Why Startups Need To Follow the Money, Not the Model

If I had a nickel for every time a startup sent me a business plan to review, I’d already have a better plan than theirs, because I just made five cents.

Come on. That’s a pretty solid joke considering the degree of difficulty.

In all seriousness, I’m seeing a growing epidemic of startups built off surefire business school concepts and buzzword-heavy strategies. I’ve got three recent examples of startups who reached out to me — they did everything they were supposed to do, everything they were told to do, and yet they still flamed out.

There’s a common thread between all three: They all started with a really good plan.

Why Startups Build From the Model Out

Startups will follow an established business model because it’s easier to get traction that way. Or at least something that looks like traction.

I’m not surprised by the trend, and it’s not necessarily new. I’m not talking about daydreamers here, in fact some of them can get pretty far: They have customers, they have employees, sometimes they even raise money and make splashy headlines. They often look like they’re bigger and sexier than their balance sheet. And that kind of hollow success fuels the myth: Get the great idea, follow the steps, make the money.

But it doesn’t work like that. In fact, in startup, it’s the other way around. Making that first honest dollar is no joke — that first, not-your-mom, not-your-friends, repeatable, scalable dollar of revenue. It’s a hard thing to do, because if you’re building something unique and successful, there is no plan to get you there. There are no steps, because no one has done it before.

So it’s a lot less daunting to follow models like these.

Model 1: Building from the brand up

Startups built on a growth-of-brand strategy are still really popular. This is especially true among first-time entrepreneurs.

The model for these startups starts with an audience, which is in fact the only metric that usually gets measured, whether it’s in site/app visits, monthly average users (MAUs), or members. The audience is convened for the purpose of…