Did you know that a Chief Operating Officer can run most business functions, making them the most efficient and effective tool for any growing business with a limited budget?
An early-stage COO is, on average, responsible for about 7 different business functions. From the anecdotal experience of my peers and me, this usually covers HR, Legal, Finance, Fundraising, Sales & Marketing, Product, and Engineering.
A COO can be responsible for such a broad range of disciplines because they're also responsible for the business's Strategy - aka turning the Founder’s wild and exciting vision into a reality - which has implications for all departments.
In this new series of posts, I'll break down how a COO does this - how do I, a detail-oriented completer-finisher with an unbridled love of spreadsheets, turn a creative, forward-thinking, relatively nebulous idea into a structured and realistic roadmap for success (and how I keep the entire company following that roadmap).
We’re going to follow the same 6-Point Strategy framework that I developed for my best-selling book How To Write Your Strategy. If you’re (like me) someone who likes to read ahead, you can get the whole book for 50% off here for the next few months using code SUMMER24).
All the articles in this series
What does a COO do in an early-stage company? How a ‘vision’ gets turned into a ‘reality’: start with the end in mind.
I’ve always hated the phrase ‘how the sausage gets made’ (it may be the fact that I stopped eating meat in 1989 when I learned that ‘cow’ equals ‘beef’) but I think it’s a useful way of thinking about how a company’s vision gets turned into a reality.
The idea behind the phrase ‘how the sausage gets made’ is that usually no-one wants to see the disgusting process that the meat goes through to get turned into that thing you eat on a Saturday morning with a hangover. You just want to focus on the good bits - understandably.
I think the same can be said for how a COO turns a Founder’s vision into a reality.
In the startup ecosystem, there’s a lot of glorification of the good bits, which are the beginning and the end of entrepreneurship.
We all want to read articles and listen to podcasts and go to talks that ask ‘What was the idea that the visionary Founder had?’ and then ‘What was the amount of money that the visionary Founder took home?’ - with few thoughts spared for how the home fires were burning and how all that beautiful creative energy was harnessed into something operationally-efficient and successful.
I think this is why the role of the COO needs so much more of a ‘sell’ than any other C-Suite position. I see Founders frequently being much more able to make the connection between ‘I want good sales numbers’ and ‘I need a CMO’ than they are ‘I want to focus on the right things so my business can afford to grow’ and ‘I need a COO’.
So, to help you understand how crucially-important to startup success a COO is, let’s peek behind that curtain and look at how the sausage gets made - let’s ask: How does a vision for a company get turned into a reality and what does a COO contribute to that process?
First, you have to start at the beginning end
When I start working with a new Founder on turning their vision into a reality, the first thing I ask is - what do you want out of this company? What’s your off-ramp? What does success at the end look like for you?
It’s partly because the dream of that end goal can help fill a big motivational gap when the going gets tough, but it’s also because your later-stage end goals can have a pretty big impact on what your early-stage strategy should look like.
It’s never too early to plan for the future.
Your ultimate vision changes the context of all the decisions you make leading up to it
Say your ultimate goal is an IPO (interestingly, ‘I want to IPO’ is the most common response I get from early-stage founders to that question, but the least likely to happen - In 2023, there were only 23 IPOs on the LSE, which was less than half the number from 2022).
Odds of success aside, if you want to end up being able to take your company public, you’re going to be building a different business to one with an end goal of being acquired.
To build a successful business, you need to be laser-focussed on what ‘success’ looks like to you. Each task that you undertake that isn’t directly linked to the improvement of one of your goals carries an opportunity cost for your growth.
If you’re looking to be acquired, for example, you need to be building the type of business that the buy-side M&A players in your space are interested in. You’re going to need to ask things like:
Which companies are active acquirers?
Why? What strategic gaps do these companies have, in terms of products or specialist skills, that they can’t build themselves or find a partner for?
What revenue numbers are companies being bought at?
What kind of internal cultures and processes are markers of the likelihood that a target company’s revenue can survive an acquisition?
If your end goal is an IPO, however, you’re going to need to answer some of the same questions, but also to think about things like:
How profitable does a business in your space tend to be at IPO?
What are the ideal market conditions for a good IPO?
What kind of future growth opportunities make for a good IPO?
What kind of public scrutiny will your company need to be able to stand up to?
The answers to these questions will shape your goals because you’re now aiming to build a company that’s attractive to specific future acquirers or investors as well as building a company that serves the needs of its customers.
It’s a delicate balancing act that has a significant impact on the strategy that you design.
Enter the COO. The COO’s role here would be to take your dream end goal - your exit plan - and, either by themselves or with their team, start to answer all those questions above so that you can be choosing the metrics today that will help you get acquired in the future, whilst also delighting your customers.
This modelling is something I frequently do for my clients. If you’d like to learn more about what that process looks like, book a free call with me:
Your ultimate vision changes the decisions you make about funding
We absolutely can’t predict the future, as much as anyone who makes a living reading market signals and extrapolating outcomes will tell you that we can. There will always be the possibility of chaos getting added to the mix - like a global pandemic that fundamentally changes how individuals interact with each other and what they value, for example.
What’s most important in the earliest stages of your business is the emphasis that you put on delivering for your customers, not on the financial return that you want from the company. Why? Because the former leads to the latter. The more you delight and solve problems for your customers, the greater the distance that your company can go.
However, if you’re on a fundraising track, it’s important to know that that end goal will add or remove you from the consideration of some investors.
Ultimately, an investor puts money into your company because they’re gambling on the fact that your company is a chance for them to make more money from their money. Some investors will be looking for a shorter-term, smaller return via secondaries, some will looking for a sale, some will be looking for companies that can deliver the long-haul goal of an IPO.
Part of your fundraising process should involve a deep consideration of historical returns that funds have received from their portfolio companies and if they’re open to helping you achieve a particular exit plan. Some investors will be put-off by the idea of an acquisition, some will be put-off by the idea of an IPO.
Whatever your plan, you’re not going to appeal to everyone. But if you’re waiting for universal approval before getting started, you’re never going to start because that’s never going to happen. And that’s coming from a pathological people-pleaser.
Even during a fundraising process, a COO is there helping your vision get turned into reality by helping you to answer the most detailed, quantitative, strategic, questions, by preparing all the paperwork and building a data room, by researching prospects and preparing tailored outreach and pitches.
What's next?
Now that you’re clear on how the very last goal of your business can impact even the earliest stages of your strategy, have you changed your perspective on what a COO can do for you?
Next time, we’re going to look at how a well-crafted Mission Statement can be the deciding factor on how well your vision translates into reality - and how a good COO is a translation machine.
If you’re a Founder with big dreams and you’re looking for a partner-in-crime who can make those dreams happen, we should chat. At the time of writing, I’m currently taking calls with prospective clients for both Business Coaching and Fractional COO services (though I only take on 2 Fractional COO clients at once, so you need to get in there quickly).
Book a free, no-strings chat with me here:
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