2Cs of any business
A few years ago, I met an entrepreneur – we will call him Ved – at the request of a common friend. Ved needed funds to be injected into his 8-year-old software products business for the healthcare industry. And this common friend asked me to “take a look and advise” because I have experience-knowledge of the software products business. A few hours into our discussion, it became clear to me that Ved’s business did not have a paying customer and cash, the basic 2Cs of any business.
Bitten by the entrepreneurial bug
Ved was an accomplished IT professional with more than 3 decades of experience. A techie by expertise, Ved had built point-products for US companies in the healthcare industry and managed multiple projects during his almost two decades in the US. On his return, he became a CIO-advisor to a leading healthcare company in India. And then the entrepreneurial bug bit him.
Ved decided to build a healthcare software product and accordingly put together a core team. This core team incubated this venture by investing their own monies. Ved had spent almost all of his savings and was living on credit cards. And was defaulting on his house and loft office mortgage payments.
The missing 2Cs of the business
Ved and his four-member team demonstrated the technology of their software product with a lot of passion. After a good two hours, I got my opportunity to pose the 3 questions:
- who is their target customer,
- how many customers are using this product, and
- how many of them are paying customers.
And, their responses were:
- any healthcare company,
- we are doing a pilot at a leading hospital, and
- None.
From the discussions, it became evident that the product was not market-tested. And it did not have any paying customers. Cash, for Ved, meant targeting investor monies into his venture. Finally, I believe that Ved did not or could not cut loss at the appropriate time.
Ved and his team were emotionally involved in their product idea. And therefore, they lost focus on acquiring customers and generating cash; the basic 2Cs of any business.
Customer and Cash are and will always remain the basic 2Cs of any business.
Any product (or service) must be acquired or adopted by customer(s). Customer(s), who pay for this adoption. This adoption then generates cash into the business. Portions of this cash recycle themselves into the original product (or service) so it can be enhanced, leveraging the earlier experiences and thus satisfying a much broader target customer/market needs. This enhanced product (or service) needs to get adopted (bought) by more paying customers and so the cycle continues. Everything else wraps around this basic concept.
Ideas sell. Good ideas find paying customers and such a business becomes an ongoing concern either in its conceived form or as part of a larger enterprise.
Good to know!