Three Types of Founders & Financial Planning

I think I can categorize founders into three types when it comes to their financial management with regards to running a business.

The fist type of founders, and I think these are found in most abundance, do not really like to make projections and plan finances. They are extravagant with their expenses and while many times they are really good at generating revenue and achieving growth, they are still often seen in debt, or raising more funds, or struggling in general most months than they are not, despite the high amount of revenue. I’d say it’s a miracle if any of these founders and their companies survive in the long-term. The only reason they may is because their business model is extra ordinarily profitable and can afford a lot of money wastage.

The second type of founders like to make too much projections, and cut cost everywhere. They believe in MVPs and lean-startup models. They don’t spend money on creating features that someone may or may not use. They test everything with a small amount of people using unscalable methods to generate data. Their future scaling decisions are also data driven. They sometimes cut so much costs that they are often seen working long hours. They also struggle with hiring and team building because of their lower cost mentality.

The third type of founders are somewhere in between. They appreciate projections and financial planning. They love MVPs and lean-startup models. But they spend a large amount of money in building team, delegating tasks, and also on R&D which eventually results a lot of times in wasted features and money. But they do it because in the long-term it’s worth it.

In Pakistan, most of the founders I’ve met are the first type while I feel most founders should aspire to become the third type of founders.

How I Helped Sell $38,000 Worth of Biryani With $1,729 Ad Spend

It all started with friends complaining that you couldn’t get a decent biryani in Islamabad. While Socialoholic focuses on launching digital businesses as soon as possible with minimum viable product, I would see my friends planning features on top of features for a biryani delivery service which did not exist yet. And the discussion would always end with one big question.

Will it work? Is there enough market for this biryani delivery service we are planning to open? Are we going to lose all the money we are going to invest?

Sick of this continuous discussion with no end in sight, I wondered if an offline business can be launched like a digital MVP startup.  I downloaded a beautiful biryani creative from Google Images, created a facebook page with a logo I designed in 2 minutes and ran a Facebook ad with $5 budget. 

To ensure that people were actually going to order biryani instead of just liking and commenting on a beautiful biryani photo, I added a phone number in the Facebook ad and hoped to see the phone ring. Lo and behold, in about 10 minutes of my ad getting approved, the phone started ringing and everyone wanted to order the biryani which did not exist in real world. Being a growth hacker, I just told everyone that biryani is sold out which further hyped the biryani startup.

Keep in mind that there is no biryani to sell yet. We are just running a Facebook ad for a biryani restaurant while sitting in my bedroom.

Once we had the calls, everyone was confident that Biryani Express is going to work and Fasih, the CEO of Biryani Express got to work. But our focus still was that we have to test this with minimum possible investment.

Instead of hiring chefs, Fasih ordered biryani in bulk quantity and sold it on per serving pricing and hence pocketing the difference in revenue vs expenses. In earlier days, we were even doing deliveries ourselves just to prove that my thesis of running a small business with no money is true.

Once we had proven the idea, Fasih, started hiring chefs and created the logistics infrastructure for Biryani Express and today it is one of the most famous biryani delivery service in Islamabad.

What started with a $5 ad on Facebook is now a great small business which employees 8 people and has generated $38,000 against a life-time Facebook ad spend of $1,729.

This just shows that the concept of lean startup and MVP is as applicable in offline world as it is in digital world.

P.S I have anonymized the actual name of Biryani Express as my friend didn’t feel comfortable sharing revenue numbers with actual restaurant name.

About the writer: Saad is co-founder and CEO of Socialoholic. He can be reached on twitter.