Notwithstanding the fact that 90 percent of startups fail, no one intends going public with a business that will eventually crumble. One cannot simply devote years and decades of his/her life only to have to live with the fact that the once-promising business idea has become an extinct company. In order to create, market and sell profitably, one has to really sit down and ask one’s self the question everyone seems to shy away from. Sometimes, businesses see the light of day as a result of luck, but that doesn’t mean entrepreneurs should join the ‘sitting ducks’ museum and wait patiently for all their eggs to hatch in the basket of good fortune.
Many reasons are behind the failure of startups, but in some cases, it boils down to the company building a product for a market that doesn’t exist – insufficient demand. Other times, it’s about failing to manage cash flow, ineffectively adapting to market dynamics or being led by a founder who eventually burns out. Asides SEO, blog, websites, customer satisfaction – which you hardly need until you launch – what are the secrets entrepreneurs with successful track records know that newbie businesspersons don’t? Well, it may sound mayhem-like, but the truth is the first step you take while creating that new business ultimately determines its success or failure.
To buttress the “aim before you shoot’’ cliché, you really need to have a long-term plan for your startup if you don’t want to see it preyed on either by bigger companies or by the absence of a ready market.
A startup’s particular focus constitutes the specific problem you are trying to solve, and the market you are looking to break into must be able to use the product or service you are creating. With modern technology, one can launch a startup in an hour, but if you want to turn it into a viable venture, you need to do more than click away on your ergonomic mouse and build a website. So what are the parameters you must consider to have a chance at success?
Be A Painkiller, Not Vitamins
Going back to biology class, you’d remember the difference between painkillers and vitamins. Well, vitamins are good for health promotion, as they aid in feeling better over time by preventing you from breaking down with an illness in the first place. Painkillers, as the name suggests, get rid of the discomforting sensations almost immediately. They put an end to the problem faster than any other substance would.
The best businesses today are the painkillers, as they are the quickest and most effective solutions to everyday problems.
Being that customers today are on the lookout for quick fixes to their pressing issues, it doesn’t really matter the outlook, logo design or long-term plan of the painkiller. They just take it. Google is a painkiller because it’s 24/7 availability and speedy ability to return search results within fractions of a second, eliminating the ‘pain’ of going to libraries and scowering through slathers of journals overnight. If you want to launch a startup this year or in 2019, aim for the pain-killing business idea, not some vitamins that customers would eventually grow tired of. Providing products and services that solve market problems is the goldmine nowadays, and that’s why companies such as Uber, Medium, Apple and Google are forces to be reckoned with.
Take Uber, for example; the ride-hailing app debuted into a market where passengers were troubled by commuting issues as it concerned mass transits and conventional transport vehicles. Cabs were what only the rich could afford, especially in less developed countries. This made passengers arrive late to their places of work and meetings, get super stuck in certain areas and even as much as getting lost. Uber came into the market to make professional cab hailing easy and affordable to everyone, no matter your seeming social status and destination. And so far the company has been a lifesaver to passengers in distress and those without cash in hand, as quick pick-and-drops alongside electronic transactions seem to be the order of the rides nowadays. So, Uber is a painkiller, not vitamins.
Wise Funding Is Convertible
If you think that breakthrough Series A is the highlight of it all, then you are heading for the exit, inadvertently. In as much as you have roped in USD 10 Mn from a league of venture capitalists, it will not guarantee the success of your business. If you don’t take careful steps with funding, then the round will not do much good for your business, no matter the product you are selling. Abound Solar, a manufacturer (well, former) of cadmium telluride thin-film photovoltaic modules for solar panels, received support from institutions such as Colorado State University and the National Science Foundation. Adding to its venture capitalist assistance, the United States startup was strongly backed by a raise from the US Department of Defense and a grant from the US Department of Energy. The ‘disclosed funding totalled to USD 614 Mn, but the company still went under in 2012 and became one of the costliest startup failures ever recorded. Just last year, Jawbone announced that it was selling off its assets despite raising USD 930 Mn during its 17-year lifespan because they failed to remain abreast with the significant market for its line of headsets, fitness trackers and wireless speakers. This company is the second costliest VC-backed failure on CB Insights’ 2017 Hardware Failure Report.
While those are lessons that need no explanation, startup founders could also take a cue from the founders of Outdoorsy – Jeff Cavins and Jennifer Young – who invested their life savings and sold both their houses to fund their AirBnB for RVs in 2014. The investment paid them off and made them the largest and most trusted RV rental marketplace in the world; because they were smart enough to utilize the money that came from their pockets.
The amount of money you put into the business hardly matters; it’s the “how” in spending it that truly counts.
What exactly are you focusing on? What are you using that investment for? Should you have contacted a VC in the first place?
Don’t Get Too Excited In Year One
Yes, your startup will see some wins in the first year, because for one it’s not so titanic to incorporate a website, garner social media following, and get many press coverage. It may not be long before you feel like claiming a celebrity status, because all the vibes may sure make you feel at the zenith of your industry. It obviously can be very exhilarating to go from working 80 hours a week for someone to running your own business with a positive review in a local newspaper. The chances are that you will record tons of victories that give you that steam-ahead impression, but have you really launched? The only problem is that you’ve probably not started racking revenues, because you concentrate on getting your products or services out into the market – which is very similar to getting good grades during freshman year.
When the first 12 months elapse, you may start to feel a bit less accomplished than you thought, coming to terms with the undeniable epiphany that “starting a business” is not synonymous to ‘running a company.”
You may have long-term customers; you may not. Your credit card can get maxed out, making you think twice about your initial – perhaps hasty – launch decision. This juncture is the time you begin understanding why so many people opine that it is herculean to launch a business. When the revenues aren’t coming in yet, and there’s no customer hanging on your every word, you may think of calling it quits and go back to working in that grocery store. But what you may not realise it is that the time to put your nose to grind with sales, marketing branding and lots more.
No matter what kind of business you are launching and what market you are breaking into, keep these three pointers in mind and never let that burning entrepreneurial desire ever get quenched out by small business leaks.