, and identify clauses that are missing, deviating from standard, and not present in standard contracts. And, as per our last use, do it just as well without needing nearly as much data to effectively train. Leading contracts analytics vendors have been doing this for over a decade.

6. Even first generation e-Procurement platforms could encode rules for auto-approval, auto-denial, and conditional workflows.
In other words, you just need the rules-based automation that we’ve had for decades. And every e-Procurement, Catalog Management, and Tail Spend application does this.

7. Any semi-modern reporting or analytics platforms can allow the templates to be customized to any level of detail or summary desired.
And if you have a modern spend analysis platform, this is super easy. Furthermore, if your C-Suite is filled entirely with accountants, bankers, and lawyers who don’t understand what the business does, because they fired all the STEM professionals who understood what the business actually does, then your organization has a much bigger problem than reporting.

In other words, there isn’t a single use case where you actually need Gen-AI, as traditional approaches not only get the job done in each of these situations, but traditional approaches do it better, cheaper, and more reliably with zero chance of hallucination.

At the end of the day you want a real solution that solves a real problem. And the best way to identify such a solution is to remember that Gen-AI is really short for GENerated Artificial Idiocy. So if you want a real solution that solves a real problem, simply avoid any solution that puts AI first. This way you won’t get a “solution” that is:

  • Artificial Idiocy enabled
  • Artificial Idiocy backed
  • Artificial Idiocy enhanced
  • Artificial Idiocy driven

As Sarah Scudder noted on “AI is a buzzword“, AI is a delivery mechanism which, scientifically speaking, is a method by which the virus spreads itself. This is probably the best non-technical description of what AI is ever! And the best explanation of why you should never trust AI!

Mistake X that Procurement Founders Keep Making

As part of the discussion between the doctor and Jon The Revelator on how 2005 can tell us why most AI initiatives fail in 2024, the doctor, who recently finished the first six installments of his Mistakes Procurement Founders Keep making series, noted one mistake that founders keep making that maybe he should have made more explicit.

Specifically, and this applies to founders who are techies / ex-consultants in particular who are tech first, the one big mistake that is still being made two decades later is this:

Building a “solution” without having identified the “problem” they are trying to solve.

Or, as The Revelator put it, you must solve problems before selling solutions.

(And, preferably, not a problem that was already solved, and solved better.)

While this mistake could fall under foundational market research, it also stands on its own because these tech-minded individuals think that just because the tech doesn’t appear to exist, there’s a market for it.

While the “find a new ‘solution’, figure out what it works for later” might work for PhD students (develop a new algorithm, technique, material, etc. and then figure out what it can be used for), it doesn’t work well in the business world.

While techies might think business people want cool, the reality is that business people, especially those writing big cheques, don’t care. Techies think business people want slick UX. The reality is that business people don’t care. Techies think business people want the latest and greatest tech stack. But, again, business people don’t care.

The techies fail to realize that the business people they are selling to are NOT the people in the organization who are actually going to use the solution, which could be on decades old tech, with a horrendous UI and UX, and descriptors from an 80s horror film. All the solution buyers in an organization care about is

  1. will it meet the business need,
  2. will we get it at the lowest price and,
  3. if the solution processes transactions or personal data,
    does it have all the appropriate security certifications and monitoring?

That’s it. The budget controllers only care about whether or not the solution will solve their problem efficiently, effectively, and affordably. And if you can’t demonstrate that, they won’t care whether or not they’re buying it from Someone Who’s Cool.

Dear SaaS Founder. We know you’ll make mistakes, but there’s no excuse to make these!

This month, having seen many of the same mistakes that he’s seen over 18 years as an (independent) analyst and 20+ years as a consultant, still being made in new startups (since leaving Spend Matters almost 20 months ago on 2022 Sep 30) the doctor decided to put his experience to e-paper and chronicle 15 of the most common mistakes he sees all too often — mistakes that don’t need to be made anymore. (In the early noughts, before there were dozens of tech startup books telling you what worked and what didn’t for founders that went before, some of these were excusable. But not anymore.)

