Successful Startup Tips
Everyone’s heard the line that half of all new businesses fail within the first 5 years, or whatever the made-up statistic is. To truly know what’s going on with startup businesses, it would be wise to narrow the discussion down to a segment, industry, geographical area, or combination thereof. So it doesn’t do much good to generalize, or even worry about what people say as far as that goes because what you should be interested in is what space you’ll be playing in. America’s business scene is too dynamic to make such generalizations, which is a great thing to be able to say, as an American. Who happens to be interested in business.
I’ve written enough business and marketing plans, interviewed enough business owners, and been in and around business at this point in my life to know why most businesses fail. And just as importantly, why and how startups succeed.
The biggest mistake: Not making sure the numbers work.
What I see more than anything is an eagerness to rush to market before doing due diligence and research and working the numbers.
Is your product/service even marketable? Have you tested it out in the marketplace? How? There are lots of ways. But make sure people are even willing to pay money for your value proposition. And even if they SAY they would, that’s a lot different from actually laying their money down, so beware.
Trying your product out in the real world is a step to gather some numbers. Pricing is a tricky science/art. It’s helpful to know some finance and economic theory when pricing out goods. It shouldn’t be a guessing game.
A website I visit daily is Product Hunt. I was one of the early members way back when founder Ryan Hoover was rolling it out, which he did very responsibly, as a Y-Combinator project. And he’s continued to build it into a serious business that is widely used (and actually makes money!)
But what Product Hunt does is introduce new products and services that are “hunted” down by early adopters, developers, designers, marketers, and other people that I like. Those goods and services are then upvoted by the public, and you can talk to the makers and discuss the products. It’s a great way to find some ways to work more efficiently and some nice design, development and writing tools.
But since it’s inception a few years ago, I’ve watched thousands of new products come and go on that site and read and talked to the makers/proprietors. And many of the products, when deployed to make money, fail as businesses. They didn’t do their homework, didn’t see if there was a marketable demand for their offering, and didn’t make sure the numbers worked. Many of the hunted products are side hustles developers and Silicon Valley types unveil there, who know a lot about programming, but nothin about business. So it goes.
But it doesn’t end there. That’s just the beginning. Forecasting sales and demand for new products is difficult. But with some hard work and smarts, you, or someone with an MBA, should be able to formulate some realistic scenarios. Work the numbers. Pay your taxes, your licensing, lease, vendors, employees, and throw in a realistic, workable marketing budget among all your many other expenses and see what your margins look like. (This is where a lot of people would/should go back to the drawing board when they see that their “Next Uber” idea may not work.)
The second biggest mistake: No Business Plan
Believe it or not, a lot of businesses start with no plan written out. Just some random goals and a pile of money and a lot of sweat, blood, and tears. If you don’t develop a plan, you don’t know where you’re going, or what to do if you get off course. You don’t know when you’ve reached important goals, haven’t set any goals, and have set sail into a stormy sea with no compass or guidance. It happens all the time.
Writing out a business plan, and it should be written, may sound like a chore, but it’s critical. If you can’t write out your business plan, then it may be worthwhile to reassess the idea.
A business plan doesn’t have to be a 300-page tome with illustrations, slide deck and citations. It can be fairly simple, but it should be thorough and make sense. You should be able to show it to a banker and not be laughed out of the room.
There are a lot of resources for business plans. The SBA is a great place to start and more specifically, S.C.O.R.E..
The third biggest mistake: No Marketing Plan
Marketing plan? What’s that? I’ve worked for businessmen and women and companies that have been around for decades and are highly profitable that have never bothered to devise a marketing plan.
So, why bother, if they’re that successful, you ask? Because if they had bothered to either hire a marketer like me or produce a marketing plan themselves, their $100 million+ businesses very well could be $1 billion+ businesses. If that’s something they’d be interested in, and you have to assume that’s why they do what they do.
I’m not making that up, either. But strange things happen over time with privately-held companies. And the strangeness is fine. But if a marketing plan were in place and being followed and used as a guide, business owners wouldn’t end up with a profitable train wreck on their hands, which happens. A lot. It sounds like a fine scenario, minus the train-wreck thing, no? But what do you do with a business that might have 300+ employees that depend on you and no one wants to buy you out because it’s such a mess, and you have no one to pass the business on to?
In addition to serving as a guide, a well-written marketing plan also sets important goals and reigns in scope and scale. In this age of mega multi-channel marketing, there’s an urge to go haywire and position yourself everywhere possible. That’s not a wise tactic.
As with so much in life, preparation is the key to success. Please do yourself a favor and make sure that the energy, time and money you’re about to invest is going to the right places and doing the right work. It makes all the difference.