So, you have a great idea for a business. You begin to put the wheels in motion to start your venture as you excitedly daydream about what’s to come. In reality, though, 90 percent of all startups fail, and they do so for a myriad of reasons. The ones that do succeed have one common trait: a tenacious founder who just wouldn’t quit.
The startup journey is not for everyone, so before you begin, it’s important that you ask yourself the following questions to make sure you are are prepared as possible:
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How do you feel about setbacks and failure?
Ultimately, the entrepreneurial journey is an inner one. Successful founders are able to handle an enormous number of setbacks, delays, failures, difficult personalities, financial struggles, criticism and sleepless nights. But not everyone is cut out for it.
While Steve Jobs is best known for his success, he also had a huge number of setbacks. He was kicked out of the company he created, and the next company he founded (NeXt) initially failed miserably, while he lost $12 million of his own money. But Steve kept on going and when he thought all was lost, Apple bought the NeXt company for nearly $500 million. Such is the startup journey.
How you handle failure and setbacks is crucial to your ultimate success as an entrepreneur.
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Have you truly researched your product idea?
Many entrepreneurs start a business based on a problem they create a solution for, not realize that there are other companies out there already solving that same problem and doing it better. Too many entrepreneurs start companies without doing proper product research or reviewing the competitive landscape.
Take, for example, this scenario: I had a meeting with a Mexican startup company that was developing a parking app. They had spent hundreds of thousands of dollars and years in development with the goal of achieving high growth when they launched their product in the American market. When they were doing their research, they had just looked on the Mexican iTunes store and saw there were no parking apps. They never checked the American iTunes store, which in fact had dozens of parking apps already in existence. The founders’ faces turned white as they realized their unique idea was not so unique after all. How could they compete against well-known brands with lots of customers and funding in the bank? While you may question how someone did not go through detailed due diligence, you would be shocked at how frequently it happens.
Some people see business plans as meaningless because the startup journey is often full of so many twists and turns and the company you set out to create can often be very different to the one you end up creating. But a business plan is a necessity, and a good exercise to help you think about your product, the competition, your marketing plan, the sales strategy, your financials, your exit strategy and more.
If you find there is competition in the vertical or sector you are researching, this should not be a stumbling block. Rather, this should be an exercise in identifying the TAM (or total addressable market).
When it comes to creating a product in a competitive market, you need to understand the four P’s:
- Price
- Product
- Positioning
- Promotion
Your product needs to be much stronger in at least one of the aforementioned P’s if you want to gain market share. But you also need to ask yourself, how easy would it be for your competition to overtake this “P” you are focusing on, should they begin to see you as a threat? The stronger your company is able to execute on all of the P’s, you should outpace the competition and see long term success.
How financially organized are you?
Ultimately, business comes down to financial success. Unfortunately, many entrepreneurs lose track of their financials at the start. However long you think it will take to launch your product or how much money you think you will need, multiply that number by three. Expect a ridiculous amount of set-backs and delays. Time is money, and many startups run out of money before they even begin because they underestimate how long it will take them to start generating revenue.
Having strong financials from the start is a must. Many entrepreneurs are thrill seekers and can be so focused on developing the product or trying to sell it that they don’t discipline themselves to keep track of the “boring” part: keeping good financial records. Make it a habit from the start to dedicate time (either weekly or bi-monthly) to review your financials, either by yourself or with an accountant.
How will you monitor your success?
Many startups don’t put a system in place to measure their success or collect data. Numbers are crucial to your success. If you want investors or journalists to take your business seriously, you need to know your numbers.
It all comes down to percentages and connecting the dots between your data. Let’s say you had 10 customers last year and 20 this year. Twenty customers may not sound like a lot but, but that’s 100 percent growth!
How many of the people who visit your website convert? How many bounce? Why? How many unsubscribe? Why? What is your average order value? How many people convert? How much are you growing (or declining) by users, revenue, etc.?
Write down the metrics you need to measure and make it a habit to track and analyze this data weekly, bi-weekly or monthly.
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What is your exit plan?
There are many successful serial entrepreneurs out there who start a business with a clear exit strategy in place. They plan to grow the business to a certain size, within a certain timeframe and then try to sell it. On the other hand, some entrepreneurs start a business as a passion project and don’t consider an end goal.
Having a clear exit plan in mind from the start helps keep you focused on the grand prize. Without a goal, companies can meander. Goals keep you focused on your business’s real success and gives you benchmarks to measure your success against.
In conclusion
When it comes to successful business, the adage of “expect the worst, hope for the best” really rings true. Many successful startups began as a completely different concept, but along the way, the founders found competition, roadblocks and opportunities that changed the shape of the company.
While good business acumen and financials are crucial, don’t forget to try and enjoy yourself along the way. Ultimately, the success of your company will depend on your ability to face struggles and setbacks head on.
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December 3, 2020 at 05:06AM by Chris Shipferling, Khareem Sudlow