Now, these aren’t being pulled out of the air. Over his career, he has researched/engaged in depth with over 500 vendors and their solutions as an analyst, consultant, or diligence professional, and publicly (co-)written up the solutions of over 350 of these on Sourcing Innovation and Spend Matters. He’s also followed the progress, or lack thereof, of many of these companies and seen some grow, some stagnate, some get acquired, and some ultimately have to shut their doors. The number of analysts still active in our space that can make the same claim-to-fame can likely be counted on your fingers!

He’d hope after last year’s series on the 10 + 2 best practices for success, some of these mistakes would become obvious and their frequency would decrease, but he was obviously too indirect in why those best practices were being focussed on and what some key takeaways were.

In any case, because he loves innovation and startups (which should be clear from the fact that he writes about 50 to 75 of them per year FOR FREE) and would like to see founders with good products, platforms, and commitment to their customers succeed, he’s hoping this more direct approach will help those companies who just started and who are still making a few of these stop doing so before it’s too late and help others start on the right track.

So without further ado, here are the links to the articles on the mistakes you’re still making:

Enjoy. Educate. Excel! (No, not the spreadsheet, the intransitive verb!)

Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 6

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first twelve (12) of the 15+ mistakes the doctor has indicated he has seen over and over again.

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)
  • Assume that because you could run a Procurement Department that you can run a SaaS company. (Part 3)
  • Assume you know the average process and technology competency in your potential customer base. (Part 3)
  • Assume that you know the messaging because you received the message. (Part 4)
  • Assume if you cut the price to get in the door, you can raise it later. (Part 4)
  • Assume you need a CMO early to get noticed and build demand. (Part 4)
  • Assume that becoming an “influencer” or “thought leader” on LinkedIn will replace proper lead-generation! (Part 5)
  • Assume that you need AI or that jumping on the Gen-AI bandwagon will save you. (Part 5)
  • Assume that you can get a great salesperson or grow your sales team (primarily) on commission (only). (Part 5)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next three and conclude this initial series.

13. Assume you can hire and do it all in-house!
There’s a reason that best practice #10 was get advice and listen to it and #11 was get the help you need sooner than later, and that’s because, when you are small, you can’t hire the people you need to do it all in house. You need a lot of expertise from a lot of senior people, all of whom will be on the higher end of the salary scale. And while these people are worth every penny they demand, that is only the case for the role(s) in their skill set, and you will need a lot more roles than you can hire for.

You will need to not only listen to the analysts that will talk to you, but get one or more expert analysts / consultants to help you tackle key challenges you don’t need a full time person for and/or can’t justify hiring at the current stage in your journey. The best people are not only great at what they do, but willing to admit where they aren’t great and could use the help.

14. Assuming you can barter for what you need when you finally realize you can’t do it all in-house.

A lot of founders are extremely cash-conscious, and while the doctor respects that, you can’t barter for everything you need to keep costs down. And when the doctor says barter for what they need, he means some will try to barter for anything:

  • for a while they would try to barter for rent reductions with stock options, even after the first IT crash … but most landlords are pretty shrewd when they have fixed assets on which to make their money and followed the “fool me once, shame on you, fool me twice …” philosophy and either politely said no or just laughed
  • when print marketing was big, he’s seen software and services companies try to barter for content, editing, design/layout, and even overhead/margin with free software / consulting / marketing services (though newsletter inclusion, promotion at an event, free consulting, etc.); this didn’t work very often
  • when they couldn’t get good trade in value on IT equipment that needed to be upgraded (with the IT vendor), all of a sudden it was hard-ware for services; that didn’t work well either

He sees (much) less of the above today, but the following is still too common:

  • speak for free at our event for exposure
  • write for us and we’ll send your article to 10,000 subscribers
  • advise us on our roadmap and we’ll give you a recommendation to our partners/customers
  • help us with our marketing and we’ll give you referral fees

Sometimes these deals happen, but, despite what the founders think, they don’t work out that well (for the founder).

