Rule #5 – “Why” is more important then “What”

The reasons you are embarking on this new project, venture, idea, or business are infinitely more important then what the project is. The reason is simple: your ability to overcome adversity, how you respond to change, and ultimately, your execution are going to be guided almost exclusively by “why” you got yourself involved in this mess in the first place.

Do you want to build a company of long-term growth and profitability? Want to get bought out quickly by someone? Are you trying to launch a portfolio company and this is simply one offering of many you expect to have eventually? Want to change the way folks consume media on the internet? Interested in reducing greenhouse emissions from sea-going vessels? Seeking the affection of thousands of net surfers? Seriously, what’s the point?

It is entirely possible that you think you know the answer already, but I’d wager that you don’t. I expect that your reasons for trying to do something new are only skin deep at this point, and as such, those reasons will fail you when you need them most. Therefore, it’s important that you take a long look in the mirror, dig in, and figure out what’s driving you.

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For example, three years ago, I knew someone who built an amazing application for sending SMS messages (essentially text messages on a mobile phone, in case you didn’t know) to groups via a computer. The tools were pretty incredible. It took no time to organize contacts and send them a text message about an upcoming event or a newly launched feature. You could even program it to send the message at a later time. Frankly, if you needed to send SMS messages to a group all at once, this application would more then fit the bill. The marketing and mass-communication possibilities were near endless.

The whole time he was building and testing the application, his friends and customers of his business were excited and enthusiastic about the application. Everyone had dozens of ways they planned on using the service and couldn’t wait for him to “release” it for wide use. However, once the application was ready to go, a funny thing happened. I noticed that there was no business model involved. He hadn’t implemented credit card processing or prepayments or contacted cell-service providers or anything. He confessed a short time later that the whole reason he built the service was to try and get a friend who was a VP for a large telecom company interested in acquiring the application. My friend’s “why?” was “to get purchased quickly.”

Such a reason is being used all over the internet today with a slew of companies. The only problem with this strategy is simple: what happens if no one wants to buy you? My friend, and countless other folks, had built a product but not a business. As such, if no one is interested in purchasing the product outright, you may be left with no choice but to try and build a business. My friend, a developer by heart but not much of a businessman, is still waiting on a buyer. The more time passes, the more other companies launch similar products with a business model intact, making his chances of selling almost nil.

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I had another acquaintance that invested in a web portal in the real estate sector. The site’s technology and substance were hardly cutting-edge, but they had built a fair amount of unique traffic and for the most part, the site contained quality content. My acquaintance came in to the game late, providing money to help the site market itself for more traffic and scale up to handle that traffic. The stated goal of the founders was that they had received numerous inquiries asking if the company were for sale. They had decided to sell the company and wanted to build traffic up as much as possible in a 180 day period to build up the value of the company before cashing out.

Six months later, traffic had doubled and the buyout being offered was more then they had expected. They wouldn’t be retiring, per se, but the plan to increase the company’s value seemed to have worked and everyone was going to walk away with a fair amount of money in the bank.

But, as is the point here, it wasn’t meant to be. The original founder (who had conceived of the idea a year and a half prior) started talking about how they could monetize the traffic if they were to keep the company. They could enter into referral agreements with Realtors, contractors, and inspectors. They could have advertisements and paid home listings. When the investing acquaintance and the other 3 founders sat him down to discuss this new strategy, he confessed that he’d never imagined they would be able to grow traffic so quickly and his only reason for selling was that he didn’t see the site ever getting anywhere. However, now that there was real traffic coming online, he saw an opportunity to build what he’d envisioned some years ago. They decided to follow his lead.

3 months later, the traffic had subsided to the pre-investment level. 2 months after that, they removed the site from their servers as the new business strategies they had tried were not generating revenue and there was no capital left, even for bandwidth costs.

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In the first case, my friend had built a tremendous product for the purposes of selling it to someone. In the second, my acquaintance lost his investment because the real “why” for the real estate site’s founder was to built a site that could stand on it’s own and make money. Would being more honest about the “why?” involved have made a difference in the chance for each example to succeed? Maybe, maybe not. Perhaps my friend in the first example would have gauged buyer interest before he’d committed so much time to the building of the product. Perhaps he would have consulted with someone about the possibility of putting a business model behind the product so it could build some value on its own. In the second case, my acquaintance invested with the understanding that the founders of the company were intent on selling out. If the chance that they would keep the company had been in play, perhaps they would have tried to generate their own revenue sooner or raised money to sustain themselves longer or recruited contacts in the real estate field a bit earlier.  Perhaps he wouldn’t have invested at all.

You will find that the “why” will not only determine much of your company’s long term prospects of success, but it will also be a guiding light when you have to make tough decisions. For example, if you are interested in selling out or building a company of stable worth, then “creating and sustaining value” is your “why.” Every tough decision can likely be determined by simply asking, “is this going to help create and sustain value here?” If you are interested in creating a company in a field in which you enjoy working, then your “why” is “participating and making a living in the xyz industry.” Every tough decision can likely be determined by answering, “is this going to help me remain a viable member of this sector’s working community?”

It is imperative, however, that you figure out your “why” early on. When you do, be proud of it. Shout it from the rooftops for all to hear. Focus on it and work hard to achieve it, sustain it, and become it. But be forewarned: if you begin working with no idea “why” you are doing so, or worse yet, a dishonest version of “why” you are doing so, you will invariably face problems down the line. And when that happens, you aren’t likely to have a true sense of why you are doing what you are doing to guide you out of harm’s way.

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