Let’s consider each of these example cases:

  • if the speaker you want normally makes 10K+ a day for speaking at an event, they don’t need your exposure; this means that if they do agree, they are likely doing it because a) they aren’t as big a draw as you think they are b) they have a vested interest in your company (through an investment, through referral fees, or through projects they get associated with it) … i.e. unless they have a vested interest, you’re not getting the value you think you are
  • they know the open rates and the actual read rates and then the percentage of people who will ACTUALLY notice their name, so if they have any reputation at all, they are just going to work for a paying client instead (now, you might luck out on a newbie who’s really great, but do you really want to roll the bones on critical messaging?)
  • if they’re good, they can make their own recommendation to your partners/customers
  • IF they are willing to accept referral fees (because the minute they do their potential clients will know they are biased towards your solution), why would they want to strike a deal with your company when they could get 10 times the fee with a big company that will sell platforms at 10X what you will get for your module?

In other words, you get what you pay for, and if you pay nothing, you get nothing. this doesn’t mean you have to spend top dollar, as many analysts and consultants (or at least those NOT at the biggest firms) will sometimes offer lower rates to startups willing to accept a limited, but well-defined, set of services offered on the analysts’/consultants’ schedule (to fill gaps between big client projects). In other words, it’s not necessary to pay top dollar to get top value.

But do NOT push referral or commissions on analysts or consultants who say they don’t accept commissions or referrals. You need to remember that some analysts or consultants can only maintain their reputation and make a living IF they are unbiased. And while unbiased doesn’t mean that such an individual cannot have a preferred solution of a given type (which could even be your solution), it does mean that such an individual CANNOT accept a fee for recommending it, because then the buyer would have no way of knowing if the recommendation was truly because the individual believed it was the right solution or if it was because it was the solution that, in the given situation, would lead to the individual getting cut the biggest check from the provider.

(However, if you want the doctor to stop talking to you, it’s one of the fastest ways to make this happen. If you’re curious, another fast way is to waste his time, but, honestly, if you don’t want a check-up from the doctor, he’d just prefer you tell him you only do commission deals as he’d prefer you not waste his time.)

15. Assume that you can take less than your forecast in a raise and still be successful!

the doctor has seen too many companies fail (to meet potential) by

  1. over aggressively estimating the minimum amount of money they need to reach profitability
  2. then taking only 70% to 80% of that to close a VC round

The #1 rule of a startup is: it will ALWAYS cost more than you think.

  • getting to MVP will take at least 30% more effort than your development team thinks; halfway in they’ll discover that the data model isn’t enough; the out of the box workflow won’t quite cut it; the algorithm isn’t fast enough; there are scalability issues with the current architecture configurations; the stack has a few bug/known issues that have to be worked around (when it’s too late to swap it out); etc.
  • you’ll always discover core functionality that you missed (possibly due to a lack of market research) you need to have to close those first few customers (without deviating from the core you should be focussed on)
  • cloud costs will be more than expected (as providers raise prices, you need replication and backup, and your beta/demo customers drive the system hard)
  • you won’t be able to do as much virtual and sales / support will have to do more travellng than you budgeted for
  • you may be able to get away without that office, but you will still need to bring the team in to a central location a couple of times and rent workspaces, pay hotels, etc.
  • you will not be able to rely on consulting partners as much as you think and will need to hire more implementation managers than was in the budget
  • you will need to bring in more demand gen / pre sales / sales earlier than you would like under pressure to show eventual profit
  • etc. etc. etc.

In other words, if you want to stand a reasonable chance of success, you have to inflate all of your numbers 20% AND not settle for less than that, because, without any flux (to weather these increased costs and unexpected events like epidemics, the loss of a key resource, etc.), you just won’t survive.

Now, are these all the mistakes the doctor has seen? Most certainly not, but these are among the most common and NOT making these would a great first 15 steps to ensuring your startup gets on the path to success. So, read them closely, then re-read the best practices, and start your journey with the knowledge of what you know and, more importantly, what you don’t so you can find the help (via partners, analysts, consultants, and appropriate beta customers) you need to make your startup a smashing success.